One of the most important aspects of retirement planning is making housing plans. The truth is you must have a place to live in retirement and you will find many different options. Furthermore, even if you opt to just keep the status quo and age in place, there are a lot of things to think about.
Your retirement housing strategy
The home is normally a retiree’s largest asset, with the median wealth in homes for a 65-year-old couple at $192,552, in accordance with the U.S. Census data. This represents about two-thirds of the median retiree’s assets. Furthermore, the home includes a cost, which can be the most significant expense for retirees at nearly $20,000 annually. So let’s take a look at 10 different retirement housing options, including aging in place right through nursing home care at the end of life.
Aging in position
What is it: Roughly 83% of retiree homeowners wish to remain in their current home for as long as possible.
Pro: The homeowner gets to keep consistency in their life. They understand their house, are aware of the expenses related to it, have an emotional attachment to it, and know the area. Oftentimes this can be the most enjoyable and stress-free way to live in retirement.
Con: Often retirees have outgrown their current homes. Perhaps they raised a couple of kids and have a lot of extra maintenance, rooms and expenses related to keeping up the house. Although it might work early in retirement, it may become a burden as they age. The current home also might not be friendly for aging in place. The home could possibly have too many stairs, very few senior amenities, and be far away from senior services like health care.
Home sharing
What is it: For many homeowners, the need to age in place is there, however the finances just don’t appear sensible, specifically if the person is single. So one choice is to take on a roommate. Home sharing is generally engaged in by women in retirement, with over 4 million senior women sharing a home with at least two other women. You will find home-sharing services that assist pair up homeowners with potential roommates, both from a financial and compatibility standpoint.
Pro: Home sharing can be a smart way for a homeowner to age in place, add companionship to their life, and enhance their finances. The homeowner has the capacity to charge rent and likely split utilities, which often can add much-needed cash flow. Additionally, it enables the homeowner to have another person live with them who is in a similar stage of life.
Con: Not everyone wants to share their home with a stranger or another person. Furthermore, the decision to bring someone into your home includes a bunch of risks. For one, you may possibly not get along. Additionally, there can be a whole lot of headaches from renting a room if the renter cannot meet their payments. It’s not easy to evict a person, especially a senior.
Relocating/downsizing
What is it: Whenever you are working, living close to work is essential for many individuals. However, as soon as you retire, that need is gone. Suddenly, location desires change. Additionally, the house you were living in might no longer meet your requirements, so relocating to a better fit can make sense.
Pro: Relocating may help free up home equity and lower expenses if the homeowner downsizes. It is also possible to move to a neighborhood with a more affordable cost of living or to a state that has lower taxes. Additionally, an advantage of relocating in retirement can be to move closer to family or to improve one’s quality of life by moving to warmer weather or closer to recreational activities.
Con: Relocating means getting used to a new area and home. Moving always has costs associated with it also, whether it is hiring movers, closing costs or just travel costs. Lastly, if the decision to relocate eventually does not work, it is very hard to undo.
Renting
What is it: If you are already renting this might be the status quo. However, for homeowners, one choice is to sell the home and rent. Occasionally, you can participate in a sale-leaseback agreement and sell your current home and then rent it back. In other cases, you can sell and relocate to a new rental location.
Pro: By selling and renting, you can free up home equity for other needs and even lower your expenses. Renting also offers more flexibility in that you are able to move more freely than if you owned. Additionally, renting can take some of the home upkeep and maintenance off the table. This could be valuable to seniors as they age. While it could have been enjoyable to mow the lawn and take care of the property at an earlier age, as one ages it can become difficult and costly to hire out, so renting can be a way of managing the costs of living.
Con: One of the biggest downsides of renting is just that a majority of homeowners do not wish to do it. A survey of retirement age homeowners discovered that only 5% planned to sell their home and rent. For the majority of Americans owning their home is part of the American dream, so renting just doesn’t fit their vision of a successful retirement, even if it is the best financial outcome for them.
Village concept
What is it: The Beacon Community near Boston is frequently credited as being the first official “village model,” but communities taking care of seniors together have been around forever. The village model is focused on allowing seniors to age in place in their homes but with the support they require. Quite often, the village model is set up much like a homeowners association where dues are paid into the “village” or “community,” which in turns provides services like transportation, events and some basic care.
