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What You Need to Know About Retirement Accounts
While looking at planning your retirement, you may have noticed there are a wide variety of retirement accounts available to choose form. This article will give a detailed breakdown and comparison of the different retirement accounts to help you decide which is the best choice based on your circumstances.
Individual Retirement Account (IRA)
The Individual Retirement Account (IRA) is a tax deductible defined contribution retirement account. This means that taxes are not paid that year for any money deposited in your IRA. Instead, withdrawals made from the account upon retirement are taxed as income.
Pros:
Tax deferred until withdrawal. Individual, customized control of investments. Tax deferral of investment growth
Cons:
Very low yearly contribution allowance of ,000. 10% withdrawal penalty. Lack of liquidity if the contributor needs the money for another purpose.
An individual Retirement Account allows the account holder to make investments using the funds in their retirement account. This means they can allocate the funds across a variety of stocks, bonds, and mutual funds. The importance of this is that any growth in these investments is tax deferred until withdrawal along with all funds in the account.
The negative side of this tax deferral is that the growth of investments will be taxed at your income tax rate rather than capital gains which is 15%. For the tax advantage to really come through, the funds in an Individual Retirement Account (IRA) must be allowed to have time for growth. In general, it is advantageous when the Individual Retirement Account (IRA) is allowed to grow for more than 20 years before withdrawal for the tax deferral to be advantageous.
A disadvantage of the Individual Retirement Account (IRA) is the low deposit limit of only ,000 a year with a catch-up addition of ,000 a year allowed for individuals 50 or older. Also, funds can be difficult to withdraw from an IRA before the designated age of 59 ½ is reached. To see a more detailed analysis of an Individual Retirement Account (IRA).
When is a Roth IRA for me?
The Roth Individual Retirement Account (IRA) is an account that is not tax deferred; therefore taxes are paid on any money before it is deposited in the Roth Individual Retirement Account (IRA). This can be advantageous for individuals who expect to have a higher income upon retirement so would rather pay the current lower tax rate than a future expected higher tax rate.
When is a SEP IRA for me?
The Simplified Employee Pension Individual Retirement Account (SEP IRA) is an Individual Retirement Account (IRA) specifically meant for self-employed individuals and their employees. The account is shared among all members involved and uses a profit-sharing model. The contribution limits for an SEP IRA are the lesser of 25% of income or ,000 in 2009. All members of the SEP IRA are required to make the same contribution.
A SEP IRA can be advantageous to a business owner due to its higher contribution allowance. It is not really an option for individual retirees who do not own a business of their own. All contribution made to the SEP IRA are made by the employer and not by employees themselves. Thus, the business owner must evaluate whether the tax benefits of expensing these costs and the increased benefits to their employees are worth the cost of increasing their own retirement contributions.
Comparison of Individual Retirement Accounts (IRA) to 401k
401k and Individual Retirement Accounts (IRA) are similar in that they both are tax-deferred retirement accounts which can increase in value over time before funds are withdrawn and they both have restrictions on fund withdrawal. One difference is that the contribution limit is only ,000 a year for an Individual Retirement Account (IRA) while it is ,500. A 401k also has the possibility of employer contributions in addition to your personal contributions.
In general, it is a good idea to prefer your 401k plan over your Individual Retirement Account (IRA) due to the higher limits and employer contributions. Before using this as a hard and fast rule, it is best to review what types of investments are made within your employer sponsored plan and your Individual Retirement Account (IRA) and what type of contributions are made by your employer.
Comparison of Individual Retirement Accounts (IRA) to Retirement Annuity
Both an Individual Retirement Account (IRA) and a Retirement Annuity are tax deferred retirement accounts. Unlike an Individual Retirement Account (IRA) which has a ,000 contribution limit, a retirement annuity has no contribution limits. Both accounts have a 10% penalty for early withdrawal.
The main feature a retirement annuity has that an Individual Retirement Account (IRA) does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.
It is generally a poor idea to invest in a retirement annuity rather than an Individual Retirement Account due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.
401K
A 401k is a retirement account sponsored by your employer. It is a defined contribution plan where you contribute a certain portion of your income into the account.
Pros:
Tax deferred until withdrawal Possibility of additional contributions from employers Tax deferral of investment growth
Cons:
Withdrawal penalties of 10% with certain exceptions. Lack of liquidity if the contributor needs the money for another purpose.
