This article is for informational purposes only and does not constitute medical, legal, or financial advice. Always consult with qualified professionals regarding your specific situation.

Financial Readiness Assessment — Where Do You Stand for Care Costs

At some point, your parent will need care that costs money. Not all of it—some services are free or subsidized. But the significant services have real costs. Assisted living runs two to four thousand dollars a month. Home health care costs thirty to forty dollars an hour. Nursing home care can be over ten thousand dollars a month. The question isn't whether it costs, but whether you're ready for that cost.

This assessment isn't about finding the money today. It's about understanding the situation now so you can plan. If someone has substantial assets, maybe they can pay for everything. If they have limited assets, maybe Medicaid will help. If they're in between, maybe there's a creative solution. The key is knowing where you actually stand, not guessing.

Start by calculating what care might cost. Then list income and assets. Then understand insurance coverage. Then figure out where the gaps are. That's your actual planning starting point.

Calculating Potential Care Costs

Costs vary massively by location and level of care. Assisted living in a rural area costs less than assisted living in a city. High-end facilities cost more than basic ones. But you need some number to work with, even if it's an estimate.

For in-home care with home health aides, typical costs are thirty to forty dollars per hour in most areas, more in expensive areas. If someone needs someone there six hours a day, that's 180 to 240 dollars a day, or roughly 5,400 to 7,200 dollars per month. If they need 24-hour in-home care, double or triple that. Some families hire someone live-in more cheaply; others hire through an agency and pay more. Get actual quotes from providers in your area.

Adult day programs typically cost thirty to fifty dollars a day if available in your area. Many are subsidized and cost much less.

Assisted living varies wildly by location. In cities and high-cost areas, it can be three to five thousand dollars per month. In less expensive areas, it can be fifteen hundred to two thousand dollars per month. The wide range means you need to research your area specifically.

Memory care—assisted living specialized for dementia,typically costs more than regular assisted living. Add 20 to 40 percent to assisted living prices.

Skilled nursing facilities (nursing homes) typically run five to ten thousand dollars per month, more in expensive areas. These are different from assisted living because they have medical care and nursing staff.

Don't just use national averages. Call facilities in your area. Call home care agencies. Get real numbers for your location. Those numbers should drive planning.

Understanding Income and Assets

List all income sources: Social Security, pensions, annuities, rental income, investment income, part-time work income. Write down the monthly amount for each. This is the income that pays for care. Don't count on future income changes unless you're certain they're coming.

List assets: savings accounts, retirement accounts, investments, real property, vehicles. Write down the value of each. Be realistic. If the house is the only major asset and selling it creates hardship, maybe it's not really available for care costs.

For retirement accounts, understand early withdrawal penalties if the person's under 59-and-a-half and how withdrawals affect taxes. Talk to a financial advisor or CPA if you're using retirement accounts to pay for care.

Home equity is an asset. If the home is worth half a million dollars and they have a mortgage of one hundred thousand dollars, they have four hundred thousand in equity. If they need to sell or use a reverse mortgage, that's potentially available. But selling a home means moving. A reverse mortgage means taking on a loan against the home. These aren't simple solutions.

If someone's divorced or widowed, are there ex-spouse benefits? Some people are entitled to Social Security benefits based on ex-spouse earnings even if they never worked themselves. Are there benefits available?

Add up total assets. That gives you a number of how much money exists to pay for care if needed.

Insurance Coverage

Long-term care insurance is rare but valuable if someone has it. These policies typically pay some amount toward long-term care costs, often with limitations. Check whether your parent has this. Many people bought it years ago. A policy might pay three thousand dollars a month for three years for assisted living, for example. Know what coverage exists.

Medicare only pays for skilled nursing care under specific circumstances,after hospitalization, for a limited time, in specific approved situations. It doesn't pay for custodial care (help with activities of daily living) at home or in facilities.

Medicaid pays for nursing home care and can pay for in-home care if someone qualifies. Medicaid qualification is based on income and assets. Rules vary dramatically by state. In many states, someone has to spend down assets to roughly two thousand dollars to qualify for Medicaid. In some states, different rules apply. In some states, there are programs that let people keep more assets. This is complicated enough that talking to a Medicaid planner is often worthwhile.

Veterans benefits exist if someone's a veteran. Some benefit levels are quite substantial. VA benefits for old age can help pay for in-home care or facility care if the veteran qualifies. Talk to the VA or a veterans' benefits advisor.

Employer retiree health insurance sometimes covers some care costs. Check whether a retiree health plan exists and what it covers.

Doing the Math

Here's where it gets real. Take a scenario. Let's say your parent needs assisted living in their area costing twenty-five hundred dollars a month. They'll live another 20 years. That's six hundred thousand dollars total.

Their monthly income is two thousand dollars (Social Security). That covers part of it. Their assets are two hundred thousand dollars. That covers five years of the gap. But then what?

Or another scenario. They need in-home care at five thousand dollars a month and they live another 15 years. That's nine hundred thousand dollars. Their income is one thousand dollars monthly. Their assets are three hundred thousand dollars. The assets run out in five years. Is long-term care insurance available? Would Medicaid coverage be available? These are the questions that matter.

The goal isn't to have a perfect answer today. The goal is to know the gap. If someone has assets and income that cover most care costs, that's a comfortable situation. If there's a gap and they'll likely need Medicaid or will rely on family, you know that and can plan accordingly.

Scenario Planning

Do a few scenarios with different assumptions. What if care costs more than expected? What if they live longer? What if multiple family members need care? What if your income or assets change?

None of these predictions will be exactly right, but the scenarios show where vulnerable points are. If care runs out of money in year five no matter what, you know that. If costs stay manageable through most scenarios, that's different information.

Using This Information

If someone has sufficient assets and income, great. The main planning is around choosing appropriate care and tax efficiency of spending assets.

If there's a gap, several options exist. Some families contribute financially to cover costs. Some people consider selling a home to free up equity. Some people adjust the level of care,maybe less expensive assisted living instead of a high-end facility. Some people move to a lower-cost state. Some rely on Medicaid once assets are spent down. Some people use a combination of approaches.

Medicaid planning is sophisticated enough that a Medicaid planner or elder law attorney can help structure finances to minimize asset spend-down if that's a goal. They can explain what's possible in your state.

The hardest conversations are family conversations about what's realistic. If someone has one hundred thousand dollars in assets and will need five thousand dollars monthly in care for 20 years, that doesn't work without Medicaid or family contribution or a less expensive care arrangement. Having this conversation with all involved,your parent, your siblings, your spouse,is important.

This financial assessment is uncomfortable but essential. It removes the guessing. It lets you plan based on facts rather than hope. And if there are gaps, it gives you time to figure out solutions rather than scrambling in crisis.

How To Help Your Elders is an informational resource for families working through aging and elder care. We are not medical professionals, attorneys, or financial advisors. The information provided here is for educational purposes and should not replace professional consultation. Every family's situation is unique, and rules, costs, and availability vary by location and circumstance.