The decision to move into independent living and continuing care or to age in place is an emotional one. Many seniors feel they are not old enough, are comfortable at home or are anxious about downsizing. These emotional hurdles can be a significant barrier, but there are also important financial and health considerations that impact the decision to move.
Seniors should review their own finances and research the care communities of interest to ensure they are financially sound. The last thing someone wants after making the transition to a new home is to redo the process later if the facility goes bankrupt. Research should include reviewing the care communities’ financial statements, occupancy, debt rating, profitability, reserves and money spent on improvements.
Individuals considering long-term care should review a facility’s risk-management plan to understand how it handles significant health concerns like the coronavirus. Seniors should consult with their physician to understand individual risk factors and health concerns that should be brought up with the facility. Many facilities have in-house medical staff, too, so prospective residents should look into the staff’s background and the number of staff to ensure residents are adequately supported.
Seniors and their family members should learn about the facility’s communication policies and what steps the community takes to enact social distancing and other safety protocols. It’s important to ask how often the facility sends communication: Is it daily, weekly or on an as-needed basis? When a facility provides transparent and consistent communication, it can give family members significant peace of mind, even throughout a pandemic. Seniors should also ask for virtual tours of the facility to see the community and their room before moving in.
Many facilities require an upfront deposit, which can be several hundred thousand dollars. People often use the equity in their home for this deposit. When deciding between facilities, it helps to understand the different fees residents pay. There are Type A contracts, known as life-care contracts, and Type C contracts, which follow a fee-for-service model. Type B contracts are a blend between the two. Type A contracts are all-encompassing and cover all costs associated with continuing care. If a person needs additional care, such as assisted living or memory care, the fees don’t increase. With Type C contracts, if a resident needs additional care later in life, their fees will increase.
One of the big differences between Type A and C contracts is what happens with the deposit. A Type A plan is not likely to offer a refund of the deposit when the resident passes away or moves out. Type C plans will generally refund some or all of the deposit. Many communities offer hybrid plans with a varying percentage of refunds available dependent on what monthly fee the resident pays. There are some communities that do not have an upfront deposit requirement and instead have higher monthly fees.
Everyone in their 50s or older should consider purchasing long-term care insurance, because planning early can help secure a future in a care community, and insurance can reduce the risk of depleting one’s assets. Although Medicare will cover short-term acute care — think recovery from an illness or surgery — it does not cover long-term custodial care. Most policies sold today will cover care in a facility or in the home.
Seniors who select a care facility need to consider the cost of moving. Move managers work with many care communities to take much of the stress out of the transition and help with tasks including organizing possessions, determining which furniture will be most suitable in the new home and holding estate sales. These services can be enlisted for an hourly rate, and costs will vary based on the number of belongings. The National Association of Senior Move Managers provides resources to find nearby providers.
People often think it is less expensive to age in place, but there can be a lot of unforeseen expenses. Regular maintenance, big-ticket items such as roof repairs and home health care can add up. There may also need to be modifications made to the home to accommodate care later in life. For example, a wheelchair lift may need to be installed or a master bedroom and bath may need to be relocated downstairs.
Those in their 60s and 70s can find it easy to live independently, but many people will find it becomes more difficult the older they get. They might be surprised to learn that home health care can cost as much or more than a retirement facility, particularly if it’s required round-the-clock. Seniors who can no longer drive may need companion care, where a caregiver will help pick up groceries or drive them to appointments. Companion care can be costly because it is not covered by long-term care insurance.
Although assisted-living facilities do not require independent living first, most continuing care communities do require new residents to be able to live independently upon move-in, and they conduct evaluations to ensure potential residents can do so. Residents who are not able to take care of themselves may be directed to assisted living instead.
With many people spending well over 20 years in retirement, it makes sense to plan for the later years. Waiting too long to move to a care community could mean that the window of opportunity might close. Planning ahead will allow seniors to determine their resources for the style of living they’ve envisioned.
Ann Summerson is a financial planner at the Wise Investor Group at Robert W. Baird & Co. in Reston, Va.