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Can
I Really Afford to Live in an Independent Retirement Community?
By Valerie VanBooven
Maybe
it’s the thought of mowing the grass, shoveling the snow, or the
kitchen faucet that needs to be repaired. The multitude of responsibilities
and maintenance involved in keeping up your current home may make
the move to an Independent Living Community look very attractive.
But is it affordable?
This
is a question we hear a lot. In most communities utilities, maintenance,
some laundry, and some meals are included in the fee. Use the monthly
fee to compare to costs of staying in your current living situation.
Remember to include utilities, taxes, insurance, fees paid for the
yard work, and maintenance of your home. There should be a staff
member available, at the facility you are considering, who can go
over financial information with you.
If
you are considering moving into a Continuum of Care Retirement Community
as opposed to a stand alone Independent Retirement Community, there
may be entrance fees or life care contracts to consider. According
to the Continuing Care Accreditation Commission, there are three
basic types of contract that a resident enters into with a CCRC:
extensive, modified, and fee-for-service. An extensive contract
offers unlimited long-term nursing care for little or no substantial
increase in your usual monthly payments. Entrance fees and monthly
costs under extensive contracts are typically higher than those
under modified or fee-for-service contracts. That entrance fee may
be refundable over time, partially refundable or nonrefundable.
You may acquire ownership of your residence within the community,
or you may be provide housing on a rental basis.
A
modified continuing care contract includes a specified amount of
long-term nursing care beyond which you are responsible for payment.
Once such specified amount of care is reached, the resident may
continue to receive care, but most pay the facility's daily or monthly
nursing rate.
A
fee-for-service continuing care contract covers the cost of your
housing, residential services, and amenities. You pay full daily
rates for all long-term nursing care required. Entrance and monthly
fees are lower under this type of contract because residents are
responsible for all long-term nursing and health care costs.
There
are many options available under the general term "CCRC".
Your best course of action is to visit several communities and to
decide which community offers the best combination of services,
amenities and contract options for your or your loved one's particular
needs and desires.
Let’s
look at an example to help illustrate how even someone who didn’t
THINK they could afford an Independent Retirement Community, really
can!
Jane
is a healthy 70 year old who wanted to enjoy the rest of her retirement
years without the hassle of home maintenance, yard work, and home
repairs. Plus, her home was built 40 years ago, and wasn’t particularly
“senior” friendly! Doorways were narrow, the laundry room was in
the basement, and the stairs to that area were narrow. She didn’t
want to risk falling.
Jane
didn’t think she could afford to live in an Independent Retirement
Community, but after visiting her friend Marge several times, she
knew it was a vibrant and active place that really catered to her
lifestyle.
Jane
also wanted to leave an inheritance to her children, but didn’t
have a large 401K or IRA to leave behind, therefore, all she had
was the value of her home. She was worried that if she sold her
home and moved to an Independent Retirement Community, she would
not be able to leave an inheritance. Her children on the other hand,
were not worried about receiving an inheritance, they just wanted
Jane to live the life that made her happy, safe, and comfortable.
After
sitting down with the staff at her local Independent Retirement
Community, she understood that not only could she afford to live
there, but she would also be able to leave a LARGER inheritance
to her children than she ever thought possible.
Here’s
how it worked for Jane:
Jane’s
Current Assets:
•
$100,000 - total in checking/savings, CDs, stocks, bonds, mutual
funds, IRA and annuities (rainy day money)
•
$150,000 – value of her home
•
$1400/ month Social Security Income and Pension
Cost
to Live in the Independent Retirement Community:
•
$2300/ month, no entrance fee, just monthly rent • -$1400/month
income • = shortfall of $900/month for Jane
Jane’s
Solution:
•
Jane sold her home for $150,000 and put the proceeds into a lifetime
annuity that generated an income of $1,204 per month. (which covers
her shortfall of $900 and leaves $300 for other needs)
•
Jane took her remaining assets (rainy day money) of $100,000 and
left $25,000 in checking, but purchased a single premium life insurance
policy for $75,000.
•
That single premium life insurance policy is worth $250,000 TAX
FREE to her heirs upon her death.
•
Plus if she passed away within 10 years, her heirs could also possibly
receive the remaining lifetime annuity payout.
•
Remember this is simply an example and not a guarantee of results.
Everyone needs to have their own person financial analysis completed.
Jane
can now move into her Independent Retirement Community and live
a safe, stress free life. Her children will receive the inheritance
she always wanted them to have. Can you afford to live in an Independent
Retirement Community? Chances are that with the right financial
planning, you can live the retirement you always dreamed of. Contact
Valerie VanBooven for more information at valerie@nextgenfinser.com
Valerie
VanBooven RN, BSN, PGCM is a long-term care expert, author of "Aging
Answers", professional speaker. She is currently the National
Director of Marketing and PR for Next Generation Financial Services
a division of 1st Mariner Bank.
Valerie
can be reached at 877-529-0550 or valerie@nextgenfinser.com
