CCRC “Nitty-Gritty” Need to Knows

 

In a post last year, I wrote about a class that I taught for the first time about continuing care retirement communities or CCRCs. I recently taught the class again. Below are some additional things to consider about CCRCs:

CCRC Definition- A CCRC, also known as a life care or life plan community, is a senior living community that provides independent living, assisted living, memory care, and skilled nursing care on one campus as residents’ needs change. There are approximately 2,000 CCRCs in the U.S.

 

Elitist Concerns- CCRCs are expensive! Entrance fees are often $400,000 or more, especially when a “second person fee” is charged for a couple. Industry experts estimate that only about 10% to 20% of older adults have the financial resources to comfortably afford a traditional CCRC.

 

Early Planning- Experts advise moving to a CCRC before you need to. Once you have illnesses, limited mobilities, and special medical needs, it will be difficult to move and you possibly may not be accepted. In addition, many CCRCs have waiting lists that are five to ten years long to get in.

 

Widowhood Scenario- Spouses in a couple should consider what they will need as singles when the first spouse passes away. CCRCs can provide peace of mind as a source of future long-term care instead of relying on children, which adds a burden to their lives (time and money).

 

Downsizing Challenges- Selling a home and moving to a (generally) smaller CCRC unit can be emotionally, mentally, and physically taxing. It generally takes longer than people think, even when everything goes smoothly. People need to allow adequate time for selling and packing their “stuff.”

 

Pre-Move Measurements- There are online programs (and some CCRCs even have downsizing consultants) to help with laying out rooms and positioning possessions. Don’t pay to move things that won’t fit. Also, remember that CCRC residents typically live there for the remainder of their life.

 

Nitty Gritty Questions- Visit with staff and residents of a CCRC and ask questions about things that are not typically found in the slick brochures that CCRCs provide:

 

§   Is the CCRC profit or non-profit? Is there a “parent” company?

§  What is the CCRC’s bond rating? Ask to see their latest financial statements.

§  What facilities, activities, and amenities are provided?

§  Can you move between housing types (e.g., a cottage to an apartment after a spouse passes)?

§  How much of the entrance fee is pre-paid long-term care expenses for a tax deduction?

§  Is there a residents’ council? If so, how active is it?

§  Is there a resident’s handbook (ask to see it before buy-in)

§  If you move to a higher level of care, how is the transfer made, including moving possessions?

§  What is the average job tenure of CCRC employees?

§  What are the CCRC’s policies on parking and pets?

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Medicare Need to Knows

 

I recently attended a face-to-face class and a webinar about Medicare. Below are ten key take-aways:

Medicare Description- Medicare is a federal government health insurance program primarily for Americans (U.S. citizens and legal permanent residents) age 65+ and certain younger individuals with a qualifying disability (end-stage renal disease and ALS).

 

Medicare Administration- Medicare is administered by the Centers for Medicare & Medicaid Services (CMS), which is an agency within the U.S. Department of Health and Human Services.

 

Medicare vs. Medicaid- Medicare is a national program that is primarily age-based. Medicaid is a federal/state partnership that varies by state and is need-based (i.e., income and asset limits).

 

Medicare Parts A and B- Both parts are collectively known as “Original Medicare.” Part A covers inpatient hospital care and Part B pays for doctors’ services and outpatient care.

 

Medicare Part C- Commonly known as Medicare Advantage, Part C an all-in-one private insurance alternative to government-run Original Medicare. Coverage is coordinated by a private insurance company approved by the federal government rather than by the government itself. Some Part C plans include dental coverage. Open enrollment period every year is a time to shop around.

 

Medicare Coverage Split- According to KFF, 55% of Medicare beneficiaries are enrolled in Part C and the remaining 45% retain Original Medicare. Most people in the latter group buy Medicare supplement insurance (Medigap) to cover Medicare deductibles and coinsurance.

 

Medicare Part D- This is insurance program that helps cover the cost of outpatient prescription drugs. It can be added to Original Medicare or Medigap insurance or it can be part of a Medicare Advantage plan that bundles prescription drug coverage with medical benefits.

 

Medicare and Long-Term Care- Medicare does not cover long-term "custodial" care (help with everyday activities like bathing or eating). However, it does cover up to 100 days of skilled nursing facility care or rehabilitation following a qualifying hospital stay of at least three days.

 

Medicare Losses- Medicare experiences billions of dollars in annual losses due to fraud and abuse. Senior Medicare Patrol (SMP), a federal program, helps Medicare beneficiaries and caregivers prevent, detect, and report Medicare fraud, errors, and abuse. SMP operates in every U.S. state.