401k and Individual Retirement Accounts (IRA) have a variety of similarities. They are both tax deferred plans to taxes are only paid on withdrawals from the account, allowing a tax-free buildup of funds and investment returns. This tax deferred features of both retirement accounts is advantageous to retirees who expect a lower income upon retirement than the income they receive during their careers.
A very large advantage of a 401k retirement account is that your employers may have a benefit where they will add funds to your account or match funds you add to the account. This is the primary advantage that a 401k has over an Individual Retirement Account (IRA) but is highly dependent on what your employer contributes.
As with the Individual Retirement Account (IRA), the 401k has a negative side if the account holder does not allow the account to be active for more than 20 years. This is due to the growth within the retirement account’s investments being taxed at your income rate upon withdrawal rather than the customary 15% capital gains tax on investments. The tax advantages on investment growth are only seen after a long period of time.
When is a Roth 401k for me?
A Roth 401k, unlike a standard 401k retirement account, is taxed before the funds are placed into the account and withdrawals are made tax free. As with a Roth Individual Retirement Account (IRA), the Roth 401k is advantageous to individuals who expect their income upon retirement to be higher than their career income, therefore the tax-deferral of a standard 401k can be a negative to them.
To find out more in-depth information about 401k retirement accounts, read our article about 401k.
Comparison of 401k to Individual Retirement Account (IRA)
401k and Individual Retirement Accounts (IRA) are similar in that they both are tax-deferred retirement accounts which can increase in value over time before funds are withdrawn and they both have restrictions on fund withdrawal. One difference is that the contribution limit is only ,000 a year for an Individual Retirement Account (IRA) while it is ,500. A 401k also has the possibility of employer contributions in addition to your personal contributions.
In general, it is a good idea to prefer your 401k plan over your Individual Retirement Account (IRA) due to the higher limits and employer contributions. Before using this as a hard and fast rule, it is best to review what types of investments are made within your employer sponsored plan and your Individual Retirement Account (IRA) and what type of contributions are made by your employer.
Comparison of 401k to Retirement Annuity
401k and Retirement Annuities are both tax-deferred accounts in which the funds are only taxed upon withdrawal. 401k retirement accounts have an annual limit of ,500 while a retirement annuity has no annual limit.
The main feature a retirement annuity has that a 401k does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.
It is generally a poor idea to invest in a retirement annuity rather than 401k due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.
Retirement Annuity
A retirement annuity is a defined contribution retirement account sold exclusively by life insurance companies. The earnings within a retirement annuity are tax deferred until withdrawal. Insurance companies can offer a variety of guarantees with their retirement annuity products, but these benefits come with extremely high fees.
Pros:
Tax deferred growth within account Guaranteed benefits No limits like a 401k or Individual Retirement Account (IRA)
Cons:
Extremely high fees Lack of liquidity, 10% early withdrawal penalty
The main benefits of retirement annuities are the guarantees that life insurance companies provide. These can include a guarantee that you will receive a minimum income per year after retirement and guarantees that the accounts value will be at a certain level in the future. The income earned within an annuity is tax deferred upon withdrawal providing a tax shelter for potential investment growth.
These benefits come at a cost. The fees charged on annuities can be extremely large and are highly criticized in the financial world. The total amount of fees charged on an annuity are around 3% a year, a far cry from the 1% a year charged by mutual funds directly. To read a more in-depth breakdown of retirement annuities and the fees charged, read our article on Retirement Annuities.
Retirement Annuities become advantageous when an individual is willing to deal with the 3% fees to acquire the potential guarantees.
Comparison of Retirement Annuity to Individual Retirement Account (IRA)
Both an Individual Retirement Account (IRA) and a Retirement Annuity are tax deferred retirement accounts. Unlike an Individual Retirement Account (IRA) which has a ,000 contribution limit, a retirement annuity has no contribution limits. Both accounts have a 10% penalty for early withdrawal.
The main feature a retirement annuity has that an Individual Retirement Account (IRA) does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.
It is generally a poor idea to invest in a retirement annuity rather than an Individual Retirement Account due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.
Comparison of Retirement Annuity to 401k
401k and Retirement Annuities are both tax-deferred accounts in which the funds are only taxed upon withdrawal. 401k retirement accounts have an annual limit of ,500 while a retirement annuity has no annual limit.
The main feature a retirement annuity has that a 401k does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.
It is generally a poor idea to invest in a retirement annuity rather than 401k due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.
