The term “senior community” covers quite a large spectrum. There are places like The Villages in Florida that are for “active” retirees. A resident of the Villages once described it as like being in college, but with a higher quality of alcoholic beverages. At the other end of the spectrum are assisted living facilities for those that need occasional or fulltime care. Places where many go out of necessity, not choice.
So why do people choose to live in senior communities? They could be empty nesters seeking others like themselves. Or maybe upkeep on the house just got to be too much. The bottom line is convenience.
Many seniors appreciate having the amenities of a community while maintaining their independence. I helped move my parents into one six years ago. My father has since passed, but my mother lives there to this day.
Over the years I’ve helped many clients through the process of selling their primary residence and relocating to a senior community. As you’d expect, money is a huge consideration. There’s no sense in even looking at a community if it’s unaffordable. So you have to determine what you can afford.
In addition to a monthly fee, some communities require that you purchase your unit with the stipulation that a significant percentage is returned to you or your heirs when you leave the community. For example, if you paid $100,000 you might only get back $90,000 when you left or died.
I’ve found this process to be somewhat confusing. When you’re gone, someone else could move in, but your heirs may need to wait until the company has the cash to distribute that $90,000. In other words, if there’s a significant buy-in with a buy-out at the end, you and your heirs need to understand exactly how the distribution process works.
Cash flow is also an affordability factor. Let’s say you’ll need $5,000 per month. How does that compare to your current monthly output? It’s only the difference that you have to make up; you’re not going from $0 to $5,000. So you need to start by looking at your monthly cost of living.
Suppose that it currently costs you $3,000 per month. How much of that will continue and how much will go away when you relocate? Well, you’ll no longer have to cut checks for lawn services or snow removal. And your property tax will disappear when your house is sold.
So maybe you can cut $500 off the $3,000 and bring your monthly tab down to $2,500. Even so, that $5,000 per month projection may seem quite large. But remember, your lifestyle is not going from $0 to $5,000 per month. You’re projecting it to go from $2,500 to $5,000.
As an advisor, I need to help you see if the additional $2500 per month is attainable. Can you afford the additional $30,000 per year from your investments and the proceeds from the sale of your residence?
Selecting a retirement community can be difficult, but if you crunch the numbers carefully I’m confident you’ll make the right choice.