How To Strategically Finance Assisted Living A Tax Savvy Approach
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Discover the smart financial tactics to cover the steep expenses of assisted living, including the benefits of utilizing IRA distributions and medical deductions. Explore the case of an elderly client with $84,000 annual costs and learn how to minimize tax impacts.
- Assisted living can be costly, with monthly expenses of up to $7,000 and annual costs around $84,000.
- A client in their eighties is considering how to pay for assisted living, with half of their money in cash and CDs, and the other half in IRAs.
- The common approach is to use cash to cover costs, but an alternative strategy involves utilizing IRA distributions and benefiting from medical deductions.
Assisted living can be a significant financial burden, with monthly costs averaging around $7,000 and annual expenses soaring to roughly $84,000. This article delves into a practical approach for financing assisted living, particularly for elderly individuals with assets split between cash, certificates of deposit (CDs), and Individual Retirement Accounts (IRAs). While it is common to consider using readily available cash to meet these expenses, an alternative strategy suggests that tapping into IRA distributions can be a tax-savvy move. This tactic not only minimizes the tax liability but also has long-term benefits, considering changes in the Secure Act that affect IRA beneficiaries. This article highlights the importance of tax planning and understanding the current tax codes when navigating the financial aspects of assisted living.
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