 Personal Finance PowerPoint Presentation Retirement Community Costs Prepare to get financially fit by practicing personal finance Insurance is part of our long-term risk mitigation strategy where we follow the adage of measure twice, cut once, put in a formal plan in place, looking something like set the insurance goals, develop a plan to meet them, put the plan in action, review the results, and repeat the process. Most of this information can be found at Investopedia, the cost of living in a retirement community which you can find online. Take a look at the references. Resources continue your research from there. This is Rebecca Lake, updated September 15, 2021. In prior presentations, we've been talking about insurance in general. We moved to medical insurance and then we moved to long-term care and our discussion of retirement communities fits into that context. So this is the cost of living in a retirement community. When planning your retirement, one of the most important decisions you'll make involves where to live. Moving to a retirement community can offer advantages when it comes to amenities, recreation, and being able to connect with other seniors. However, it's important to consider what you'll pay for senior living and how it compares to other options. What is a retirement community? When digging into the costs for different senior living options, it's essential to understand the difference between a retirement community and an assisted living facility or a nursing home. Retirement communities, also called, quote, senior living communities, end quote, or quote, independent living communities, end quote, are designed for people in their mid-50s and beyond who are desirous and capable of living independently and don't require specialized medical care. So we've got still functioning individuals that don't need that special care that might be in other types of facilities. These communities can offer different types of housing, including single-family homes, duplexes, condos, and apartments in terms of amenities. Retirement communities can provide things such as on-site gyms and fitness centers, cleaning and laundry services, transportation services, golf course or swimming pool access, which is nice, community recreational events, on-site dining, all great stuff. Assisted living facilities and nursing homes, on the other hand, are for seniors who need some level of help managing daily life. So as the name implies, with the assisted living, we're going to need more assistance or it is for people that need more assistance. And then the nursing homes would typically be thought of as a step up from there where more assistance is needed for the nursing homes for the daily activities. So that can range from assistance with basic chores, such as laundry or cleaning, to round-the-clock medical care. A third type of community, called Continuing Care, offers a full range of services from independent living through assisted living. So now you've got the full range here, and that of course can make it so one person doesn't have to be changing facilities as basically their needs change. So they have memory care and nursing home care. So this allows residents to age in place, regardless of their health needs, going forward and can also accommodate couples in which one partner needs a higher level of care than the other, which can also be quite nice if you can have two people that have different care needs that can be in the same facility that can manage both of their needs. So comparing costs of retirement community living, there's no set rule for how much you might pay to live in a retirement community. The costs can depend on a number of factors including which amenities are included, the type of housing being provided, where the retirement community is located geographically, whether you're required to pay interest fees, monthly fees, or both, what those fees cover in terms of housing, utilities, and other services. Generally, the more amenities and services offered, the more you may expect to pay for retirement living in a senior community, which of course would make sense. That's basically how it works with basically any kind of living facilities, the more amenities you have. So living in a highly desirable area where senior housing options are limited could also push up the final price tag. Again, it kind of makes sense. Retirement community interest fees. Some retirement communities require new residents to pay an interest fee to move in. So they're typically used to help pay for the services and amenities the retirement community provides, which can include medical care. So interest fees are often associated with continuing care retirement communities, which provide a spectrum of care to residents as they age. For example, you may start off in the independent living segment of the community. Then as you grow older, transition to assisted living and finally nursing home care, depending on what's covered, the fee can range from $1,800 to $600,000. So this type of retirement community may be appealing if you want a reassurance that your care needs will be met as you grow older and want to stay in one place. You may still have to pay a monthly fee, however. So this kind of independent living option could require a larger financial commitment than another type of retirement community. Retirement community monthly fees. While you may not pay an interest fee to live in a retirement communities, there's still a monthly fee to contend with. According to the senior living referral service, a place for mom's national senior living cost index, the median monthly cost of independent living was $2,522 in 2018, the most recent year for which numbers were available. So that's just over $30,000 a year. Still, it's possible that you could pay more or less depending on the community in which you choose to live. If you're moving to a retirement community at age 55, the minimum age to join most senior living communities, you'd have to consider how the monthly fee fits into your budget. While you could begin taking social security benefits at age 62, that would still leave you with a seven-year gap to fill. And you also have to be mindful of taking money from a 401k or an individual retirement account, an IRA, prior to age 59 and a half, as that can trigger tax penalties. So of course you got to take your tax considerations in place and see if your income or your assets are under that umbrella of some kind of retirement plan like an IRA or 401k to see if you can access it properly without getting penalized. So in that scenario, you may have to pull money from a savings account, certificates of deposit, CD, or a taxable brokerage account to cover the cost if you're not working part or full-time. Taking money from a taxable account can affect your tax liability, so you may want to talk to a tax pro about the implications of using that money to pay for retirement community living. So living in a senior community versus aging in place. If you're on the fence about costs of moving to an independent living community, it can be helpful to compare it to what you're spending where you live now. So obviously that would be the base point. You say, okay, I'm home, I know what I'm going to be spending here, what's the cost at this point? Can I compare that baseline to some other format? So for example, here's how a sampling of average annual spending breaks down for people aged 55 to 64 according to the U.S. Bureau of Labor Statistics for 2020. We got $21,379 for housing, $7,292 for food, $4,508 for utilities, $1,262 for household operations, $1,003 for housekeeping supplies, $2,244 for household furnishings, $10,287 for transportation, $5,648 for healthcare, $3,521 for entertainment. Altogether it adds up to $57,180 for the year. If you could move to a retirement community and pay the monthly median fee of $2,522 for housing, utilities, food, transportation and healthcare, then you'd come out ahead by nearly $30,000. Again, you have to look closely at where you're getting in exchange for what you're paying. So as you compare retirement communities, ask detailed questions. For example, what amenities are included? Does housing include all of your utilities? What level of healthcare is provided? Are meals, housekeeping and laundry services paid for as part of the monthly fee? Then compare all this to your current budget and what you think you might spend going forward. For example, what if you needed a housekeeper every week or multiple times a week if taking care of your home became more difficult? So the more you dig into the numbers, the easier it may be to decide whether a retirement community makes financial sense. What's the bottom line? Retirement communities can offer numerous advantages if you're looking to make a move in your later years, getting to know the cost involved and comparing those costs across different senior living community options can help you find the one that offers the best combination of price and lifestyle for your retirement budget.