Can I Afford Assisted Living?

There are different models, types, and prices of assisted living communities. You should pick the best one you can afford. Some are very expensive and offer a lot of amenities, more affordable communities offer fewer. The choice of community is always affected by your finances. Here is expert advice from an experienced Executive director about the financial aspects of choosing an assisted living community.

More is Included. Is assisted living more expensive than other residential settings? In general, the answer is yes. This is mostly because state regulations mandate a basic set of services that are provided to assisted living residents that are not included elsewhere, such as dining, laundry, housekeeping, and activities. These services provide a lot of value and their cost is usually included in the rent.

Assisted Living is expensive and will always cost more, year after year.[1] The cost of labor, food, water, electricity, maintenance, capital investment, insurance, and compliance increase every year and these increased costs are always passed on to residents.

Residents are not required to accept most services, but communities will not make individual financial arrangements that reflect your individual consumption or daily utilization. Many residents will claim not to need certain services, or will refuse them, but most residents are usually pleased once they begin to enjoy the benefits.

Assisted living communities also make personal care services available, which can be initiated or terminated when they are needed with almost no advance notice. Personal care services, such as assistance with bathing, dressing, and medication management are generally unavailable in retirement living and many independent living settings. Personal care services are always charged in addition to the charge for rent. Some assisted living residents do not need personal care so they are not charged for it. As residents age, personal care needs usually increase, and so does the cost of personal care.

Private Payment. Assisted living is not considered health care and therefore is not funded by health insurance. Most elders who choose assisted living fund the cost privately, from their retirement savings, and a combination of Social Security, pension, veterans’ benefits, or family financial support.

You will have to decide whether or not you will have the resources needed to sustain your residency over your expected lifespan. There are life expectancy calculators you can use because your life expectancy can vary by known factors.[2]

When you move into an assisted living community you sign a legal and contractual agreement, as a tenant to lease an apartment. Assisted living communities are highly regulated and must therefore abide by state regulations that will also apply to you. The agreement will incorporate these regulations.

Many of the regulations govern the financing of assisted living, including rate increases, such as how they must be communicated, and when they can be applied. Even though they are regulated, as private enterprises, assisted living communities have the right to charge whatever they want for their rent and care. But the financial relationship between the community and its residents is regulated by the state.

Assisted living rates are expected to increase 4.4% annually through 2026.
-Genworth Financial        

In California, for example, regulations require that residents receive not less than 60 days written notice in advance of any fee increase.[3] Regulations do not limit how much an increase can be or how often rates can be increased. Because assisted living communities are state regulated, local rent control ordinances do not apply.[4] It is possible that residents could receive several fee increases a year, any of which could be exorbitant. Over the next few years, assisted living rates are projected to increase on average about 4.4% per year.[5]

The majority of elders expect to pay their monthly bill from their retirement income. Many will finance their residency from the sale of their home, investments or other assets. Many receive the assistance of family members, especially from their children. People who have planned wisely for their retirement will have the resources they need to afford most assisted living communities. Assisted living was always intended to be a less-expensive alternative to skilled nursing care[6], and it remains so. But there is no denying that assisted living is expensive.

Long Term Care Insurance. There are long term care insurance policies that are available for purchase from reputable insurers. Many employees, especially public sector employees, enjoy long term care insurance as part of their employee benefit package. Long term care insurance policies pay a monthly cash benefit to the beneficiary that can be used to defray the expense of assisted living. This means you use can your benefit at any community you choose, as long as they are appropriately licensed and staffed.

Each long term care insurance policy is governed by its own terms and conditions. Generally, they pay monthly, for a fixed number of months or for a lifetime. The insurance carrier will probably require your assisted living community to provide a certification of the services it provides to you, and your continuous presence in the community. The assisted living community may charge you a fee for providing the monthly certification. Some long term care policies will not pay a benefit for days on which the resident is away from the assisted living community, on vacation, or in the hospital.

Many long-term care insurance policies incorporate a “deductible” or an initial period of time, usually several months, during which the benefit payable is $0. During the deductible period, there will be a process of initializing the insurance claim and setting up the regular receipt of monthly payments. Once the deductible period is expired, you should begin to receive a benefit payment each month.

