Savings, income, and personal assets

Social Security payments are widely used to help pay for assisted living and other types of senior living. In fact, one study found that more than 95% of current senior living residents are utilizing Social Security payments. But Social Security typically won’t cover the full cost. And your benefit amount depends on the age you began collecting Social Security payments.

This program provides monthly payments to older adults with disabilities or blindness whose income meets the financial qualifications. People ages 65 and older without disabilities may also be eligible for SSI payments – if they meet financial qualifications – to help cover the costs of assisted living or long-term care.

Pensions are an employer-funded retirement benefit that can be applied to senior living costs. Payments can begin as early as 65, though Federal law requires taking a pension no later than age 72.

An annuity is an investment option that can provide a guaranteed income throughout retirement. They are purchased for a set period and pay out a specific amount in retirement based on the investment strategy and amount invested. Many seniors use the proceeds from the sale of their house to purchase an annuity.

Retirement savings often come from company-based retirement plans. Private companies mostly offer 401(k) retirement funds. 403(b) plans are offered by tax-exempt organizations, such as non-profit organizations and educational institutions. Both provide sources of income that many use to help cover the cost of senior living. You are generally required to take withdrawals by age 72.

IRAs are savings accounts that allow tax-free saving. With a Roth IRA, you contribute after-tax dollars. Your money grows tax free. You can make tax-free withdrawals after age 59 ½ (if you meet the holding requirements). With a Traditional IRA, you contribute pre- or after-tax dollars. Your money grows tax deferred. Withdrawals are taxed as current income after age 59½. In most cases, withdrawing from either a Traditional or Roth IRA comes with a tax penalty.

Many seniors sell stocks and bonds when the stock market is up. However, if the market is down, it may be better to tap into other sources of income and wait for the market to rise again.

Withdrawing money from savings, money market accounts, or sell their certificates of deposit is another way many older adults pay for senior living and senior care. Money market accounts typically offer higher interest rates than regular savings accounts. You must wait until the CD matures to avoid paying a penalty.

Some seniors generate income by selling their cars, furniture and other personal assets. This not only helps finance senior living costs, but it also frees them from keeping things they no longer need or that no longer brings them joy.