When planning for retirement, a big part involves financial planning to cover the costs that inevitably come with growing old.
The costs involved in aging include expenses for necessities like food, utilities, transportation, and healthcare. But the amount of each expense can vary depending on your changing needs as you grow older, or additional costs may be added if you plan to retire in a different senior housing option such as a nursing home.
So in this article, we will guide you through the common costs of retirement housing options to help you with your financial planning for retirement.
Average Cost of a Retirement Living Facility
Establishing your budget and making appropriate plans are the best ways to ensure you have enough money to pay for a retirement home.
According to Genworth’s Cost Of Care Survey, the average cost of long-term care in the United States in 2021 was as follows:
- $7,908 per month in a nursing home for a semi-private room,
- $9,034 per month in a nursing home for a private room
- $4,500 per month for care in an assisted living facility for a one-bedroom unit
It is crucial to inquire about the extra-cost services as well as the conveniences that are offered. For some services, like room cleaning, laundry, and help with personal care, senior living homes charge an additional fee. Remember to budget for your shifting demands.
Common Costs Involved In Retirement Housing Options
Seniors have a wide range of retirement housing options, including independent living, assisted living, and skilled care, all with different cost structures. While some neighborhoods allow you to rent an apartment and use the community’s amenities for a monthly cost, others only provide a month-to-month program and service agreement.
– typically rely on the kind of apartment you choose, and the services provided. Less money is required to enter smaller apartments than larger ones. Additionally, some institutions could charge for premium food plan choices.
There are two types of entrance fees:
A non-repayable entrance fee – less expensive but typically doesn’t come with a refund if you decide to leave the retirement community.
A repayable entrance fee – is more expensive but also provides some reimbursement when you leave the facility in the future.
Health Care Costs
Even if their healthcare requirements change, several retirement communities allow their residents to remain in the same neighborhood. Since their costs are frequently predictable, you can also plan your budget for any potential future medical needs.
Even when the quality of care provided changes, many retirement homes with entrance fees continue to charge the same monthly rate. Some organizations maintain the usual monthly fees for a fixed period in an assisted living or skilled nursing facility setting and may raise them subsequently following the cost of care.
Monthly and Service Fees
In senior living complexes, daily costs, including housekeeping, meals, transportation, and other services, are charged monthly. In addition to the monthly subscription, they could also tack on extra costs for particular services.
The health of your loved one(s), the style of home they select, whether they rent or buy, the number of individuals residing in the facility, and the type of service contract are just a few of the variables that affect these payments, according to Investopedia.
Factors Influencing The Costs of Senior Living Options
While researching senior living costs, it’s beneficial to know why prices are as high — or as low — as they are.
Here are the factors that affect the costs of common senior housing options.
1. Level of Care
Costs associated with a senior living will vary greatly depending on the patient’s degree of care. And it’s frequently the main element influencing the typical cost of senior life.
Various senior living facilities have been built, with varying costs, due to the enormous differences in care levels.
2. Geographical Location
The cost of senior living facilities can ultimately be influenced by where you reside, like many other factors like real estate and petrol prices.
Facilities differ in their amenities. The amenities that residents have depend on the degree of care they require. At certain facilities, such as those that provide care of lesser quality, residents may not be aware of or may have few amenities available.
4. Senior Care Needs
The monthly price is typically greater when people with specific disabilities need specialized care from highly qualified personnel. The amount of care typically decided by evaluating our needs would determine the senior care facility cost. There is an additional charge for assistance with activities of daily living, such as eating, bathing, using the restroom, dressing, grooming, and managing medications. Keep in mind that the cost of care increases with the level of treatment.
5. Senior Care Facility Size
The size of senior care facilities varies, ranging from a modest board and care home with six beds to a luxurious retirement resort. A Board and Care Home is the smallest type of care institution. The state has granted licenses for board and care facilities, which resemble typical homes and can host up to six senior citizens. The cost of a senior care facility increases the more wealthy you go.
In general, you can anticipate paying more for retirement living in a senior community the more amenities and services are provided. Living in a location with few possibilities for senior housing could raise the overall cost.
Additional Senior Housing Costs To Ask About
When evaluating senior housing options, be sure to ask about the following:
Pricing models. Most assisted living facilities offer a base room fee and tiered pricing that fluctuates depending on the degree of care needed. The cost of the care add-on increases with the level of care required. Other accommodations might be all-inclusive, a la carte, or fee-for-service.
Additional fees. In most cases, the base rent for senior housing includes all meals, housekeeping, activities, and 24-hour on-site support. Entrance fees, deposits, and fees for extra services like television, laundry, pets, and transportation are all possible extra costs.
Lease length. While most assisted living facilities charge every month, some may demand a longer-term contract.
Buy A House Or Save For Retirement
Apart from common retirement facilities, aging-in-place is also becoming even more popular among seniors. Most want to age at the comfort of their homes to maintain their freedom, while some think it’s a convenient choice when it comes to cost.
But is it really better to buy a house you can age in or save the money for retirement instead?
David Ning, a personal finance specialist, advises against taking up a new 30-year fixed mortgage when you are in your fifties.
“Getting a 30-year mortgage while you are in your 50s is pretty perilous,” he says, “whether you are buying a new home, refinancing your existing mortgage, or you just want to take out equity from a home that you own free and clear. Do you really want to keep paying until you are 85 if you are 55, for instance? ”
Before committing to such a significant expenditure, it’s crucial to carefully weigh all the options.
According to Investopedia, before making the decision to purchase a home after age 55, you should think about alternative mortgage products that would be more suitable and decide whether paying off the mortgage is more crucial than maximizing your retirement savings.
Moreover, owning a house also comes with hidden costs that go unnoticed by homeowners. According to CNBC, these hidden housing costs includes;
- Property taxes
- Lawn maintenance
- Utilities and maintenance
- Furnace and air-conditioning
- Wiring – cable, phone, Internet
- Pest control
You may locate the best pricing and lifestyle fit for your retirement budget by being aware of the prices involved and comparing those costs across several senior living community options.
Furthermore, understanding what makes up these costs and the factors that affect their price is crucial when planning financially for your retirement since there’s a chance that you may need to move out of your home and into a different retirement housing that offers the type of care that you’ll need.
To learn about the resources that can help you with these expenses you may check out our compilation of Financial Assistance and Resources For Seniors.