Paying for Senior Care in Escanaba: Financial Options to Consider
Paying for senior care in an assisted living community in the U.S. was more expensive in 2024 than in 2023. According to the latest Genworth report, Americans spent a median of $70,800 for assisted living in 2024, a 10% increase from the previous year. Still, it didn't stop older adults from transitioning; indeed, these communities' occupancy rates jumped to 84% from 2023's 77%!
Given those costs, though, seniors in Escanaba, MI, may wonder what financial options are available to cover assisted living expenses. There are several, including:
- Social Security
- Employer-sponsored and individual retirement accounts
- Long-term care coverage
- Life insurance policies
In this guide, the friendly, caring team at LakeHouse Escanaba, our assisted living community in Escanaba, MI, will cover all those points, so please read on.
Social Security Retirement Income
Older adults who've paid Social Security taxes for at least a decade while still employed should get a monthly benefit from the U.S. Social Security Administration (SSA). They can then use this to help cover their senior care costs.
The amount of retirement income benefit depends on seniors':
- Previous work
- How much Social Security taxes they paid
- Eligibility to receive additional funds based on their former or current spouse's work
Social Security is one of, if not the primary source of retirement income and financial help for aging adults, especially among Americans 65+.
According to the SSA, in December 2024, retired beneficiaries received an average monthly benefit of $1,975. The agency also says that in 2025, nearly 69 million Americans (on average) will receive monthly Social Security benefits.
401(k) Retirement Savings Plans
401(k)s are employer-sponsored retirement saving plans companies offer to help employees save for retirement. Financially savvy individuals take advantage of these workplace benefits and include them as a crucial component of long-term care planning.
The exact mechanism of how 401(k)s work varies from one plan (and employer) to another, but they typically involve:
- Employers setting up the plan as part of their employee benefits packages
- Employees making contributions to the plan (automatic deductions from their salaries)
- Employers matching their employees' contributions
401(k)s come in several types, but the primary ones are the traditional and the Roth plans.
Traditional 401(k) Plans
Escanaba seniors who participated in a traditional 401(k) plan made pre-tax contributions. Thanks to this, they reduced their tax burdens while saving for retirement.
Older adults can use the funds they've saved (and grown) through traditional 401(k) plans to cover their Escanaba assisted living expenses.
It's crucial to note that seniors will pay taxes on contributions and earnings when withdrawing money from traditional 401(k) plans. However, they won't have to pay an "early" or "premature" penalty if they only withdraw after they turn 59 1/2. According to the Internal Revenue Service, such penalties amount to a 10% additional tax.
Roth 401(k) Plans
Employer-sponsored Roth 401(k) plans are similar to their traditional counterparts, with one primary exception. The contributions made by employees and their employers aren't tax-deferred and, instead, made with post-tax dollars. The advantage to this is that all income earned on the retirement savings account will be tax-free, including:
- Interest
- Dividends
- Capital gains
Escanaba seniors can use their "tax-free" savings and earnings to help cover the costs of their affordable senior living options.
Individual Retirement Accounts (IRAs)
Like 401(k)s, IRAs allow individuals to save more and maximize their retirement incomes. Anyone who earns income in the U.S. can open an IRA, usually through an investment firm or a brokerage.
Like 401(k)s, IRAs can be traditional or Roth. Traditional IRAs allow owners to make pre-tax contributions and defer their tax payments. On the other hand, contributions to Roth IRAs already have taxes deducted from them, so savers can enjoy their savings and plan income tax-free.
Ideally, though, Escanaba seniors should have both a 401(k) and an IRA. One reason is that IRAs typically have lower contribution limits, so their overall pooled amounts are lower than 401(k)s. Moreover, as "individual" plans, only the owner contributes to them (unlike with 401(k)s that often come with employer contributions).
Therefore, IRAs are best as "supplements" to employer-sponsored retirement savings plans.
Long-Term Care (LTC) Insurance
LTC insurance is a private plan that helps older adults pay for long-term services and support (LTSS), such as those provided by a high-quality assisted living community in Escanaba, MI. Such policies usually cover a significant portion, if not all, of the costs incurred by policyholders in these communities up to their limits.
Adults who started long-term care and financial planning early would have purchased LTC insurance when they were younger (around 45 to 55). One reason is that the younger the policyholder, the less expensive the policy's premiums typically are.
Although seniors can still buy LTC insurance now that they're older, they should prepare to pay more for coverage.
Life Insurance Living Benefit Program
Some life insurance policies include a living benefit program, which allows a policyholder to use a portion of the death benefit while alive. The exact rules vary, but they enable policy owners with a medically necessary need for assisted living to set up this program. For instance, if the policyholder can't and shouldn't live alone and must have a care provider to rely on due to a chronic health condition.
The Michigan MI Choice Waiver Program
MI Choice Waiver is a state-run program that provides community transition services for seniors who want (or need) to move to assisted living. While it won't directly cover room and board costs, it can help with financial elements of the move, such as security deposits or set-up fees. Seniors must meet monthly income and specific health and personal care requirements to qualify.
Plan Early and Properly to Simplify Paying for Senior Care
Early and proper financial planning can make paying for senior care easier on older adults' pockets. By combining Social Security, employer-sponsored and individual retirement accounts, LTC insurance, and life insurance, moving to an assisted living community can be within many Escanaba seniors' financial reach.
At LakeHouse Escanaba, our primary goal is to deliver superb value to our residents with our high-quality senior housing, cozy floor plans, attentive personal care services, and many on-site amenities. We also have special pricing offers, including our Veterans Program, in honor of our retired military personnel.
Speak with us today to learn more about and schedule a visit to our community!