The Rise of Cost in Senior Living Facilities

May 28, 2024 | By Adam Lippman

The Rise of Cost in Senior Living Facilities

Senior living facilities provide independence and peace of mind while empowering you to live comfortably with access to help when needed. However, the cost of these facilities is increasing rapidly. With this increase comes more pressing concerns for older adults and their families as they navigate funding.

Whether you plan to use private financing, long-term care insurance, or funds from selling your life insurance policy, it is necessary to understand the factors contributing to this increase and how they may impact your situation. This knowledge will help you navigate the various options for funding your next chapter in life.

Factors Driving Assisted Living Cost Increases

Despite the 3.2% cost of living adjustment that Social Security will provide in 2024, inflation rates are still making it challenging to keep up with costs. 

  • Demand for specialized care:¬†More patients with Alzheimer’s and dementia are moving into assisted living facilities, which increases the need for qualified staff.
  • Location:¬†The prices of assisted living facilities and the add-ons you may see vary by state. So, where inflation hits the hardest, facilities’ costs rise.
  • Health care needs:¬†The assistance you require in the long-term care facility may impact prices ‚ÄĒ this may be due to age, illness, or injury.
  • Amenities:¬†Activity programs, the size of the facility, and the type of facility will impact costs and how the organization has to increase those to keep up with overheads.

Assisted Living Facilities Cost Breakdown

The base cost of assisted living can¬†range between $3,500 and $10,500 a month. Assisted and independent living costs consist of three primary components ‚ÄĒ moving-in, monthly rent, and additional care services. These services can include help with eating, bathing, and administering prescription medicine. Memory and skilled care facilities will incur additional fees as these offer 24/7 support, assistance, and access to licensed health care professionals.

Impact on Older Adults and Families

In 2024, the projected median cost of assisted living is $4,917 per month, and due to inflation, the prices continue to rise. While most older adults fund their living facilities with a combination of assets, insurance benefits, and personal savings, the need for assistance from family members is increasing. Additional implications of the rise in retirement home costs include:

  • Stress and emotional impact:¬†Financial stress resulting from increased assisted living costs puts emotional strain on older adults and their families. This rise also brings up overwhelming concerns about affordability and future care needs.
  • Challenges in planning:¬†The unpredictability of the long-term care cost inflation rate makes financial planning more challenging. Older adults and their families may need help anticipating budget requirements as costs continue rising.
  • Care compromises:¬†Families may have to make difficult compromises in long-term care, like moving into a more affordable facility or seeking out alternative care that does not fully align with their needs.

In 2024, the projected median cost of assisted living is $4,917 per month, and due to inflation, the prices continue to rise.

Funding Options

Personal funds like retirement plans and Social Security may only cover some expenses assisted living facilities demand. There are a few other funding options to explore, each with its own eligibility criteria and implications. As neither Medicaid nor health insurance covers assisted living, you may need to explore these other options:

  • Reverse mortgages:¬†You can tap into your home equity through a reverse mortgage, generating a line of credit or income to fund your cost of living.
  • Long-term care insurance:¬†This insurance or investment portfolio helps cover some of the costs associated with assisted living facilities, nursing home care or in-home care.
  • Private financing:¬†Funds from savings, Social Security benefits, stocks, pension payments, or retirement accounts like your IRA or 401(k) can help you pay for your accommodation and other living costs.
  • Senior bridge loans:¬†A senior bridge loan is a short-term loan similar to a line of credit to boost you financially when needed.
  • Pension Protection Act annuity:¬†This annuity converts savings into an annual pension to guarantee you have a non-taxable income.

Selling Your Life Insurance Policy

You can sell your life insurance policy to fund your assisted living accommodations and add-ons to make your life more comfortable. When you do this through a Life Settlement, the buyer pays you a lump sum to become the new owner of your policy, taking over the monthly premium payments and becoming the beneficiary.

Consult with your financial advisor before taking this step, as they can help you determine any taxes applicable to your sale. They can also help you map out a good strategy to optimize how you allocate the lump sum toward your cost of living and explore additional funding options if you need it.

Life Settlement

A Life Settlement turns your life insurance policy into a present resource if you are 65 years or older, your policy is two years or older, and your death benefit is $100,000 or more. The sales process is typically as follows:

  • Partner with a broker:¬†Start by partnering with a reputable broker who will help determine if this sale will align with your needs.
  • Proposal and evaluation:¬†Your broker appraises your policy and gathers the necessary personal information they need from you to plan how they can maximize your policy’s value. They send proposals to potential buyers and then present their offers to you.
  • Contract and payment:¬†When you choose the offer you like best, your broker orders an agreement from the buyer. Once the paperwork is done, the transaction takes place. Depending on your state, you may have 15 days to change your mind about the sale.

Viatical Settlement

If you have a terminal diagnosis and a life expectancy of less than two years, you can opt to sell your life insurance policy through a Viatical Settlement. The sales process is similar to a Life Settlement, with the same terms and conditions regarding change of beneficiary.

Access Your Policy’s Value With Settlement Benefits Association

The rising cost of senior living facilities puts significant pressure on older adults and their families. The strain on finances is becoming more pronounced, and finding quality care and accommodation is more accessible with knowledge of financing options available. Through private financing, reverse mortgages, and selling your life insurance policy, you can access the care you need without compromising your or your loved ones’ financial stability.¬†

Settlement Benefits Association has helped older adults and people with terminal diagnoses sell their life insurance policies with the best possible outcome. We are an active member of the Life Insurance Settlement Association. Our knowledgeable team is here to represent you and your interests as you navigate selling your life insurance policy. Contact us today for more information, or use our Visual Valuator to find out how much your policy is worth.

Access Your Policy's Value With Settlement Benefits Association

Previous Article How Are Life Settlements Paid? Next Article 2023 Life Settlement Market Data