Over time, we all face choices about where and how we live as we age. Below are 10 options for retirement living options.
Aging in place
The American Association of Retired Persons (AARP) says that 87 percent of retiree homeowners want to stay in their current home for as long as possible.
Benefits: The homeowner gets to delay change. Many seniors prefer to age in page. They know the house, the neighborhood and the community. They are used to the cost of living and the physical logistics of daily living. They are likely close to their bank, their house of worship and their favorite grocery store. Most folks find staying put to be the most enjoyable and stress-free way to live in retirement.
Drawbacks: Some retirees have outgrown their current house. Often, the house where they raised their kids has gotten too big and hard to maintain. Sometimes, it works early in retirement and then becomes a burden as they age. And it’s likely that the current home has too many stairs and other tripping hazards. Sometimes the current home is not handy to senior services and healthcare. As time goes by, the access to support services is more important.
For some seniors, the desire to age in place is there, but the finances don’t work, especially if the person is single. Some choose to take on a roommate. Home sharing is mostly chosen by women. There are several home-sharing services that help pair up homeowners with potential roommates.
Benefits: Home sharing can be a great way for a homeowner to age in place, add companionship to their life, and improve their finances. The homeowner can charge rent and likely split utilities. Additionally, both roommates benefit from the security of not being alone in the home without assistance.
Drawbacks: Not everyone wants to share their home with a stranger or even a friend. Furthermore, the decision to bring someone into your home carries risks. For one, you might not get along. Additionally, there can be a lot of headaches from renting a room if the renter is unable to meet their payments. It can be hard to evict a person, especially a senior.
Relocating and downsizing
When you are working, living close to work is important for many people. However, in retirement, location priorities can change. If your house is too big, and your grandkids live three states away, you might be motivated to move.
Benefits: Moving can help free up home equity. And living expenses can fall if the senior downsizes or moves to an area with a lower cost of living. And moving to a low-tax state can increase the savings further. And, if you move to a more temperate climate you might be able to enjoy hobbies more weeks out of the year.
Drawbacks: Relocating is a big deal and it requires change. It means getting used to a new area and a new home. And moving is not free. You pay for movers, real estate transaction costs and a host of little expenses. If the decision to relocate eventually does not work, it is very hard to undo.
If you already rent, this is no change. For homeowners, selling the home and renting a new place can create some opportunities.
Benefits: By selling and renting, you can free up home equity and possibly reduce your expenses. Renting also provides more flexibility in that you can move more freely than if you owned. You will also likely eliminate a lot of home upkeep and maintenance.
Drawbacks: Many seniors do not like the idea of renting. They have been raised with the cultural message that “paying rent is throwing away money.” So it can be hard for those folks to be happy as renters.
Senior communities planned to provide shared amenities and resources are not new. The village model is often set up like a homeowners association where dues are paid into the “village” or “community,” which in turn provides services like transportation, events and some basic care.
Benefits: The village model can help reduce costs as seniors share services and costs across the group. By allowing seniors to age in place for longer, they can delay having to move into more expensive senior housing like assisted living facilities.
Drawbacks: Village communities are still relatively rare. Services can be limited, so some retirees are forced to move as their needs for services grows. And the village “dues” are an added expense.
Age-restricted (active adult) communities
Generally, in the United States you cannot discriminate based on age, gender or race when it comes to housing options because of the Fair Housing Act of 1968. But, The Housing For Older Persons Act of 1995 allows for communities to restrict housing options to older individuals under two arrangements. The first requires that at least 80 percent of the occupied units have at least one person who is 55 or older living in the home. The other type requires all residents to be at least age 62, including both spouses.
Benefits: Seniors can live near and around their peers. The communities often provide a variety of services, clubhouses and recreational activities.
Drawbacks: Senior communities typically have additional costs to cover the added amenities. Sometimes, it can be a challenge for a couple with a large age difference.
Continuing Care Retirement Communities
Continuing Care Retirement Communities (CCRCs) offer a continuum of care throughout retirement, often starting with independent living. Most of these communities require the senior to move in when they are in good health and can live independently. Over time, the senior can stay in the same community as they require increasing levels of care.
Benefits: CCRCs allow a senior to age in place in the same community but receive services and long-term care as their needs change. This is also a way to control and, in some cases, prepay your long-term care costs. The communities also often provide food, transportation and recreational activities.
Drawbacks: CCRCs are typically for-profit businesses that can run out of money and go out of business. Additionally, many require down payments in the hundreds of thousands of dollars. So if the entity goes bankrupt, seniors could lose these down payments.
Assisted living offers a combination of housing and care services. Typically, when someone moves into an assisted living facility, they need help with some activities of daily living, but the person can usually still live independently.
Benefits: For many, assisted living facilities offer the care required to maintain their preferred standard of living. You can often pay for only the services you use in a given month. So you can get help for a short time if that fits, or add more regular services as that makes sense.
Drawbacks: Cost. According to the 2018 Genworth Cost of Care Study, the average assisted living cost is roughly $48,000 a year. And it’s increasing at 3 percent per year. With a lot of these facilities available, it can be hard to choose the right facility.
Nursing homes provide housing and full-time care for individuals needing significant levels of long-term assistance. Nursing home care is less about making a housing decision and more about receiving the level of care you need.
Benefits: Care can be significant and help the person live a better lifestyle than they would if they tried to manage alone at home. Additionally, nursing homes can provide skilled care services that might be difficult for family members to provide or expensive to hire out at home. And nursing home care can be covered by your state’s medical assistance program.
Drawbacks: Nursing home quality ranges significantly, and so does cost. Most people do not want to move into a nursing home until they have no choice. And it’s expensive. According to Genworth, a private room in 2018 cost more than $100,000 a year on average.
Charity housing can mean a few different things. First, there are charities and religious organizations that provide free or reduced-cost housing options for low-income seniors. Another form of charitable housing can come from family members. Many will take in relatives to help them out.
Benefits: Charity can be the cheapest form of retiree housing. When it comes to family members taking in a senior, it can also be a great way to spend time with family.
Drawbacks: Most people do not want to rely on family members or charities for their housing or other needs. The desire for most people is to live independently.
With so many choices, it pays to get some advice. In the St. Paul area, I have a friend who does a great job of helping families evaluate their options and select a good fit for their situation.
As you, or a family member age, I recommend that you check out Eunice Neubauer and the work she does for families.
You might find that you want some advice about the financial aspects of your aging process. If so, I recommend you contact a CERTIFIED FINANCIAL PLANNER™ professional.
To find a CFP® professional near you, start your search here.
As you visit with financial planners, I suggest a couple things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor only paid by clients, not any financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at firstname.lastname@example.org. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.