How to Pay for Independent Living: Costs and Funding Options

Now that you’ve started looking at independent living communities, you might be feeling a bit of sticker shock with the price. However, you have to admit that those amenities and services are awfully hard to resist. Here’s some good news: while independent living can seem expensive, once you take time to break down what those monthly costs cover, you will likely find that it can be attainable for you at this time during retirement.

Independent living is not covered by Medicare, long-term care insurance, or Medicaid. Most residents use private funds to pay, leveraging a combination of retirement income, savings, and proceeds from selling their home. Let’s dive into your options for paying for independent living so that you can enjoy the services and amenities without compromising your retirement plans.

How Much Does Independent Living Cost?

Independent living communities vary greatly in cost, and while some sources state costs range from $1,300 to $6,000 monthly, there is no single national average price. The expense can increase or decrease based on location, size, amenities, and whether the community uses a rental or entrance-fee model.

To determine whether you can afford independent living, start by finding the price for at least 5 independent communities in your desired location. This will help you begin your financial planning process. Then, begin to explore options for paying the monthly fee, including personalized financial services, VA Aid and Attendance, and life insurance settlements.

What Is Usually Included in Independent Living Costs?

One of the best things about independent living costs is that they are almost always nearly all-inclusive. While pricing and inclusions vary by community and contract, it is common for costs to include:

• Apartment or residence costs
• Some utilities
• Home maintenance
• Dining
• Transportation services
• Wellness programs
• Activities and events
• Security and emergency response

Other upgrades can include additional meals, upgraded floor plans, parking, storage, and salon services.

What Factors Affect the Cost?

Costs of independent living can vary from community to community based on factors such as:

• Location and expenses associated with the local housing market (you might expect to pay more in a large city than in a small, rural area)
• Floor plan size, layout, and finishes (a studio apartment will likely cost less than a 2-bedroom model)
• Dining program selection (a dining plan that includes 3 meals daily will cost more than a plan that includes 1 meal per day)
• One-time “buy-in” fee, which is common in some types of continuing care retirement communities (check your contract terms and ask any questions before signing)

How Do Most Seniors Pay for Independent Living?

Seniors who reside in independent living pay privately. Insurance, Medicare and Medicaid do not pay for independent living, so seniors use their own money to pay for expenses. Most seniors combine more than one asset source rather than relying on a single benefit in order to pay their monthly costs.

Social Security, Pensions, or Retirement Income

The most common payment source for seniors living in independent living comes from their social security, pension, and/or retirement income. This predictable monthly stream of income can cover some or most of the recurring fee.

Work with your financial advisor to determine how to allocate this steady income for your bills each month. Remember, independent living costs often cover the majority of your expenses, but you will still have to account for other costs such as home insurance, car payment (if applicable), grocery money, and other expenses.

Personal Savings and Investments

Of course, you don’t have to rely only on retirement income, pension, and social security money to pay for independent living. Your cash savings, brokerage assets, and dividends can also be used. Your financial advisor can work with you to determine when to begin dipping into these accounts.

Home Equity

Since you will be moving to an independent living community, you can sell your current home and stash away that income to use for monthly payments or to cover a one-time “buy in” expense. Downsizing your home also comes with other benefits, such as removing expenses like taxes, repairs, utilities, and major maintenance costs.

Life Insurance or Annuity Proceeds

If you have life insurance, contact the company to review your contract. Access to annuity funds depends on the policy and you don’t want to rely on this money unless you are sure you will have access to it. Remember to review any fees or taxes that might come into play if you begin to use annuity proceeds.

Can Family Members Help Pay for Independent Living?

Family members can help to share costs of independent living, especially when the move reduces caregiving or household burdens. However, it is important to get everyone on the same page so that there are no surprises about who is covering what expenses each month.

Can Insurance or Government Benefits Pay for Independent Living?

Independent living communities do not offer around-the-clock healthcare services or support. Because of this, coverage is extremely limited.