Retirement Accounts Conclusions
Overall 401k retirement accounts provide the best variety of features for retirement. Individual Retirement Accounts (IRAs) are very similar to 401ks but lack the benefits of employer contributions and have lower contribution limits. It is best to deposit all funds available into your 401k until the limit is reached and if your income allows it, contribute the remainder into your Individual Retirement Account (IRA).
Retirement annuities are widely criticized and rightfully so. They provide a few features that may entice individuals to contribute but those features come at a very hefty price that isn’t associated with any other type of account. Retirement annuities should only be used if your individual life circumstances make the features they provide a worthwhile sacrifice of 3% in fees every year.
In addition, each type of 401k and Individual Retirement Account (IRA) is different based on who is providing the account. This would be either your employer for a 401k or a financial institution for your Individual Retirement Account (IRA). They all provide different ways in which to manage the investments within the fund itself.
Only general recommendations can be given about which of these three main types of retirement accounts are best for individuals. Decisions must be made in an informed way while taking into account very specific circumstances of the individuals planning their retirement and deciding which retirement accounts are right for them.
You can read more about retirement planning and retirement investing and how these accounts fit into your overall retirement goals.
The original article can be found here:
Retirement Accounts
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Retiring Baby Boomers:Is It Too Late to Learn New Skills?
There is such a lot of discussion around the subject of retiring baby boomers these day because of the fact that most don’t have enough of a nest egg to support themselves through the rest of their lives. Or mostly, support themselves with the quality of life they’re used to. Thanks to the Internet, there is a perfectly sound solution to this problem as I will discuss here.
In answer to the question I posed for retiring baby boomers, “is it ever too late to learn a new skill”, I believe the answer is “no”. I’ve been retired for a couple of years now and have had to provide myself with extra income because the pensions just don’t do it. Quality of life goes out the window. I admit, it is certainly taking me longer to catch on to the new Internet skills I’m learning now than it would have some years ago but it’s quite do-able with the right training.
Once I understood the concept (the big picture) of the whole thing and realized that human beings were writing the code on which it exists, then all I had to do was learn the commands to get where I wanted to go. I admit this a bit of a challenge sometimes, because one word can mean different things to different programmers. That’s why it’s essential to find a good Internet Marketing Coaching Program to keep you on track and interpreting those commands for you.
This is where, I’ve found, most people give up and decide the thing is beyond them. Very fortunately, I have stumbled upon an Internet Marketing Coaching Program whose whole purpose is to teach the skills you need for Internet Marketing in a full and interactive way. I can contact the people at this company and ask the most mundane question and they will patiently explain without any condescension. I also have an sponsor whom I can contact at any time to ask even more mundane questions with the same response.
Something I have found out through my sponsor is that the vast majority of people who are signing up to learn the new skill of Internet Marketing with this Internet Marketing Program are retiring baby boomers, fifty years and older. Is it because we “seniors” now have time on our hands to learn something new? Is it because we’ve run out of money beyond our pensions and need an extra income stream to be able to maintain a quality of life we aspire to?
For myself, it’s the latter, I need extra money so that I can travel and see my far flung children who, themselves, never have extra money to some to see me. So, I’m off on a new adventure and having a great deal of fun. All I have now is time and I’m filling it with the most rewarding activity – making money!
Retiring Baby Boomers is a website where you will discover the skills and find creative ways to make money at home. The extensive training in Internet Marketing know-how is a must for success.
Article from articlesbase.com
(Original Airdate: Friday, June 3, 2011) NBA Legend Shaquille O’Neal holds an official Retirement Press Conference at his Orlando, FL home after announcing to the world via Twitter that he is hanging up his size 23 basketball shoes after 19 NBA Seasons.
Video Rating: 4 / 5
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Available Assisted Living For Better Livelihood
In the speedy world today, it surely sounds nice to have opportunities for the older people or old aged persons to have a facility like assisted living which provides them a chance of having independent living in a resident home along with having nice quality assisted services related to basic ADL. ADL refers to ‘activities of daily living’. These events include your everyday actions such as eating, cleaning, washing, bathing, dressing, grooming, cooking and many others. You can proceed the assisted living services regarding medical aids for you or any of your loved one. Such homes that offer assisted or independent living facilities are by far unique than those of nursing homes. In addition, these do not provide immense medical services.