The assisted living community will have no interest or responsibility for your long term care insurance policy other than providing the information and monthly certifications required by the insurance carrier. If there is a problem or delay in processing your long term insurance claim, you will still be responsible for paying the monthly invoice. Be sure that the assisted living community has a good reputation for processing long-term care insurance claims promptly. Ask about any additional charges for this service.

Monthly Invoice. The monthly invoice will show charges that are due and payable that month. Some of the charges will be invoiced in advance. These are generally charges for rent and charges for personal care, if any. Charges in advance are usually predictable and rarely change month-to-month.

If there are changes in rent or care charges, you will see corrections made to your account on the next monthly invoice. Sometimes these are increases or decreases in charges. Sometimes these are removals or reversals of charges. And sometimes these are corrections to charges made to the account previously.

For example, if there is an increase in rent the rent charge will be higher on this month’s invoice than last month’s invoice. If there is a decrease in care, the care charge will be lower on this month’s invoice than last month’s invoice. If this change occurred in mid-month then you may see reversals or corrections to care charges on last month’s invoice that were made in advance.

Some of the charges are not made in advance but are charges-in-arrears, meaning after the related service has been provided. These charges include items such as guest meals, supplies, or emergency services that are not planned in advance.

Because the invoice includes charges-in-advance, charges-in-arrears, and corrections, the invoice can be confusing. Some residents will need help to understand what they are being charged. Assisted living communities want residents to understand their invoice to cultivate the confidence of residents in billing accuracy and fair treatment.

Communities are happy to make arrangements to have another party receive a duplicate invoice to ensure that it is paid. Many assisted living communities offer an electronic withdrawal program (Automated Clearing House or ACH) that will automatically deduct the balance due on your invoice directly from your bank account. This way the monthly invoice is always paid and there is never a risk of a late payment incurring penalties or interest charges.

You Have to Pay the Monthly Bill. If you do not pay your monthly bill, sooner or later, you will have to move out. This is something you will want to avoid, as it will make you a less attractive candidate at your next community. Do not move into a community that you cannot afford! Moving is difficult and unwelcome transitions can have negative impacts on your emotional and physical health.

Hopefully you like your current residential setting, and will be able to financially sustain it as long as you like. Most assisted living communities will act quickly to end your residency if you do not pay the bill on time and keep your account current. This is not because the communities are greedy, but because they cannot operate without receiving the payments that you and the other residents have promised.

If you do not keep your account current, most communities will ask you to make a financial arrangement to bring your account current or to agree to move to another community. Some assisted living communities may initiate proceedings to evict you. There are regulations governing the eviction process and in some states, eviction requires a court trial and order from a judge.[7] Many communities will help you find a more affordable place to live. Some communities offer a charitable care program to help fund costs that are not affordable. They do not want to evict you if they do not have to. They do not wish to make unnecessary trouble for their residents.

The assisted living community will require you to pay their fees every month. The community will issue you a monthly invoice. Even if you pay the invoice, the community may impose a late charge and/or an interest charge if you do not pay on time. Not paying the monthly invoice on time can result in unnecessary and wasteful expense. Failing to keep your financial account current is one of the main reasons a community will ask you to leave.

Why Are You Moving? Some assisted living residents made a careful plan before they moved from their home. They did a lot of research and spent time visiting assisted living communities to pick the right one. They were able to take time to ask questions, get to know the community, and to grow comfortable with the staff. The result of this kind of thorough selection process is a resident who is a better fit for the community, enjoys an extended residency, and who is more satisfied with their new living situation. But sometimes even after a thorough process, it turns out the selection was not a good fit. Below, we discuss how to end a residency.

Other assisted living residents do not make a plan. They move from their home because they had to move, they had no choice. Perhaps there was a medical emergency that permanently changed a person’s functionality, and now they need more care than can be provided at home. These residents transfer to an assisted living community directly from an acute care hospital or skilled nursing facility without ever having a chance to visit the community before moving in and without ever exercising choice. Sometimes the financial suitability of a community simply cannot be addressed in the moment, and placement must be obtained where it can be found without regard for the initial cost. In these cases, the matter of financial suitability must be addressed after any immediate medical or rehabilitation need is satisfied.

