Aging in Place vs. Assisted Living: The Financial Considerations
As you plan for your later years, one of the biggest decisions you may face is where to live. Many older Americans prefer to stay in their own homes or downsize to an apartment or smaller home, a concept known as aging in place.
Others opt for assisted living, which refers to specialized elderly care facilities that provide additional care and social opportunities.
“Each option comes with its own financial considerations, as well as emotional and lifestyle factors that can influence your overall well-being,” says Robert Cavanagh, Senior Vice President, Investments at David Lerner Associates, Inc. “Understanding the costs, benefits, and strategies for funding these choices is essential to making the right decision.”
The Costs of Aging in Place
Aging in place can be an attractive option for those who value independence and familiarity. A study by AARP found that 90 percent of adults aged 65 and older prefer to remain in their own homes as they age rather than move to a nursing home or assisted living facility. However, staying at home comes with expenses that may increase over time.
Some of the key costs to consider include:
- Home Modifications: Installing ramps, stair lifts, and bathroom safety features can be costly but necessary to maintain accessibility.
- In-Home Care Services: Hiring home health aides or personal care assistants adds ongoing expenses that can vary based on the level of care needed.
- Maintenance and Utilities: Keeping up with home repairs, property taxes, and utility bills can become more challenging as you age.
While aging in place may seem more cost-effective than moving to an assisted living facility, unexpected medical needs and rising in-home care expenses can shift the financial equation over time. According to Genworth’s Cost of Care Survey for 2023, the annual median cost for a home health aide is approximately $75,500 , and expenses can quickly escalate if round-the-clock care is needed.
The Costs and Benefits of Assisted Living
Assisted living communities offer structured support and social engagement, including planned activities, 24-hour medical staff, and assistance with daily tasks, but they come at a price.
The national annual median cost for assisted living is approximately $64,200 , depending on location and level of care.
Key financial considerations include:
- Monthly Fees: These cover housing, meals, utilities, and some basic medical services.
- Additional Care Costs: Services such as medication management, specialized memory care, and personal assistance may require extra fees.
- Financial Predictability: Unlike homeownership, where unexpected repairs can arise, assisted living offers a more predictable monthly expense structure.
For individuals who require ongoing medical supervision or struggle with daily tasks, the comprehensive nature of assisted living may justify the high cost.
Financial Strategies for Covering Costs
Regardless of the choice you make, having a financial strategy in place is crucial.
Starting early allows you to take advantage of compounding investments, avoid last-minute financial strain, and ensure that unexpected expenses don’t disrupt your plans. Many individuals underestimate long-term care costs or rely solely on savings, which can lead to financial difficulties later in life.
Some common ways to fund long-term living arrangements include:
- Long-Term Care Insurance: Policies can help cover in-home care or assisted living expenses, but premiums and coverage vary.
- Home Equity Options: Selling a home, taking out a reverse mortgage, or leveraging home equity can provide funds for care.
- Personal Savings and Investments: Structuring retirement savings to account for potential long-term care expenses can offer financial flexibility.
Working with an investment counselor can help you explore these strategies and determine the best course of action for your individual circumstances.
Plan for Change
Choosing between aging in place and assisted living is a highly personal decision that depends on financial resources, health needs, and lifestyle preferences. Understanding the full scope of costs and potential benefits can help you make an informed decision that aligns with your long-term well-being.
If you’re unsure which senior care option is best for you or a loved one, consider speaking with an investment counselor to review your financial options. Schedule a consultation with David Lerner Associates today to develop a strategy tailored to your needs!
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.