There is a long range of assisted living services including a stand alone residence to a one level of care in a continuing care independent living community. Continuing care retirement community is also often referred to as CCRC. The potential residents as well as their families will notice a much more appealing and pleasing physical environment. You will notice that an assisted living community comprises of an environment which is much like home and holds the same homely atmosphere. In addition, you can also find apartment styles in such communities usually containing one bedroom and studio models. There are small kitchens typically known as kitchenettes which normally, include a small refrigerator and a microwave. Sources for which Assisted living or independent living is traditionally, paid for include private funds. Nevertheless, there are always some exceptions. Sometimes, your insurance policy might also cover for assisted living especially, if it is a long term care i nsurance policy. Before paying for the assisted living servic you should always check to see if your or your loved one’s insurance policy covers such areas. The regulation of the assisted living or the independent living is performed at the state level. Being regulated at state level, makes every state accountable and authoritative to monitor their own policies which define as well as regulate the care, services and facilities that any assisted living community requires in order to meet the needs of individuals along with the standards of the state.
Similar to regular housing, the independent living housing also allows you to hire in – home assistance for your helping you out with your daily living activities. Nevertheless, in many scenarios an elderly person or a senior individual require round the clock assistance with their day to day living activities such as toileting, bathing, eating, walking around, cleaning or any other task then you he or she can get at an assisted living community. In an independent living community you will only receive assistance regarding daily life activities and not very wide medical help. Such kinds of facilities have made living exceptionally simpler and easier for elderly people who reach a certain age where they are unable to take appropriate care of themselves. Moreover, such communities provide them a chance to build new social networks and bonds.
Mr. Abernathy is an advocate for assisted living facilities throughout the United States. He supports several groups including Seniors Guide Online for senior citizens. For more information please visit our independent living website.
Article from articlesbase.com
This video explains what an Assisted living facility is and how they can help seniors with activities of daily living. Assisted living helps with medication management, memory care, and other cognative issues.
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Differences Between Nursing Homes, Assisted Living Facilities and Continuing Care Retirement Communities in Virginia
Benjamin Franklin said it best – “nothing in life is certain except death and taxes” but with daily advancements in science, technology and health care, Americans are living longer than ever before*. This blessing however, has created a unique dilemma for modern American families: How to plan for and prepare for one’s retirement years.
Have you taken a road-trip lately? Almost every highway is graced with large bill-boards providing the locations of new planned communities where couples can spend their retirement years dedicated to recreational pursuits. I doubt you will find a local newspaper that doesn’t have at least one ad promoting the amenities found at a local assisted living facility. Try to search for “nursing homes in Virginia” on the Internet and thousands of web pages will appear. Each and every day new facilities offering different programs are being built and marketed across the state.
Is such a facility right for you and your family? If so, which facility? We often hear the terms “retirement community,” “nursing home,” and “assisted living facility” but rarely consider what these terms actually mean. The differences however, are striking and it is imperative to understand these differences when making choices for yourself or your loved ones.
NURSING HOMES
In Virginia, a nursing home means any facility with the primary function of providing long-term nursing care, nursing services and health-related services on a continuing basis, for the treatment and inpatient care of two or more non-related individuals**. Put simply, a nursing home is a facility designed for someone who needs less care than a hospital, but requires daily health care assistance.
The Virginia Department of Health licenses such facilities and has established guidelines regulating various aspects of their operations, programs, and staffing needs, etc***. For example, a nursing home must: (a) have written policies and procedures regarding the treatment of residents and the management of resident care which are available to residents and their families (12VAC5-360-20); (b) provide emergency medical services within 15 minutes, under normal conditions (12VAC5-360-50); (c) be subject to unannounced on-site inspections of the nursing facility by State employees (12VAC5-371-60); (d) have a written agreement with one or more physicians licensed by the Virginia Board of Medicine to serve as medical director (12VAC5-371-230); and (e) each resident shall be under the care of a physician licensed by the Virginia Board of Medicine (12VAC5-371-240).
In addition, residents of nursing homes are also given certain rights as defined by Virginia Code §32.1-138. See http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+32.1-138. Nursing homes are the most regulated and structured residential options for our Seniors requiring some level of daily health care. If the facility provides care through Medicare and Medicaid programs, it is deemed a “Certified nursing facility” (Virginia Code §32.1-123; Virginia Code §32.1-127) and must be in compliance with both federal and state laws.
Of course, the more rules and regulations that define and control the daily operations of a nursing home, the greater the responsibility of the staff. These are the people who will be charged with the daily task of caring for your loved one, and making sure they are in compliance with state and federal laws. No matter how nice and or attractive the facility might be, the staff will make the difference between your loved one being cared for and encouraged, or not.