Making the Decision. Once you have selected an assisted living community, the financial move-in process begins. You will make an agreement with the assisted living community to rent a certain apartment at a certain rent beginning on a certain date.

Many people think that once they have made their selection, the decision has been finalized, but you are only submitting an application for residency. The assisted living community may accept or reject your application. The assisted living community has the final say whether they want you to join their community. Even if you are financially suitable, you must also be clinically suitable for moving in.

Often, residents will say they are “not ready” to move in and delay their decision without realizing that someone else who also likes that community may reserve a desirable apartment first. The community will not accept your application and will not reserve an apartment for you until you have paid a deposit or “community fee.” Do not lose an apartment that you like, in a community you like with unnecessary delay! Consider moving forward even if you are not sure. You can always change your mind later.

Negotiate Your Fees. The community fee varies widely from community to community and is known by a variety of labels. The community fee is a non-refundable charge to initiate the move-in process. Many senior living providers use the community fee as a marketing tool so it is worthwhile to ask the sales representative about sales specials that are available. Sales discounts are routine in assisted living and local communities may compete for your residency by reducing the community fee and the rent fee.

Always ask for elimination or reduction in the community fee! The community fee is refundable in part if a new resident moves out in the first few months. A wise assisted living community will refund the entire amount you paid should it reject your application, or if you change your mind, even if they are entitled to keep it, in whole or in part. Again, the assisted living community is interested in making sure that residents it does not accept still tell others good things about their experience.

The community may be more willing to negotiate the community fee or rent charge if they are under-occupied or in a competitive market. If you are considering more than one community, you can feel free to let the competitors know about offers or incentives you have received. They will be grateful to have the competitive information and also know what they need to do to earn your business. This is not the same as haggling over a used car, but negotiating charges is common.

Most assisted living communities will not negotiate personal care charges. Senior living providers are also less willing to offer discounts to residents who need to move in quickly or have a lot of care needs.

As part of the process, the community will share with you its recent history of rate increases.[8] You can use this history to develop a reasonable expectation of how much the community’s rates are likely to go up in the future.

The assisted living community will not hold an apartment for you indefinitely without collecting rent. In general, the community will only hold your apartment for a month at most, even if you paid a community fee. Why? Because they are in the business of renting, not reserving apartments. If they let you reserve an apartment, they will not be able to rent to someone else who may want to move in and pay rent sooner. The community may insist that you take possession of the apartment and responsibility for paying rent shortly after you pay the community fee.

Assessment Process. At this point in the process you have selected your apartment, made an agreement on monthly rent and community fee, scheduled a financial possession date, and submitted your application documents. The next step is to conduct an assessment of your financial and clinical suitability for residency. The community will ask you to complete many forms and provide a lot of financial and health information.

Some communities may conduct an extensive review of your financial status, and ask you to submit tax returns, 1099s, bank and brokerage statements, and other information. They will want to assess your ability to meet the typical expenses of a resident in their community. They do not want to admit a resident who will be unable to carry the financial burden of residency. Communities will use a variety of methodologies for financial analysis. Some communities conduct no, or cursory, review and depending on how much they need to rent the apartment, will admit residents without regard for their financial means.

Assisted living communities will allow third parties to assume or share financial responsibility for a resident. Most often the third party is a spouse or child of the resident. This allows the community to incorporate the assets and income of the third party in conducting its financial assessment. The assisted living community may or may not require the third party to execute an instrument that amends the residency agreement, depending on the exact nature of their relationship and its legal basis, if any.

For every resident who is admitted, a responsible party must be identified and recorded, even for residents who are completely independent. This is because the community is required by regulations to notify a responsible party of certain events, such as illness or injury.

Persons who have diagnosed dementia are not permitted to execute legal instruments and their signature is not considered valid. Therefore in memory care admissions, there is always a third party who not only executes the agreements but is also financially responsible for the monthly invoice.

