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Retirement Living Costs
It's the first-and most difficult question that comes up in
retirement planning: how much will it cost? There are as many
answers as there are different ways to retire--depending on where
you plan to retire, how much health care and personal services you
end up needing, and how long you live.
Costs of Different Types of Retirement Communities
The most important variable in retirement living costs is how
you choose to live: in your own home, in an age-restricted
retirement community, in an independent living community or in
assisted living or
continuing care.
55+ Retirement Communities
Age-restricted or 55+ retirement communities are just like any
other kind of master-planned community where occupants own their
own homes. Accommodations run the gamut from condos to mobile
homes, large vacation-style homes to high-rise apartments, and
costs vary accordingly. As in any other kind of real estate
investment, prices depend on the size of the unit purchased, the
amenities offered and of course, location.
In addition to the cost of the home itself, the best retirement
communities usually charge fees for exterior maintenance,
recreational amenities and services, running anywhere from a few
hundred dollars to thousands of dollars a month, depending on the
level of amenities offered. The good news: in the current real
estate slump, more and more communities are offering incentives,
like pricing adjustments or help selling your old home.
Independent Living
At first glance, independent living communities may look like
55+ retirement communities, with active, healthy residents taking
advantage of amenities like tennis, yoga or golf. But many
communities function more like all-inclusive resorts than
conventional real estate, meaning a single monthly rental fee
includes not only housing, but also:
- some or all meals
- utilities
- light housekeeping, including linen service
- landscaping
- exterior and interior maintenance
- activities and transportation
- live-in managers and security
Some communities, like Holiday Retirement, offer month-to-month
lease fees while others require a commitment; some charge buy-in
fees, while a few require purchase of a home in addition to monthly
fees for services. The size of this monthly fee varies widely,
depending on the size of the unit and the location of the
community. Holiday, for instance, uses a monthly average of $2600
in its online cost-of-living calculator, but actual
retirement living costs for a one bedroom can vary by as much
as $5000 across the country, closely tracking regional real estate
values and cost of living.
Independent living communities can be a bargain, especially
compared with assisted living, and in some cases they're even less
expensive than living at home. When evaluating the cost of
retirement communities, be sure to factor in all of the expenses in
your current location-from mortgage payments to taxes, utilities,
insurance, groceries and recreation.
Continuing Care Retirement Communities
Most complex of all are retirement living costs at continuing
care communities (CCRCs). Contracts, fees and financial agreements
may vary from community to community, but one fact is universally
true: joining a continuing care retirement community requires a
significant financial commitment.
The best retirement communities require a substantial entrance
fee up front, ranging from $20,000 for a rental agreement to as
much as half a million dollars for a purchase agreement. This fee
guarantees the resident access to a "continuum of care" for the
rest of his or her life. CCRCs have three different kinds of living
arrangements: independent care (also sometimes called "active
retirement"), assisted living and skilled nursing. As a resident's
needs change, he or she can progress through levels of care without
ever having to leave the community. This security comes at a price,
however. In addition to the entrance fee, there's a monthly fee to
cover meals, housekeeping, utilities, transportation and amenties.
This fee is typically $1000 or more, depending on the resident's
service plan.
CCRCs use one of three different cost structures, each of which
affects the size of both entrance and monthly fees. Under an
extensive or life care contract, residents get unlimited lifetime
access to health care without an increase in monthly fees once a
higher level of care becomes necessary. Because the community is
assuming the financial risk, the senior pays more up front in the
form of a large entrance fee.
Under a modified or continuing care agreement, entrance fees may
be smaller, but access to health care services or skilled nursing
is limited to a specified number of days, after which residents pay
more each month. This type of contract is best for seniors who
don't see their health care situation changing significantly-and
who can afford to pay extra if it does. Finally, A few CCRCs
operate like independent living communities, with a fee-for-service
contract in which residents pay only for the services they need.
There may be little or no entrance fee involved, but this option
can be risky: if your health takes a turn for the worse, skilled
nursing can cost up to $250 a day, which could quickly drain the
most ample nest egg.
Retirement Communities as
Investments
One way to cushion the blow of retirement living costs: think of
them as an investment. In many cases, those sizable CCRC fees
are refundable-meaning a portion comes back to the resident (if he
or she decides to leave the community) or to his or her estate
(after the resident's death). Returnable entrance fees are higher,
but they guarantee that the money spent to gain entrance to a
community is an actual investment with cash value for the senior's
heirs. With occupancy rates down, some CCRCs, like Mirabella in
Seattle, are promoting 90% returnable entrance fees.
Likewise, any purchase of real estate, whether in a 55+
retirement community or in an independent living community, has
potential value as an investment. Your home may appreciate in value
over the years, creating potential profit for your estate. If you
need to shift to a higher level of care, a home in a retirement
community can be leveraged to help pay costs for the move.
Reframing retirement living costs as an investment means doing
your homework. To make an informed decision about moving into a
CCRC, be especially careful to check the community's financial
health; only a community in good financial standing will be able to
fulfill its contractual obligations to you or your estate. Legally,
applicants are allowed to review a CCRC's audited financial
statements and receive periodic updates.
When buying real estate in a 55+ or independent living
community, be sure to keep an eye on future property values. Buying
into a community in a remote area seems like a bargain in today's
real estate market, but it may not appreciate in value the way a
more popular location will.
Learn more about retirement
communities.