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A nursing home is best suited for someone:
Who requires daily health care – such as assistance getting in and out of bed; taking medicine; or using the restroom.
Who may have dementia or Alzheimer’s and as a result, is unable to eat and or bathe daily without reminder or assistance;
Who is recovering from a fall or accident and is therefore unable to walk, dress and or eat without assistance
ASSISTED LIVING FACILITY
“Assisted living facility” means an adult care residence which has been licensed by the Virginia Department of Social Services to provide a level of service for adults who may have physical or mental impairments and require at least moderate assistance with the activities of daily living. Within assisted living, there are two types: regular assisted living for those seniors (typically) who need assistance with one or more daily activity; and intensive assisted living for someone who may be incapable of performing activities due to mental and/or severe physical impairment (12VAC30-120-450).
The Virginia Department of Social Services licenses assisted living facilities but does not regulate in the way the Department of Health regulates nursing homes. While there are Virginia guidelines regulating aspects of assisted living facilities, they are limited: An assisted living facility must: (a) provide or coordinate personal and health care services; and (b) provide 24-hour supervision.
As reflected in the table below, assisted living facilities have no obligation to provide health care and/or have health care staff available to assist your loved one. In addition, with no obligation to provide such services, there is the question as to whether or not they owe a duty to warn or treat residents with illnesses or diseases that could be transmitted from other residents.
While a nursing home will have many nurses on staff and doctors hired to monitor the residents, assisted living is more analogous to an apartment building or college dorm where laundry and food services are provided and residents are on their own for the rest of the day.
An assisted living Facility is best suited for someone:
Who is basically independent but may not be able or willing to prepare their own food or drive to doctors’ appointments;
Someone who wants to scale back and anticipates needing assistance with laundry, cooking, etc. in the near future.
A couple where one spouse is independent but may need assistance in feeding and or providing for needs of other spouse.
CONTINUING CARE RETIREMENT COMMUNITY
In Virginia you may also see advertisements for a retirement community. They are popping up all around our favorite College Towns and Tourist destinations.
A Continuing Care Retirement Community provides care depending on your current needs. Like an insurance policy, the resident pays an entrance fee and periodic adjustable payments, which in turn gives the resident a package of residential and healthcare services that the CCRC is obligated to provide at the time these residential and health care services are required. For example, if upon entering, all you want is help with your meals, that is the only service which will be provided. If you require intensive physical therapy or God forbid, daily assistance for a Dementia patient, the CCRC has assisted living services or nursing home services available under your contract. Continuing care contracts are regulated by the Virginia Bureau of Insurance of the Virginia State Corporation Commission.
Many CCRCs can have nursing home services available either on-site, or at licensed facilities off-site (12VAC5-360-10). While you may be entering the Retirement Community as a very healthy independent and capable resident, as your needs change, so will your contract with the Community and in turn, the facility’s obligations to you.
A Continuing Care Retirement Community Facility is best suited for someone:
Who is basically independent but anticipates the need for daily health care for themselves or a spouse in the near future;
Someone who is physically disabled and would be unable to care for themselves or a spouse if the disability grew worse.
With at least three very different choices, it is very important to do your research:
To research assisted living facilities in Virginia, go to Department of Social Services website: http://www.dss.state.va.us/facility/search/alf.cgi.
To research nursing homes, go to Medicare’s website: www.medicare.gov.
AND LAST BUT NOT LEAST
It is always best to speak to a family member of a current resident and spend time getting to know the staff, no matter what type of facility you are looking into. If looking and researching is not enough, then consider the chart below – a comparison of the legal duties of a nursing home compared to the legal duties of an assisted living facility in Virginia.
DUTY or REQUIREMENT
NURSING HOME
ASSISTED LIVING
Duty to provide nursing care and or monitor resident’s health?
YES
NO
Doctor required to supervise residents?
YES
NO
Each resident shall be under the care of a physician licensed by the Virginia Board of Medicine?
YES
NO
Must have nurses on staff?
YES
NO
Must offer rehabilitative services?
YES
NO
Must have ongoing consultation from a registered dietitian or dietitian on staff?
YES
NO
24 Hour Supervision required?
YES
YES
Must develop a written plan upon admission of resident?
YES
YES
Staff must undergo criminal background check?
