Budgeting and Financial Planning for Assisted Living

Planning ahead can bring peace of mind. Whether preparing for your own future or helping an aging parent, having a clear financial plan makes it easier to manage expenses—especially when it comes to assisted living.

Even if everything is going well today, life can change quickly. Health needs may shift and healthcare costs are expected to keep rising. That’s why building a flexible, thoughtful budget now can help you stay prepared and make the most of your retirement savings down the road.

Steps to Create Your Budget

Financial planning for assisted living in advance can ease stress and give you a clearer picture of what’s financially possible—so if a major life decision, like moving into a senior living community, becomes necessary, you’ll already have a plan in place. Here’s how to create an effective budget:

1. Understand the Costs 

If you’ve asked yourself, “How much does assisted living cost and can I afford it?”—you’re not alone. Cost is a concern for many families, but fortunately, it is much more affordable than you think, especially when you compare it to the real costs of remaining in your house.

According to the National Investment Center for Seniors Housing & Care (NIC), the average monthly cost for assisted living is $5,350. Monthly costs typically include rent, utilities, maintenance, meals, activities, and personalized support and care.

The cost of assisted living can significantly vary depending on the size of the community, services and amenities offered, and the amount of support and care needed. Location and factors like city, state, and even neighborhood, influence prices, so it’s essential to research communities in your area to have an accurate idea of the cost.

2. Start Saving Early

The earlier you start planning, the more time you have to save money, make it grow and figure out what works best for you or your loved one. Starting early also means your money has more time to grow on its own. Some planning tips:

• Maximize retirement savings. If you’re still working, be sure you’re contributing to retirement accounts such as 401(k)s, IRAs and other investment vehicles as a way to secure your financial future. If possible, take advantage of employer-sponsored retirement plans and make regular contributions to these accounts.
• Downsize and reduce debt. As retirement approaches, downsizing your home can help reduce expenses, free up equity and reduce housing-related costs (like maintenance, yard work, etc.). Additionally, reducing or eliminating debt creates a more stable financial situation.
• Set aside funds specifically for future expenses (or emergencies). Creating a separate savings account specifically for senior living or healthcare costs can provide a financial cushion should the unexpected happen.
• Consider long-term care insurance. Long-term care insurance can be a valuable tool for protecting and stretching your assets.

3. Review Funding Options

Most people cover assisted living costs using a combination of sources, such as proceeds from a house sale, private insurance, and personal savings and assets. Programs like the Veterans’ Aid and Attendance program may also help offset costs for eligible veterans and their spouses. While Medicare and Medicaid don’t typically pay for room and board, Medicaid and community-based waivers may help low-income seniors with some costs in certain states, according to the National Council on Aging.

4. Create the Budget: 

• Set financial goals. According to US Health News, considering your desired quality of life and the kind of care you want helps you assess what’s realistic based on your budget. Think about where you want to live, what services are essential and what amenities will enhance your life.
• Evaluate your finances. Take a close look at your net worth. Calculate your monthly retirement income from all sources (pensions, annuities, stocks, Social Security, etc.). Knowing what comes in each month gives you a clear picture of what you can afford.
• Use budgeting tools. Take advantage of online tools like Roobrik, which can help you estimate assisted living costs and potential financial needs.
• Seek advice from professionals. Regular financial reviews with a professional financial advisor or estate planner can help ensure you stay on track and evolve your plan as needed to keep you prepared for any changes in your health or finances. Remember, if your situation changes, so should your budget.

Enjoy a Secure Future

Budgeting for assisted living doesn’t have to be overwhelming, but it should ideally begin well before it’s needed. You can ensure a comfortable and secure future by evaluating your financial situation, exploring funding options, collaborating with financial advisors, legal experts and family members, and implementing practical budgeting tips.

Ultimately, it’s about finding the right balance between financial stability and the quality of life you desire as you age. By taking the time to plan now, you can make informed decisions that will give you peace of mind regarding your financial well-being tomorrow.

Find Community

Whether you’re searching for yourself or a loved one – now or in the future – our community locator tool can help you find an assisted living community that’s right for you.

Where You Live Matters

Where You Live Matters is powered by the American Seniors Housing Association (ASHA), a respected voice in the senior housing industry. ASHA primarily focuses on legislative and regulatory advocacy, research, and educational opportunities and networking for senior living executives, so they can better understand the needs of older adults across the country.