Health Assessment. The assessment process includes a health assessment. The health assessment should be conducted by the clinical leadership of the community or if not, by the executive director. The end result of the process is a decision whether to accept or to reject your application for residency, a proposed care plan, and initial estimate of personal care costs.

The foundation of the health assessment is the “physicians’ report.” The assisted living community will provide you with a form that your physician will complete and sign. This form provides the physician’s consent for your residency, which is required by regulation in most states.[9] The form is used by your physician to provide a basic health history, clinical diagnoses (if any), treatments, and pharmacy. The physician will also provide the assisted living community important guidance on your needs for personal care.

Information from your physician is very important to the process for the assisted living community to create an ongoing relationship with your health care provider. Good communication and response from your physician is key to provide continuity of care. You must have and remain on a local physician’s service or health care practice throughout your residency and you should plan to have the physician’s report updated every year at your annual checkup. If you do not have a regular health practitioner, you will need to get one.

The assisted living community will conduct its own health assessment process and ask you to provide a self-report of your own health and personal care needs. The community wants to have all the information it needs to help you, and to share with first responders in case you have a medical emergency.

In deciding whether to accept your application, the assisted living community wants to be assured that it can render the care you need, now and in the future. If your current needs exceed the community’s capacity to provide care for you, or if your health care trajectory means your needs will soon exceed it, the community is ethically obligated to reject your application for residency. If the community cannot care for you properly, you should continue the search for a community that can.

Applicants for residency may think it is wise to obfuscate their health history or deny health care needs, perhaps in order to minimize expenses. This is a recipe for disaster and should always be avoided. In most cases, the assisted living community is obligated to provide the care – in its sole determination – that you need. Whether or not you agree that you need the care, if it is provided, you will be obligated to pay for it. Therefore it is best to be as honest and forthright as possible in providing accurate health information.

Children should exercise caution in providing health and personal care information about their parent, unless they -share a residence with their parent, -have direct access to the parent’s health record, and -are personally familiar with the parent’s care needs. Children or others who are not as well-informed may provide information that is inaccurate, outdated, or colored by opinions, memories, or emotions.

Your need for personal care will change over time and the health assessment process will be conducted periodically or whenever there is a clear change in your condition. The health assessment process is the foundation upon which your service plan will be created.

If there are questions about the health information or clarifications needed, the community may reach out to you or your physician. It is important to react quickly to these requests because getting responses from the physician is typically the most time-consuming part of the process. If the community does not get timely responses, your assessment process will be lengthened. The assisted living community may ask you to contact your health provider to follow up. The answers may determine whether or not the assisted living community will accept your application.

Personal Care Plan. If the assisted living community is going to accept your application, it will propose a plan for your personal care, if any, and tell you how much the care will cost. The community should explain how the cost of your care plan is determined and how you can expect costs to change as your needs change.

You have some leverage over portions of the plan but not others. For example, most communities allow residents to select the frequency of bathing or other care. But there are some areas over which residents have no control.

Medication management is one element of personal care that is clearly outside the control of residents. In order for residents in assisted living communities to manage their own medications, they must have the approval of both their physician and the assisted living community. Spouses or other family members are never permitted assist residents with their medications.

In California, medications include -prescription medications, -over-the-counter medications (e.g. Melatonin, Tums, Tylenol, Gas-x, Ibuprofen, and Metamucil), -nutritive supplements (e.g. Boost, Glucerna), and -non-nutritive supplements (e.g. Vit. D, St. John’s Wort.) For any resident, including residents who are NOT enrolled in medication management program, all of these are considered medications that must be prescribed by a physician. This means for every medication that is taken by a resident, a doctor has to provide a written order and signature as if it was a prescription. These prescriptions are kept on file as required by regulations, and used by the community as needed to reorder, store, and administer medications in accordance with the doctor’s orders.[10]

If residents are unable to manage their own medications, for whatever reason, the resident must be enrolled in the assisted living community’s medication management program. If you are enrolled in medication management, this service will be included in your personal care plan.