YES
YES
Monitored by Virginia Center for Quality Health Care Services and Consumer Protection
YES
NO
Monitored by Department of Social Services
NO
YES
*Life expectancy increased dramatically during the past century, from 47 years for Americans born in 1900 to 77 years for those born in 2001. These same factors—improved medical care and prevention efforts— that are partly responsible for the dramatic increases in life expectancy have also produced a major shift in the leading causes of death in the United States in the past century, from infectious diseases and acute illnesses to chronic diseases and degenerative illnesses.” The State of Aging and Health in America 2004, published by the Center for Disease Control, available at http://www.cdc.gov/aging/pdf/State_of_Aging_and_Health_in_America_2004.pdf.
**See generally, Virginia Code §32.1-123, as amended and Virginia Administrative Code § 12VAC5-360-10.
***It is a Felony under Virginia law to operate a nursing facility without a license. See generally, 12VAC5-371-30.
Lauren Ellerman is an attorney with Frith Law Firm in Roanoke, Virginia. She concentrates her practice on medical malpractice, nursing home abuse, nursing home neglect, lead paint poisoning, and business torts. You may view her complete profile at http://www.frithlawfirm.com/lauren.htm and the firm’s home page http://www.frithlawfirm.com
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Paying for Assisted Living
As more Baby Boomers – 77 million strong – begin to slide into retirement, the term “assisted living” is going to be on the lips of everyone from financial planners to family physicians.
Assisted living gives older adults a safe, sanitary and supervised living space to spend their sunset years. The number of Americans with an assisted living facility in their future is on the rise – the U.S. Census Bureau estimates that the population of Americans 85-years-and-older will grow by 33% by 2010.
In addition, the U.S. Census Bureau estimates that approximately 6.5 million older people currently need assistance with daily living activities. The Bureau reports that number is expected to double by 2020.
With great numbers, however, comes great financial responsibility. How, after all, are people going to pay for assisted living services? Let’s take a look:
What does assisted living cost?
The Census Bureau estimates that, on average, the per-diem rate for assisted living in a private room is about 60%-to-70% of the cost of a similar-sized room in a nursing home. That could mean a bill of between and 0 per day- and a good-sized case of sticker shock for potentially millions of Americans.
How can you pay for assisted living?
There are several sources of funds commonly used for paying for assisted living: Private funds, long-term care insurance, or sometimes veterans benefits. Private funds can come from personal investment portfolios, like 401k plans or Individual Retirement Accounts. Many people sell their homes, using equity that has built up over their lifetime, to pay for assisted living.
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Seniors who do not want to sell their home may consider paying for services through a reverse mortgage, where long-time homeowners essentially borrow against the value of their home. The U.S. Department of Housing and Urban Development has a good analysis of reverse mortgages.
Long-term care insurance – an umbrella term for insurance that covers nursing home care, home-based health care, assisted living health care (in addition to other medical services) – can help shoulder the cost of assisted living for those who have a policy with a few restrictions:
For example, most long-term care insurance policies won’t cover the costs unless you are unable to perform two or more “activities of daily living” (ADLs). Some examples of ADLs include bathing, dressing, eating, getting from a bed to a chair, using a toilet, and walking. Some insurers may evaluate with a physician of their choice – not yours – to see if your condition qualifies for coverage.
The type of long-term care policy is critical, too. For instance, a “facility-only” policy covers care received in a licensed Assisted Living Facility or Skilled Nursing Facility, but not care in an unlicensed facility or in your home. Better to get an Integrated Home Care policy with 100% protection for care received either in a licensed Assisted Living Facility or Skilled Nursing Facility, or in an unlicensed setting, like your home.
In some cases, veteran’s benefits can cover the costs of assisted living programs. To qualify, you’ll need your military discharge papers (copies are fine); a valid medical condition (like blindness – but the condition need not be life threatening) that comes with a doctor’s letter of validation, certain minimum financial asset conditions, and the filing of a formal application, called the Veteran’s Application for Compensation and/or Pension, VA FORM 21-526, Parts A, B, C, and D.
Does Medicaid cover assisted living?
While Medicare won’t pay for assisted living care, in some cases, Medicaid will. Specifically, Medicaid may pay for an assisted living stay of limited duration (mostly 90 days or less). But there are factors that could reduce or stop Medicaid from paying during that time period (for example, your physical condition hasn’t improved during your assisted care facility stay). Payment statutes vary from state to state, and with Medicaid, financial help with assisted living costs is highly needs-based, i.e. the less money you have, the better chance you have.
SeniorHomes.com is a free resource for people looking for senior housing or senior care for a loved one or themselves. Browse valuable articles to help you through or search or find assisted living, independent living, Alzheimer’s care, or a retirement community with our nationwide directory.
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