How Medicare or Medicaid Can or Can’t Help Pay for Independent Living

Medicare does not pay for independent living. This includes any costs associated with your rent, meals, amenities, or services. Medicare might cover separately billed, medically necessary and prescribed services, such as physical therapy or home nurse visits after a qualifying hospital stay.

Medicaid does not typically cover independent living expenses, though that can vary by state. Do not count on Medicaid as an option for your independent living payments.

Can Long-Term Care Insurance Help?

While it is true that long-term care insurance policies vary, it is almost universal that your policy will not cover monthly independent living expenses. In general, long-term care insurance requires a qualifying hospital stay in order to cover approved living support. Now is a great time to contact your insurance company and get a refresher about what your policy does and does not cover, as well as any benefit triggers, elimination periods, and monthly caps.

Veterans Benefits to Help Pay for Independent Living

If you qualify for VA Aid & Attendance benefits, you might be able to receive additional money each month on top of a VA pension. However, you must qualify in order to gain access to this monthly payment. Work with your VA representative as you begin to explore your options for a personalized take. 

Are Independent Living Costs Tax Deductible?

Typically, personal housing, meals and lifestyle expenses are not considered medical deductions. This makes independent living monthly fees unable to be tax deductible. However, you should always keep your accountant in the loop with your new living arrangements so that they can help you to clarify what you can and cannot deduct during your next tax filing.

How to Build an Independent Living Budget

Independent living communities can simplify and make budget planning more predictable for most residents. As you are forecasting your financial plans, be sure you are comparing total living costs and not just your current mortgage to your independent living monthly fees. 

Is Independent Living Cheaper Than Staying at Home?

Sometimes, independent living can be less expensive than remaining at home. This can be a pleasant surprise for many seniors and their family members. Remember that independent living fees are often all-inclusive, meaning you can eliminate certain budget line-items that you are currently paying. Use this simple checklist to compare costs.

What Other Independent Living Costs Should You Plan For?

While independent living offers a nearly all-inclusive monthly fee, there are some additional expenses you can plan for, especially when you are in the moving process:

• Movers
• Application fees or other one-time fees for the community
• Estate-sale services
• Storage
• New furniture or other furnishings for your home

Once you are moved into your independent living community, you will want to allocate money for additional entertainment expenses, such as running out to the movies with your granddaughter or sending a care package to your son for his birthday. You might also want to consider that monthly fees could increase to account for inflation and the cost of living.

Finally, it is important to keep an eye on any future support you might need. For example, keeping money reserved for assisted living or memory care services can be a wise decision for you and your family.

Questions to Ask About Independent Living Pricing

As you are exploring independent living communities in your desired location, keep money at the forefront of many of your discussions with representatives. The clearer you are on expenses, including what those fees cover and what they don’t, the more confident you can be that you are planning appropriately for the future.

Questions you can ask might include:

• What is included in the monthly fee, and what costs extra?
• Is there an entrance fee, community fee, deposit, or application fee? Is any part refundable?
• How do floor plan, location within the community, and second-person occupancy affect the rate?
• How often have rates increased, and how much notice is provided?
• Are utilities, meals, housekeeping, transportation, parking, storage, and activities included?
• What happens financially if a resident needs temporary help or a higher level of care?
• Can I review a sample agreement and a complete fee schedule before deciding?

Planning Your Next Step With Legend Senior Living

Independent living can be a wonderful next step for any senior who is looking to enjoy resort-like amenities and services that keep wellness at the center of the community experience. As you continue to explore options in your desired location, remember to calculate your current housing and lifestyle expenses and compare them with the independent living monthly fee. Use this information as you begin to narrow down your choices and plan for the future.

At Legend Senior Living, our independent living residences feature maintenance-free living, chef-prepared dining experiences, housekeeping and laundry services, transportation, social events, senior wellness programs and many more amenities you’re sure to enjoy. We invite you to explore independent living and consider visiting a residence near you. We’d love to answer any questions you have and give you a glimpse of what our residences have to offer. 

Find a Legend residence near you.