Ending Your Residency. Regulations make it easy for any assisted living community resident to terminate the residency. Simply by giving the assisted living community not less than a 30-day written notice, financial responsibility for the apartment can be concluded. This notice does not have to be given on any certain day of the month.

The community should facilitate transfers, including a reduction in the 30-day financial responsibility period if a vacated apartment can be turned around and re-rented quickly. Remember that the assisted living community has an interest in happy former tenants who tell others that they had a good experience, and should not retaliate in any way for your decision to depart.

If a resident passes away, financial responsibility concludes the day after the apartment is fully vacated. So family members have financial incentive to remove a decedent’s property promptly.

Most communities will appreciate as much advance notice of termination as you care to provide. And if your plans change, most communities are happy to have you extend your stay, as long as you pay the appropriate daily rate. Unless your apartment has already been rented, they will be happy if you change your mind and decide to stay.

When a residency is concluded, the assisted living community will issue a final invoice to close out your account. Communities have rules that govern what is refundable and what is not, depending on when the resident is physically removed or absent from the community. Many communities will charge personal care services for only the initial 14-day period of an absence, so residents who are departing a community may be able to save some money by moving out before the 30-day notice expires.

There are also regulations requiring the partial refund of any deposits or community fees that were paid if the residency is terminated soon after it begins.

Go or No Go. At this point in the process, the community will have received all the financial and health information it needs to assess your residency. You know how much initial rent will cost and how much initial care will cost. You understand how the community determines care charges and you know how much fees have increased the last few years. You have found a community and apartment that you like, and how much it will cost initially, and an idea of what the next few years will cost. The community has accepted your application and wants you to move in. Are you ready?

how long your residency is likely to last: 
in your 70s? a residency will last 10 years
in your 80s? a residency will last 5 years
in your 90s? a Residency will last 3 years        

My recommendation is that you calculate the predicted costs of the first 12 months of your residency. Then, for each of the following years, increase that cost by a factor to reflect regular annual rate increases. Genworth Financial’s cost estimator uses the “rate of inflation” as its increase factor. In my experience, increases have tended to exceed the rate of inflation. Also consider the current economic outlook is more inflationary than in years past.

Therefore, I recommend using 10% as an increase factor, unless you have better information from the community. Then, consider your age and health status in determining how your own care costs are likely to increase, but I recommend using a 10% inflator for personal care cost element as well. Even if your care cost does not increase, including a yearly increase in your calculation will help you to plan for an increase in the cost of care as well as any increase in personal care need you may have.

Rule of Thumb. You should have enough assets or income to cover at least ten years of residency if you are in your 70s, 5 years if you are in your 80s, and 3 years if you are in your 90s.

The average length of stay in an assisted living community is 22 months.[11] However, in my experience this average is the result of a very wide variation in the duration of stays. Some residents stay a matter of days or weeks, others make their home in an assisted living community for many years. You will have to make an educated guess as to how long you expect your residency to last.? ///

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[1] Genworth Financial's 2023 data indicates that the estimated median assisted living cost in the U.S. is $4,774 per month, which translates to $57,289 annually. https://www.consumeraffairs.com/assisted-living/statistics.html and https://www.genworth.com/aging-and-you/finances/cost-of-care.html

[2] A Social Security longevity calculator is found at https://www.ssa.gov/oact/population/longevity.html

[3] 8 California Code of Regulations (CCR) 22 §87468.2 and Health and Safety Code §1569.655

[4] California Health & Safety Code §1569.147(b)

[5] Genworth Financial estimated in 2021 that over a 5-year period the costs of assisted living would increase 4.4% annually. https://pro.genworth.com/riiproweb/productinfo/pdf/131168.pdf Given the increased inflation in recent years, this figure probably underestimates actual increases.

[6] The median cost of nursing homes nears $9,000 per month for a private room. https://www.consumeraffairs.com/assisted-living/statistics.html

[7] 8 CCR 22 §87224

[8] California Health and Safety Code §1569.658

[9] 8 CCR 22 §87458

[10] 8 CCR 22 §87465

[11] https://www.consumeraffairs.com/assisted-living/statistics.html