Paying for Assisted Living: A Complete Guide to Funding Options

Assisted living facility costs vary significantly by state, location within a state, and the level of care required. Monthly costs in urban areas and high cost-of-living states often exceed the national median. Memory care — specialized assisted living for individuals with Alzheimer's or other forms of dementia — typically costs more than standard assisted living due to additional staffing and security requirements.

Many assisted living facilities charge a base monthly rate that covers room, board, and standard services, plus add-on fees for additional personal care, medication management, or specialized services. Before selecting a facility, request a full written breakdown of all fees, including what triggers additional charges as care needs evolve. This transparency is essential for accurate financial planning. Understanding how long your money will last at these monthly rates is a critical first step.

Personal savings, retirement account distributions (401(k), IRA), investment accounts, and home equity are the primary funding sources for most families paying for assisted living. If selling a primary residence is part of the plan, capital gains exclusions under IRS rules may apply — up to $250,000 for single filers and $500,000 for married couples filing jointly, subject to ownership and use requirements. Details are available in IRS Publication 523.

Retirement account withdrawals are generally subject to income tax, and required minimum distributions (RMDs) apply to most traditional retirement accounts beginning at age 73 as of 2026. A financial planner with expertise in elder care financing can help you sequence withdrawals from different accounts in the most tax-efficient order, potentially preserving more assets over time. Putting real estate into a trust before needing care is one strategy some families explore — see our guide on how to put a house in a trust. Understanding how many savings accounts to maintain helps you keep dedicated funds for care costs separate from your other reserves.

Medicare does not cover the cost of assisted living as ongoing custodial care. Medicare Part A may cover short-term skilled nursing facility care following a qualifying hospital stay of at least 3 days, but this coverage is time-limited and has specific conditions. Once skilled nursing care needs end or Medicare's coverage period expires, ongoing room and board costs in any residential care setting are typically not covered. Medicare.gov provides the most current details on nursing home coverage.

Medicare Advantage plans (Part C) may offer some supplemental benefits that standard Medicare does not, but coverage of assisted living costs remains very limited under most plan structures. Always verify any coverage claims directly with Medicare.gov or by calling 1-800-MEDICARE before relying on them in your financial plan. Understanding the difference between long-term disability insurance and long-term care insurance is also important when reviewing your coverage options.

Medicaid may cover assisted living costs for individuals who meet both financial eligibility and functional care need criteria, but coverage varies significantly by state. Not all assisted living facilities accept Medicaid, and those that do may have limited Medicaid-funded beds. Many states have Medicaid waiver programs specifically designed to fund home- and community-based care, including assisted living, for eligible individuals. See Medicaid.gov for details on long-term services and supports.

Medicaid eligibility requires meeting income and asset limits that vary by state. The Medicaid look-back period — typically 60 months prior to application — means asset transfers made to reduce countable assets may affect eligibility. An elder law attorney can help you understand state-specific rules and any planning strategies available within the law. Contact your state's Medicaid office or Benefits.gov for state-specific eligibility information. Families who have placed property in a trust should also consider how long a house can stay in a trust when calculating Medicaid eligibility.

Long-term care insurance is specifically designed to cover the cost of assisted living, nursing home care, and home health services that are not covered by Medicare or standard health insurance. Policies pay a daily or monthly benefit amount when the insured person meets the defined benefit trigger — typically the inability to perform two or more Activities of Daily Living (ADLs) or a cognitive impairment diagnosis.

The cost of long-term care insurance premiums increases significantly with age at purchase. Premiums are generally most affordable when purchased between ages 50 and 65, before health conditions may affect eligibility. Review the benefit period, daily benefit amount, inflation protection options, and elimination period when evaluating any policy. The NAIC provides consumer guidance on long-term care insurance evaluation. An insurance broker who specializes in long-term care products can help you compare policies from multiple carriers.

Eligible veterans and surviving spouses may qualify for VA Aid and Attendance benefits, which provide monthly cash payments that can be applied toward assisted living costs. Aid and Attendance benefits are available to veterans who need help with daily activities such as bathing, dressing, or eating, and who meet service and financial eligibility requirements. This benefit is separate from and in addition to basic VA pension benefits — see VA.gov for eligibility details.

The application process for VA Aid and Attendance can be complex. Veterans Service Organizations (VSOs) offer free assistance with VA benefit applications. Contact the VA directly at va.gov or call 1-800-827-1000 to begin the eligibility determination process. While waiting on VA benefit decisions, using a retirement withdrawal calculator can help you model cash flow during the interim period.