March 15 – Making the decision to move to a retirement community is more than just a financial decision – it can also be an emotional or practical one.
Brad Breeding, president of LifeSite Logics, a company that provides tools to research and evaluate continuing care retirement communities, says it really boils down to two questions: What does peace of mind mean to you, and what is peace of mind worth to you? For each person, the answers may be very different.
Breeding, whose background is financial planning, spoke to a crowd of prospective residents at Carroll Lutheran Village on February 20 on the importance of making a fully informed decision that is best for each individual’s situation.
The longer we live, the more help we need as time goes on. A recent Merrill Lynch survey of people 65 and older found that their biggest worries of living long lifetimes were:
1) Serious health problems
2) Being a burden to their family
3) Running out of money
4) Being lonely
5) Not having purpose
6) Having nothing left to leave to their children.
Breeding says this survey demonstrates that we think about more than dollars and cents when it comes to making retirement decisions.
Older adults have two choices: stay in their home (or move in with a family member), or move to a retirement community. Breeding asked the audience what staying at home meant to them. The resounding answer was “independence.” Memories, an emotional connection, comfort, familiarity, etc. were additional responses.
There are many benefits to staying at home. “Choosing to stay at home IS a decision,” he said. But, a lot goes into that decision. For example, to stay at home and remain independent, consider:
• Will I need to modify my home and what will that cost?
• What ongoing interior and exterior maintenance is required and can I handle that physically and/or financially?
• Will I be able to travel for extended periods of time and leave my home unattended?
• What if I need assistance with day to day living?
• Who will manage care providers that may need to come to my home?
Breeding says many people think their adult children will manage their household and their care. “That is a lot easier in theory than in practice,” he says. “It’s a major chore to help someone stay in their home.” And, he adds, delaying the inevitable can cause an emotional and financial burden on the entire family. “If you have adult children that live near you and you have not discussed with them ‘what peace of mind means to you’ and what you would like to see in your future, please have that conversation.”
He adds that many seniors believe that purchasing long-term care insurance will cover their bases. But, he says, “Access to care is not a plan.” A consumer can purchase long-term care insurance that will pay for top quality care, but if that care isn’t available in your area, the policy is of little value. “Assets address how to pay for care, but not where you’re going to get that care,” he warned.
While it may be counterintuitive, many seniors often find that living in a retirement community offers greater independence than staying in their home. There are a variety of retirement living choices, all of which offer different amenities, services and levels of care should it be needed. We’ve all heard the terms active adult living, senior apartments, independent living, etc. These types of options are just like staying in your own home – except your neighbors are in your age demographic. These types of communities typically do not provide any kind of care should it be needed. Assisted living and skilled nursing homes are often thought of as retirement options, but they are really care facilities that provide a specified level of care to older adults. Continuing care retirement communities are another retirement choice, which blend the previous options to provide a ‘continuum of care’ for its residents.
The Continuum of Care
Many people progress from the ability to live independently to requiring some type of daily assistance. The ‘continuum of care’ consists of independent living, where residents are fully independent with little to no assistance; assisted living, where residents need some help with day to day living; and long-term nursing where skilled care is needed 24/7.
“Continuing care retirement communities are the only type of retirement community that contractually provides access to the full continuum of care,” said Breeding. “That’s what makes them unique from any other retirement living choices.”
Continuing Care Retirement Communities
A recent survey of families of CCRC residents found that:
• 93% agree CCRCs provide service to their family member(s)
• 77% would be likely to consider a CCRC for themselves
• 75% felt their family members’ experience has positively influenced their interest in CCRCs.
These results are in sharp contrast to the survey of families who were struggling to support family members who wanted to stay in their own homes.
Types of CCRCs
Most continuing care retirement communities require a contract and an entry fee. It is important to understand the differences in these contracts, and when selecting a community to ask questions about the types and levels of services provided within that community. The two most common forms of contracts are life care and fee for service.
With a life care contract, a resident will pay the largest entry fee, but that fee includes the cost of any future advanced care (assisted living or skilled nursing) you may, or may not, needed. In a fee for service community, the entrance fees are lower and residents pay for advanced care only when it is needed. “This appeals to a lot of people,” said Breeding. There are other types of contracts that provide some advanced care of discounted care. Breeding stressed it is important to read and understand the contract before committing.
The Financial Impact of Staying at Home vs. Retirement Community
As we explore retirement options finances are an important part of the equation. Many people think staying at home is cheaper than moving to a retirement community. Breeding acknowledged that can be true for some people, but not necessarily so for others. Each individual’s situation is different depending on the expenses they have at home and the expenses they would incur at the retirement community they select.
Those who stay at home will pay property taxes, utilities, insurance, groceries, maintenance, repairs, and other fixed costs. Breeding suggests adding $1,000 to that amount each month for any additional expenses such as medical costs, transportation, travel, etc. Once these monthly costs are determined, they can be compared to the monthly costs of a retirement community. Most monthly fees at a continuing care retirement community include property taxes, insurance, most meals, maintenance, some utilities, and some transportation costs. However, it is important to note that communities with no or low entrance fees are generally going to have higher monthly costs.
Even so, Breeding says many people find that when they do the analysis, a CCRC is less per month than staying at home. Plus, excess proceeds from the sale of a home (after paying the community entrance fee) can be saved or invested to boost net worth and generate additional monthly income.
Breeding encourages everyone to go through the financial exercise of comparing the costs of staying at home vs. moving to a retirement community, especially if the financial aspect is crucial to them.
“What you might find out is that it’s going to be a lot less than you thought it was when you really start to crunch the numbers.”
There is also a hidden cost to staying at home. The equity most older adults have in their homes is considered dormant. “How much income is the equity in your home generating for you today?” he asks. The sale of the home releases that equity so it can be used to generate income and built net worth.
Some communities will provide a refund of a portion of the entry fee if you leave for any reason. How much you get back is determined by how long you are there. Each refund policy should be clearly stated in the contract. The refund policy is an important feature for many people, who find it comforting to know that they, or their estate, may see a refund.
A Forbes magazine article described three main phases of retirement:
Early phase – a time when you’re trying to adjust to a new lifestyle and a new budget
Mid phase – a time beginning around age 70 when you start deciding what steps you want your family to take should you decline. Breeding says it’s important to be proactive in this phase. “A lot of families are not doing a very good job of that,” he said. “They don’t think ahead, they don’t talk, they don’t plan proactively for their futures.”
Late phase – a time when your health has changed and you require significant help to function. “By this point, preplanning in the mid-phase makes this transition as manageable and life affirming as possible,” said Breeding.
He admits having these conversations with a parent or older family member is difficult. “We’re afraid to offend our parents by bringing these things up,” he said.
“My goal is not to try to convince you to move to CLV or any retirement community for that matter,” he said. “For some of you it may, for some of you it may not.” The important part is to begin thinking ahead and making informed decisions.
The bottom line?
What does peace of mind mean to you? What is peace of mind worth to you?
Copyright © 2015 Lisa Albin