You’ve probably noticed how hard it is to find how much assisted living costs. Believe it or not, the lack of price transparency isn’t just a marketing tactic. Still, it leaves many unprepared for the expense. We show that families with modest budgets are especially likely to underestimate the cost of assisted living. Then we offer tips on how providers and consumers could address the problem.
By 2030, nearly 20 million Americans will be age 80 or older. Most of them will need long-term care. The trend toward smaller family sizes will leave them with fewer family caregivers. Many will turn to private-pay assisted living, which offers apartments plus meals, light housekeeping and assistance with daily activities. Despite the growing need for assisted living, we find that many families underestimate the expense.
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Based on data from over 40,000 families, we estimate that over 40% of consumers spend more than the high end of their anticipated assisted living budget range.
When families call A Place for Mom, our Senior Living Advisors ask them about their anticipated monthly budget for senior housing and care. Because we keep in touch with families until they move into a community, we can compare their actual first-month rent and care charges to their initial budget. Based on data from over 40,000 families, we estimate that over 40% of consumers spend more than the high end of their anticipated assisted living budget range. Half of the families who contact us have a budget range with a midpoint of at least $300 less than the median cost of assisted living.
74% of consumers with an anticipated budget from $1,500 to $2,000 per month end up spending above that range.
Seventy-four percent of consumers with an anticipated budget range between $1,500 and $2,000 per month end up spending above that range. On average, they spend $915 more per month than the high end of their budget. In contrast, 24% of consumers with a budget range between $5,000 and $6,000 per month underestimate their costs.
Many consumers with smaller budgets are simply uninformed about the real costs and could actually afford much more than they state. Others truly have limited budgets, but aren’t poor enough to qualify for government programs. These consumers would potentially benefit from easier access to information about pricing for currently available floor plans at specific assisted living communities. Unfortunately, that information isn’t often available.
Companies like Redfin and Zillow aggregate real estate listings and show them on a convenient map. Aggregating listings is no small technological feat, and everyone agrees it has utterly transformed the experience of home buyers and sellers. By comparison, price transparency is rare in the senior living industry. Families usually must visit a community for a quote.
“Today’s senior living consumers increasingly expect to obtain pricing information online,” says Dan Willis, senior vice president of partner services at A Place for Mom.
While providers don’t list prices in part to encourage tours and avoid sticker shock, the lack of price transparency is not simply a marketing tactic. Care needs vary widely among prospective residents, who often do not understand those needs upfront. This makes it hard to list prices accurately without risking information overload. Still, demand for price transparency grows.
“Today’s senior living consumers increasingly expect to obtain pricing information online as a critical part of their search and decision process,” says Dan Willis, senior vice president of partner services at A Place for Mom, “As this trend accelerates, senior living providers will need to present their pricing structures in a way that is easier for these committed consumers to access and understand.”
“We track the behavior of consumers across senior living websites, adds April LaMon, co-founder of Lead InSite, an online behavior research firm that focuses on senior living. “Pricing information and transparency are a key aspect of the pre-research process. When this information is readily accessible on a website, consumers move through the decision process more purposefully.”
Just as Redfin and Zillow solved the listing aggregation problem, assisted living providers will someday find a way to post pricing online without causing information overload. If providers made pricing more transparent, consumers could more effectively plan their retirement, and senior living could remain relevant to increasingly savvy consumers.
Until then, what can families do to better plan for assisted living costs?
Tools like the Senior Living Cost Index (SLCI) and Genworth Financial’s Cost of Care Survey show local cost estimates for senior care. Estimates vary due to varying methods and sources, yet they provide enough information to aid retirement planning given typical costs in your area. For example, the SLCI shows that consumers who live in Seattle, Washington, could have save over $6,800 (13%) per year by moving an hour south to Tacoma. When making long-term plans, it’s safe to assume about a 3% annual increase in local prices, although prices are growing faster than that in some key markets.