Pro: The village model can help lower costs as seniors share services and costs with others needing similar assistance. By letting seniors to age in place for longer, they are able to avoid having to move into higher priced senior housing like assisted living facilities before they have to.
Con: While there are several hundred village models in the country, that is not a lot of options. For the majority of seniors there is no village model option in their area. Additionally, services are restricted, so the retiree may still need to move as their needs for services grows. Furthermore, there is a cost associated with the village model, so that could impact cash flow.
Age-restricted (active adult) communities
What is it: Generally in the United States, you are unable to discriminate based on age, gender or race when it comes to housing options as a result of Fair Housing Act of 1968. However, The Housing For Older Persons Act of 1995 permits communities to restrict housing options to older individuals provided that certain parameters are followed. Essentially, there are two kinds of age-restricted housing options. The first mandates that a minimum of 80% of the occupied units have a minimum of one person who is 55 or older living in the home. The other type is a little more restrictive as it requires all residents to be no less than age 62, including both spouses.
Pro: One of the biggest benefits is companionship. Seniors choose to live near and around those going through a similar part of their life and retirement. The communities often supplies a variety of services, clubhouses and recreational activities.
Con: There can be additional expenses associated with living in such communities, so it is not always the most cost effective housing option. Furthermore, with a 62-and-over community, adult children cannot move in if they don’t meet the age requirement. Additionally, for spouses with large age gaps, they can be prohibitive also.
Continuing care retirement communities
What is it: Continuing Care Retirement Communities (CCRCs) offer you a continuum of care throughout retirement, often beginning with independent living. The majority of these communities require the senior to move in when they are in good health and can live independently. As time passes, the senior can remain in the same community but receive different amounts of care and senior housing, ranging from assisted living to long-term care to end-of-life care.
Pro: CCRCs allow a senior to age in place in the same community but receive services and long-term care as their needs change. This can be a way to control and, in most cases, prepay your long-term care costs. The communities regularly provide food, transportation and recreational activities.
Con: The biggest concern with CCRCs is if the entity can fulfill its promises with time. CCRCs are usually 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, in the event the entity goes bankrupt, seniors could lose these down payments.
Assisted living
What is it: Assisted living provides a combination of housing and care services. Typically when someone moves into an assisted living facility they need assistance with some activities of daily living and are in the early stages of needing long-term care services. However, the person can still live mostly independently.
Pro: For some, assisted living facilities offer the care necessary to maintain a standard of living desired by the senior. They could require some assistance with bathing, dressing, mobility or cooking.
Con: Cost. In keeping with 2018 numbers in Genworth’s Cost of Care Study, the typical assisted living fees are roughly $48,000 annually. Furthermore, Genworth predicts that this cost will balloon to roughly $86,000 annually by 2038. Additionally, it’s not easy to decide on the right facility. Prepare yourself to figure out how you will pay for assisted living and the kind of facility and care that you would like.
Nursing home
What is it: Nursing homes provide housing and full-time care for individuals needing significant stages of long-term assistance. Nursing home care is less about making a housing decision and more about getting the level of care you must have.
Pro: Care can be significant and help the person live a better lifestyle than they would if they attempted to manage alone at home. Additionally, nursing homes may provide skilled care services that might be challenging for family members to supply or costly to hire out for at home.
Con: Nursing home quality ranges significantly, and so does cost. Furthermore, the majority of people do not look forward to or decide to move into a nursing home, however, it is usually driven out of necessity. As reported by Genworth, a private room in 2018 cost over $100,000 a year on average. Plans for how to finance your care should start prior to when retirement.
Charity
What is it: Charity housing often times will be a few different things. First, there are charities and religious organizations that offer free or reduced-cost housing alternatives for low-income seniors. Another type of charitable housing can come from family members. Many will take in relatives to help them out.
Pro: Charity will likely be in many cases the most cost effective 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.
Con: The majority of people do not want to depend on family members or charities for their housing or other needs. The desire for most people is to live independently. However, living with family and using charitable housing is a viable alternative for millions.
Have a questions or concern? Nick, Cindy & Nicholas Davis with RE/MAX Premier Group are here to assist you with all your Real Estate Needs. We are always available at 813-300-7116 to answer your questions or you can simply click here and we will be in touch with you shortly.
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