What can you do to make senior care affordable in the short term? If you don’t want to go into hock until those VA benefits kick in, another solution is to try to round up enough money to afford the out-of-pocket expenses. There are several options that can help on a short-term basis.
Paying for Senior Care
It’s not a day anyone looks forward to facing: the day you realize Mom or Dad needs long-term senior care. Planning ahead is important so that you have the financial resources to pay for senior care if and when it becomes necessary. The problem is, most of us don’t start planning until it’s already too late, and then we have to figure out how to afford senior care in the short term. VA benefits usually take 6-9 months to process on average.
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Fortunately, even if you’ve made a few mistakes in your financial planning, it’s still possible to pull together the money to pay for senior care while you’re waiting for funding such as VA benefits to kick in.
Cost Cutting and Budgeting. One way to start budgeting for senior care right away is to look for ways to cut costs in other areas. The usual suspects that inflate your budget?: lattes at Starbucks, dining out, clothes shopping, cable TV, movies, the third car… all the fun stuff.
Caregiver Tax Credit. If your parent is a dependent you may qualify for tax credits that can help you save money.
Make Interim Living Arrangements. Can your parents move in with you or another relative until your VA application is accepted? You’ll also want to figure out exactly what kind of care your loved one needs — not all types of care cost the same, and you might be able to cut costs by looking into a part-time home health aide until your funding comes through. Once you’ve made that important assessment, then you’ll be ready to figure out how much money you need over the short term.
Going into Debt to Pay for Senior Care. Some people choose to go into debt in order to pay out of pocket for assisted living, especially if the waiting period is relatively brief, as with Medicaid. While it’s definitely an option to use a credit card or loan to pay for senior care, financial planners who have experience with long-term care don’t necessarily recommend it except as a last resort. “Yes, you can put it on a credit card,” says Terry Swehla, CFP (Certified Financial Planner), CLTC (Certified in Long-Term Care). The question is, “Are you willing to pay 20-25% interest on the credit card in order to have that privilege?” Terry, who is Managing Director at United Capital Private Wealth Counseling in Modesto, CA, works with many clients who are financing long-term care for a family member. About loans, he says, “Personal loans are harder to get in this day and age. You can always check home equity loans, [but] these are all things that take time…People need to be thinking ahead of time, even if it’s how to cover in-home care.”
Working Overtime and Taking on a Second Job. One way to cope with having insufficient savings is to get a second job. “Even working 15-20 hours more per week could make a big difference,” says an article on the Zuk Financial Group website.
Temporarily Stop Funding Retirement or College Accounts. You can also funnel the money you would have sent to your 401k retirement plan or child’s college savings plan into a short-term senior housing account. Some people transfer funds from those savings accounts, however, Terry Swelha points out that not every savings plan can be used to pull out money for senior care, and regular savings accounts may not earn enough interest to make it worthwhile. “If it’s in a special fund such as a 529, you can’t tap it for that purpose. If it’s in an UTMA [Uniform Transfers to Minors Account], then that money’s gifted to the child, so you can’t invade the principal to make use of it for somebody else’s needs. As for your own retirement funds, most 401(k)s have loan provisions, some of them up to $50,000. There are strict requirements on how you pay that back, but that could be a temporary stopgap as well.” But, Terry adds, “You cannot borrow against your IRA. That comes up frequently.”
Asking Extended Family for Assistance. Sometimes the gap that needs filling in is small — let’s say your loved one is already getting a small pension, and only needs part of their assisted living costs paid for out of pocket. In this case, it might be possible to ask other family members for a little help. “It’s a family decision, which siblings or relatives are going to be involved,” Terry notes. “Unfortunately, you may not have other siblings who have the means or the desire to help out if you do not have assets of your own.”
Can My Parent Gift Me Assets in Order to Qualify for Medicaid? For those who can’t work more hours or borrow from family members, some might be tempted to ask their parent to gift them money in order to get the parent’s assets low enough to qualify for Medicaid — after all, it takes only 45-to-90 days to process Medicaid applications, while VA benefits can sometimes take as long as a year. However, this is definitely not an option that financial planners recommend. Linda I. Wilson, a Certified Financial Planner with Zuk Financial Group, says, “I am not allowed to even discuss it with clients.” “Many of those strategies have been stopped because of people doing things to hide assets,” says Terry Swehla. “You have a five-year look back on the gifting of assets, and unless someone’s willing to lie—which is then a felony—on their Medicaid application,” then any major transfer of assets is going to be closely examined by your state Medicaid agency.
Plan Ahead to Prevent Future Financial Hardship
Both Terry and Linda stress that the most important way to avoid financial strain when it comes to paying for senior care out-of-pocket is to save and plan ahead. “I have had many clients who approach that time when they qualify for long term care with a firm organized plan in mind and others who have refused to ever think about it,” Linda says. “The right time to think about short term savings tips is not the minute they start needing the care but many years before.”
But if you are stuck in a situation where you’re not sure how you’re going to afford senior care, take the time to get informed and be proactive anyway. “Know what resources are available to you,” Terry says. “Check with social service agencies. Even check with assisted living facilities. They will give you information on what it’s going to take to get in, as a Medicaid patient or otherwise.”
Most of all, though, Terry says, “Don’t beat yourself up over what you can’t change. You just have to accept that there are going to be limits to what is available because of that lack of planning.”
Do you have any tips of your own for short-term saving? If you’ve been in a similar situation, what steps have you taken to try to afford senior care? Let us know in the comments below.