Retirement communities have become the answer for an increasing number of seniors looking to get out from under the burdens of home ownership, focus more on hobbies and health and increase their social and recreational opportunities. But with so many types of communities and ranges of services available, navigating the maze of living options can be overwhelming -- and fraught with opportunity to overpay.
If you are considering retirement living for yourself or your aging parents, here are six points to keep in mind:
1. They're not cheap. Most have entry fees ranging from five figures all the way up to $500,000 or more, depending on the size and location of the apartment or home you choose. Ongoing monthly fees start at around $2,000, and typically include your residence, your medical care and food -- and may run higher depending on the type of community, size of dwelling and level of care provided. Most communities will conduct a financial test to ensure there are sufficient assets and income to support the ongoing monthly costs as well as the up-front fees.
2. Apply while you're still healthy. Many retirement communities require that their members pass rigorous physical and psychological screenings and may reject applicants with cancer, strokes or dementia. Even facilities that accept people who aren't healthy only do so on a space-available basis. If you wait until your first health crisis to apply to a retirement community, you might not get in. Or if you are not healthy for a period of time, the life plan offered may be withdrawn. In general, the earlier you decide to apply, the more choices you will have. Those who wait until they become frail will have limited options and less time to make these critical decisions.
3. Know your needs. Define what kind of services you require. Needs could range from lawn, home maintenance and cooking to intensive help with bathing, moving around and eating. You should also think about your interests and look for amenities that would suit your lifestyle, such as a fitness center, golf course or access to cultural events and other activities. Consider your future health needs as well. According to the U.S. Department of Health and Human Services, about 70 percent of people over the age of 65 will require some type of long-term care services during their lifetime. Gauge how likely and how quickly your needs may increase.
Because future needs can be hard to predict, many opt for a Continuing Care Retirement Community (CCRC) facility that puts independent living, assisted living, nursing care and memory care all on one campus. This way, residents have the option to transfer to other parts of the campus as their needs change throughout their golden years. Warning: the fact that they have a Parkinson's, Alzheimer's or dementia facility doesn't necessarily mean you or your loved one will get in. This is an important part of the evaluation process to understand whether the community guarantees on-site access to these memory care services.
4. Location. Location. Location. Think about where you envision spending your golden years. Are you looking for a warm climate? The intellectual stimulation of a college town? Or is proximity to family tops on your list? Don't underestimate the value of being within driving distance from relatives and loved ones. Several of my clients have found that the opportunity to golf year-round couldn't compensate for not being able to have Sunday dinner with the grandkids.
5. Take a test drive. Don't fall for the marketing hype. Make sure you visit the community -- even ask to stay there over night to really get to know the place. Come in different seasons and preferably outside office hours so you can talk candidly with the residents about what it's like living there and what they think of management.
6. Enlist an advocate. Buying an apartment at a continuing care or retirement community is a complex process. Upfront fees, life care options, meal plans and a host of other variable costs can bewilder even the savviest individual considering this important next stage of life. It is essential that you fully understand what you are getting into. You should ask what measures are in place to protect your tenancy in case the community hits hard financial times or forecloses. Find out how much money they have in reserves. Be aware of exit fees and what financial choices there are in the event of a resident's death.
To help you through the process and make sure you get the most value for your money, I recommend finding a good Registered Investment Advisory Firm or other financial professional to serve as your advocate. With so many retirement living service providers and options available, there is usually room to negotiate on anything from the size and location of your apartment to the number of meals included in your monthly fee.
Depending on my client's needs and desires, I have been able to negotiate substantial reductions in upfront fees and lock in interest-free terms for extended payments. For example, I negotiated a $67,000 discount on a $240,000 entry fee for one client; and secured an agreement for a 10 percent down payment with the balance payable, interest free, after six months for another client. One community agreed to 42-months of no price increases. There are also opportunities to negotiate services. For instance, I recently assisted a client in obtaining a free golf cart along with the vehicle's maintenance for life.
Selecting the right senior living community is an important decision that involves more than choosing a floor plan -- it's about security, quality of life and lifestyle. In addition to meeting your social, cultural and recreational requirements, the retirement community you choose should be financially sound and have continuum of care in place to meet your future health needs.
1. U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Information, www.longtermcare.gov/LTC/Main_Site/index.aspx
2. U. S. Senate Special Committee on Aging, Continuing Care Retirement Communities: Risk to Seniors, http://aging.senate.gov/events/hr224cr.pdf
This information in this article is general in nature and may not apply to your own financial situation. Please consult your own professional tax, and/or financial advisor regarding this information and your own personal financial needs. For a complete disclosure statement, please see my biography.