What do elderly do when they run out of money? A comprehensive guide

According to a 2024 National Council on Aging study, nearly half of older Americans lack the financial resources to weather a financial shock. So, what do elderly do when they run out of money, and what options are available? This guide explores the paths seniors can take to regain financial stability.

Quick Summary

Seniors facing financial hardship can navigate a range of options, including accessing government benefit programs like Medicaid and SSI, leveraging personal assets such as home equity, seeking aid from community and nonprofit organizations, and exploring alternatives for supplemental income or housing.

Key Points

• Government Programs: Seniors can access vital federal and state assistance programs like Medicaid, Supplemental Security Income (SSI), and SNAP for food, housing, and healthcare needs.

• Asset Utilization: Strategies such as obtaining a reverse mortgage on a paid-off home or converting a life insurance policy can generate significant cash flow for living expenses.

• Community Support: Local Area Agencies on Aging, nonprofits like Meals on Wheels, and other community-based organizations offer a wide range of no-cost or low-cost services.

• Family Assistance: Family members are often a primary source of help, providing financial support, housing, or assistance with navigating benefit applications.

• Alternative Income: Returning to work, including flexible part-time or gig economy jobs, can provide supplemental income to cover basic living costs.

• Seek Professional Guidance: Consulting with an elder law attorney, financial advisor, or social worker can help seniors and their families navigate complex financial and legal options.

Government Assistance Programs

When savings are depleted, government programs offer a critical safety net for covering essential expenses like healthcare, housing, and food.

Medicaid and Medicare Savings Programs

For low-income seniors, Medicaid is a primary source of assistance, often covering long-term care that Medicare does not. It's a joint federal-state program and eligibility varies by state. State-funded Medicare Savings Programs (MSPs) can help cover Medicare costs for those with limited income.

Supplemental Security Income (SSI)

Seniors 65 and older with limited income and resources may receive monthly payments through the federal SSI program, administered by the Social Security Administration. SSI eligibility often aligns with other programs like Medicaid and SNAP.

Nutrition Assistance

Programs exist to combat food insecurity among low-income seniors. The Supplemental Nutrition Assistance Program (SNAP) provides funds for food purchases. Meals on Wheels delivers meals to homebound seniors, while local senior centers offer congregate meals.

Housing and Energy Assistance

Federal programs can help with housing and utility costs. HUD offers subsidized housing and Housing Choice Vouchers (Section 8), limiting rent to around 30% of income. The Low Income Home Energy Assistance Program (LIHEAP) assists with heating and cooling bills.

Leveraging Personal Assets and Income

Seniors with assets can explore strategies to generate income without complete liquidation.

The Role of Reverse Mortgages

Homeowners aged 62 or older with substantial home equity can use a reverse mortgage to convert equity into cash. This provides tax-free income without monthly mortgage payments but the loan balance grows over time. It can also impact eligibility for programs like Medicaid.

Cashing Out Life Insurance

A life settlement involves selling a life insurance policy to a third party for more than its cash value but less than the death benefit. An accelerated death benefit may allow access to a portion of the policy's value while the policyholder is still alive.

Returning to Work and the Gig Economy

Part-time or gig economy work offers flexible income opportunities for older adults. Resources like RetirementJobs.com can help connect seniors with age-friendly employers.

Seeking Support from Family and Community

Family and community networks are crucial when financial options are limited.

Family Contributions and Housing

Family can help with expenses, provide housing, or assist with benefit applications. Some states have filial responsibility laws requiring adult children to support parents, but this varies.

Community Aid and Nonprofits

Local organizations and nonprofits offer free or low-cost services like legal aid, transportation, and home care. The National Council on Aging's BenefitsCheckUp is a useful tool for finding available benefits.

Comparing Options for Financial Relief

Option	Speed of Relief	Impact on Assets	Eligibility	Best For
Medicaid	Moderate (after application)	Significant (asset limits apply)	Low-income seniors needing long-term care.	Long-term healthcare funding
Reverse Mortgage	Fast (after approval)	Converts home equity into cash	Homeowners 62+ with significant equity.	Supplementing retirement income
Downsizing	Varies (property market)	Frees up home equity	All homeowners	Reducing housing costs
Part-time Work	Moderate (securing a job)	Increases cash flow	Able-bodied seniors	Adding flexible income

Navigating the Application Process

Applying for government benefits can be challenging. Key steps include assessing your financial situation, contacting a local Area Agency on Aging (AAA) for guidance, using online tools like BenefitsCheckUp.org, gathering necessary documents, and considering professional help from an elder law attorney or financial counselor.

Conclusion

Running out of money in later life is difficult, but not insurmountable. Government programs, strategies for leveraging assets, and community support provide vital resources. Proactive assessment, exploring options, and seeking help from various sources are key to maintaining financial stability and quality of life.

Frequently Asked Questions

What is the primary government program for a low-income senior's healthcare needs?

Medicaid is the main government program providing comprehensive health and long-term care coverage for low-income seniors. Unlike Medicare, it can cover extended nursing home stays and in-home care for those who qualify based on income and assets.

Can a reverse mortgage affect eligibility for other financial aid programs?

Yes, while reverse mortgage proceeds are generally not taxed as income, they can affect eligibility for other needs-based programs like Medicaid or Supplemental Security Income (SSI). Any unused proceeds kept in a bank account could be counted as an asset, potentially pushing a senior over the program's resource limits.

What is Supplemental Security Income (SSI) for seniors?

SSI is a federal program that provides a minimum monthly income to adults 65 or older, or those with a qualifying disability, who have very limited income and resources. It's a needs-based program, unlike Social Security retirement benefits which are based on work history.

If I run out of money in an assisted living facility, what happens?

Assisted living facilities typically have different policies than nursing homes. If you run out of funds, you may face eviction, as these facilities are not generally covered by Medicaid for housing and room and board. Some states, however, may have waivers or specific programs that help cover a portion of assisted living costs.

How can community organizations help an elderly person with no money?

Community organizations and nonprofits, including those affiliated with Area Agencies on Aging, offer a wide range of services. These include meal delivery, transportation, help with household chores, and referrals for other local support systems.

What if an elderly person has no family to help them financially?

Seniors without family support can rely on a network of government and community resources. In extreme circumstances where a senior cannot live independently due to health issues and has no means of support, they may become a ward of the state, with a guardian appointed to make decisions on their behalf. However, this is considered a last resort.

Are there housing options available for low-income seniors who run out of money?

Yes, several options exist, including subsidized housing programs (like HUD's Section 202), Housing Choice Vouchers (Section 8), and low-income housing tax credit properties. These programs help make housing more affordable by capping rent based on income.