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"I'm Not Ready Yet": The Cost of Peace of Mind

Courtesy of myLifeSite

The "running out of money" fear

Many seniors worked hard for their entire adult life and diligently saved for retirement. They paid off their home mortgage to reduce their monthly expenses as well as boost their assets. But transitioning from the wealth accumulation and planning phases of retirement planning to the distribution phase — spending that money you saved — can create anxiety for some.

In certain cases, seniors might look at the costs associated with a move to a Life Plan Community and have their fear of "running out of money" triggered. Add to the equation the thought of “trading in” what is oftentimes a person’s largest asset — their home — in order to pay for senior living, and that worry can be further exacerbated.

At first glance, some Life Plan Communities can seem pricey — or even cost-prohibitive for those seniors who are particularly worried about long-term affordability and their retirement savings holding out. It is by no means an irrational concern.

Depending on which type of Life Plan Community contract you choose, you may have to pay a sometimes-hefty entry fee, which can be a six-figure amount. (In many cases, seniors will pay their entry fee using the proceeds of their home sale.) In addition, most Life Plan Community residents pay a monthly service fee. Again, depending on your contract type, that monthly fee may be set or could fluctuate should care services eventually be needed.

On the surface, it is easy to understand why these costs initially cause concern for some people who struggle with a fear of running out of money. However, it is worth looking at this affordability issue from a different angle. Consider what Life Plan Community residents are actually getting for their money, and for some people, that value can put the cost into perspective.

Cost versus value

While the price of a Life Plan Community might seem high, what exactly are you getting for that money? Does the Life Plan Community provide you with a valuable “product,” making it worth the cost?

If you are looking at an entry fee community, some portion of that entry fee may be refundable to the resident or the resident’s heirs (depending on your contract type). So, while it might seem like a large output of money up front, you (or your heirs) may recoup some or most of that initial investment.

But what about the monthly service fee at a Life Plan Community? That amount typically covers the cost of the residence, utilities, property taxes, and a meal plan that covers at least one meal per day (additional meals can be purchased). In many Life Plan Communities, that monthly fee may also include amenities and services like weekly housekeeping, events and classes, social opportunities, outings, transportation, and more.

Bear in mind, there are still expenses that come with staying in your current home, even if it is paid off. For instance, you have utility bills, property taxes, homeowners’ insurance costs, maintenance costs, and food costs. There are also sometimes-hefty unforeseen costs (and oftentimes, headaches!) associated with deferred maintenance — like when the furnace goes kaput or the roof starts to leak. Many of these costs of homeownership are eliminated for people who opt to move to a Life Plan Community.

The biggest cost X factor

But perhaps the biggest unknown cost variable that goes along with remaining in your current home is the potential cost of care services, should you need them.

According to Genworth’s Cost of Care Survey, in 2021, the monthly median cost of a home health aide or homemaker services is around $5,000. That would of course be on top of your other homeownership-related living expenses.

If a higher level of care is needed, that cost of care would be even higher. The monthly cost of an assisted living community averages $4,500, and a private room in a nursing home is around $9,034 per month. This is per person, of course, so for a couple, if one person needs care, and the other doesn’t, the homeownership costs do not go away.

This is perhaps where the value of a Life Plan Community becomes most clear for some people. Residents of a Life Plan Community have contractually guaranteed access to a full continuum of care services, should they need them, ranging from assistance with a few activities of daily living to full-time skilled nursing care at the healthcare center.

Depending on your contract type, your monthly service fee may or may not increase should you or your spouse/partner require such services, and it’s important to be sure you understand exactly what you are getting for your money. However, many people who ultimately decide to move to a Life Plan Community do so because of the value they put on having peace of mind that, should they need it, care services will be available to them, making a Life Plan Community well-worth the cost.

A senior living cost decision informed by facts

While there are certainly emotional aspects to making a decision about senior living, it is also a financial decision. But don’t let financial hesitancy make your senior living decision for you.

Crunch the numbers. When you factor in the value of what you get when you live in a senior living community, including the peace of mind that comes with living in a Life Plan Community, the cost may be much more affordable than you had thought.