At a time when many Americans are thinking about the ideal place to live after retirement, it might help you to know the true cost of retirement communities. If you’re weighing the options for an older relative or for yourself later on, here are the top considerations to keep in mind, financial and otherwise.
All-inclusive retirement living can mean anything from independent living in your own apartment to round-the-clock care in a skilled nursing community. There is a particular group of retirement communities that include every level of care, so that residents can transition to higher levels of care when needed and not have to move out of the community. These are called Continuing Care Retirement Communities (CCRC), and they almost always come with an entrance fee that is used in part to cover the cost of expanding healthcare needs.
According to the U.S. Government Accountability Office, that fee varies wildly: expect to pay between $1,800 to $600,000. That’s too wide a margin to be helpful, but it speaks to the sheer variety of options out there.
The lower figure represents the entry fee for a Type D contract at a CCRC, which covers a rental unit and guarantees entrance to CCRC services and health care on a fee-for-service basis. For this type of contract, the monthly fees will accordingly be much higher than those that have a higher entrance fee and the fees will be paid in tomorrow’s dollars.
Type A contracts, on the other hand, are called Life Care contracts because you get what you pay for: unlimited use of health care services and little to no fee increases based solely on an increased level of need. A Life Care contract typically has a higher entrance fee because some of the cost of future health care is prepaid at today’s dollars. Due to this prepayment, a portion of the entrance fee is tax-deductible for those who qualify to itemize medical deductions.
Finally, entrance fees may or may not be refundable, and the entrance fees that offer higher levels of refundability are usually comparably higher than those that offer lower refundability.
The average monthly cost of senior independent living can vary since there are different levels of service from which to choose. Aside from your basic living space (your apartment or your house), there are add-ons designed to make your life easier, more fun, or safer. For example:
- Upscale dining
- State-of-the-art fitness centers
- Weekly scheduled events, outings, classes, and more
- Resort-style amenities such as swimming pools and putting greens
- Cleaning, laundry and other services
- On-site medical resources
For communities that don’t offer Type A Life Care (which as a reminder provides residents with unlimited, lifetime access to independent living, assisted living, and skilled nursing care with little or no increase in the monthly fee if a higher level of care is needed), some communities offer these as an add-on as well. Below are national averages from the U.S. Government Accountability Office for some common medical needs:
- Assisted living options ($1,500 to $6,500 per month)
- Skilled nursing units ($1,500 to $10,700 per month)
- Memory care units (the price varies based on location)
Aging in Place: The Cost of Not Moving
Now that we have an understanding regarding the cost of moving to a retirement community, let’s look at the cost of taking the other path: aging in place at your current home (or your loved one’s home, if you’re researching for a relative). It’s no surprise that most older Americans prefer to stay right where they are – in the home they’ve lived in for years and where they’ve made many happy memories.
But the hard truth is that this option often turns out to offer many more challenges over time. There are plenty of financial stumbling blocks including a myriad of costly health concerns that can crop up when seniors live alone in a house that’s too much for them to manage.
“Without changes to how communities are constructed and services are delivered, older adults may find it increasingly difficult to age in place.”
- AARP Research Report, Aging in Place: a State Survey of Livability Policies & Practices
As long as we’re discussing the average cost of senior independent living, we may as well zoom out and look at the big picture. As we age, our homes become increasingly difficult to maintain. And don’t forget property taxes, which don’t typically get cheaper. In fact according to Tax Foundation, they’ve been known to rise as much as 19 percent in four years!
Eventually, it also becomes difficult to manage the daily tasks of living unless significant home modifications are made, from as little as adding support bars to bathtubs, to stair lifts and other upgrades. One CNBC expert estimates the total cost of these changes to be $20,000 to $30,000, while others at MarketWatch put the figure much higher, up to $100,000. These include:
- Grab bars
- Bathroom remodel
- Better lighting
- Wider doorways
- Kitchen modifications
- Safer flooring options
- Easy-grip doorknobs
This also doesn’t factor in grocery shopping, home maintenance, lawn care, shoveling, and other chores and needs.
The Unexpected Financial Benefits of Moving to a Retirement Community
As people grow older, they tend to begin to need in-home care. It might start out with just a few hours of help with chores each week. Over time, many seniors also need transportation services, meals, and even help with dressing and other daily chores. Here’s what that GenWorth.com estimates it can cost:
- Homemaker services: $48,048 per year
- Home Health Aide: $50,336 per year
- Adult Day Health Care: $18,720 per year
Compared with the average cost of senior independent living – $48,000 per year for Assisted Living – aging in place could turn out to be financially difficult. Moving to a retirement community could in fact turn out to be unexpectedly good for the finances.
The other factor to consider is that moving to a retirement community is often an opportunity to downsize, which means less space to need to maintain and keep clean, and also less risk for falls and other health concerns. Many people as they age actually end up preferring a one or two bedroom apartment with no steps and everything they need close together.
Health Cost Considerations
There could be other unexpected benefits, too.
Although it’s typical for people to state a preference for staying in their current home and community as they age, it’s easy to forget the challenges that brings. Over time, as seniors lose touch with their network of friends and become less mobile, social isolation can set in. According to a growing body of studies, inadequate amounts of social interaction can be deadly for seniors.
In fact, loneliness in seniors has been found to be twice as dangerous as being obese and just as detrimental as being a smoker. By staying social, the National Center for Biotechnology Information asserts that seniors can also boost immunity and reduce inflammation that can lead to chronic illness.
That brings us to one of the surprising financial benefits of moving to a retirement community: saving on medical costs by staying healthy.
You or your relative will find a multitude of ways to stay connected. Whether it’s through lunch dates with your neighbors or regular outings to cultural events or senior fitness classes, these communities are very good at making sure nobody feels isolated. Classes and activities also keep everyone mentally stimulated and engaged.
The Hidden Benefits of Community Living
So, what’s better: aging in place or moving to a retirement community? It’s definitely your call – nobody can make that choice for you. Even after taking all these different factors into mind, it might be hard to see which way the scales tip.
But you now have the facts. Hopefully that’s given you a firm understanding of the cost of retirement communities. Now, we invite you to take the next step and shop around. If you think community living might be for you or an older relative, feel free to select an Acts community and get pricing information. It’s free and there are absolutely no strings attached!