 

Medicare Appeals- Beneficiaries can appeal a decision not to cover a specific medical procedure. A common culprit is that the billing code was entered incorrectly. About 70% of appeals are successful. Of course, documentation is needed to present a strong case.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Estate Planning for Pets

In my book, Flipping a Switch, I have a chapter titled “Green Bananas, ROLE Calculations, and Lasts.” A key take-away is, as people age, their time orientation changes. 

Sometime in her mid-70s, my Mom started using the phrase “People my age don’t buy green bananas anymore.” While the green bananas analogy is an extreme example, people do start performing return on life expectancy (ROLE) calculations as they age. In other words, “mental math” comparing how long things might last in relation to their age and life expectancy.

                                   

There is, perhaps, no better example of ROLE calculations than the decision to get a pet in your 60s and beyond. Unlike young adults, who fully expect to outlive one or more pets, older adults often stop to ask “what if the pet outlives me? What happens then?” Without advance  planning, when pet owners pass away, their pets often end up in an animal shelter and, unfortunately, many healthy pets who are not adopted are euthanized. 

What to do? I recently attended a class, Estate Planning for Pets, where I learned that pets are considered property and have no legal rights. Thus, it is up to pet owners to plan for their four-legged friends’ future. Below are five key take-aways:

Learn About Pet Life Expectancies- Average life expectancy for dogs and cats is 10-12 years and 10-14 years, respectively, but there are caveats. Larger dogs live for a shorter period of time than smaller dogs and spaying and neutering a puppy can increase lifespan. Indoor-only cats live longer than those who spend significant unsupervised time outdoors.

Consider Adopting an Older Pet- Older adults who want a pet often take a big gamble when they get a puppy. An alternative strategy is to visit a local animal shelter or pet rescue agency and adopt a dog or cat that is, say, 3 to 5 years old. This way, the pet’s remaining life expectancy will be more in synch with its owner’s.

Designate a Pet Guardian- Talk with friends/family about concerns for your pet’s future and identify someone to care for your pet if something happens to you (e.g., injury, death). Also designate a “Plan B” pet caretaker in case the primary pet guardian is unable to step up. Make a list of your pet’s favorite foods, medical issues, vaccination records, and exercise routines.

Create a Pet Care Fund - Set aside money for surrogates to care for your pet. Consider creating a pet trust fund based on pets’ actuarial life expectancy. The trust will include funding for pet caregivers to use for pet food, vet bills, etc. and also include a residual beneficiary to receive remaining funds, if any, after all pets named as trust beneficiaries pass away.

Don’t Assume- Some people do not make any contingency plans for their pet. Instead, they just assume “my family will take care of my pet.” Sometimes, however, family members cannot. If you assume someone will care for a pet, it is a hope- not a plan. That said, it is not uncommon for family or neighbors to temporarily take care of pets until a permanent solution is put into place including transferring a pet to a prepaid pet lifetime care facility.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

ABCs of CCRCs: Choosing a Life Care Community

 

My husband and I recently took a big step in planning our future. We paid a $1,500 refundable deposit to get on the waiting list for a continuing care retirement community (CCRC) with a target move-in date of 2033. Why the long timeline? We are healthy, active, and not ready to leave our beautiful single family home. At the same time, we don’t want to wait until our 80s and find 200 people ahead of us. The waiting list is about 200 with annual turnover of about 20-25 units.

Also known as Life Care or Life Plan communities, CCRCs provide housing for older adults on a continuum beginning with independent living and including assisted living, memory care, and/or skilled nursing care services, if needed. Below are seven things to know about CCRCs:

 

Rationale for CCRC Selection- Three common reasons why people select CCRCs are 1. to have a “forever home” in later life, 2. to not burden their family with end-of-life housing and health care decisions, and 3. they do not have family members to assist with end-of-life decisions.

 

CCRC Ownership- Approximately 80% of CCRCs are non-profit organizations. Some are faith-based, some have affiliations with educational institutions, and some are independent non-profits.

 

Entry Fees- There are different payment models. Many CCRCs charge a substantial six-figure entry fee and some offer rental contracts. Entry fees increase with the square footage of the independent living unit that an individual or couple selects. Entry fees at the CCRC that I selected ranged from $237,000 (488 sq. ft.)  to $863,100 (2,350 sq. ft.) with an extra $59,000 for a second person. Part of the entry fee is used to pre-pay residents’ future health care services.

 

Monthly Fees- Like entry fees, monthly fees increase with the square footage of units and the number of occupants. For the units noted above, the monthly fees are $3,190 and $9,455, respectively, with an extra $1,850 charged for a second person.

 

Health Evaluation- Prospective residents must generally complete a health questionnaire and undergo a cognitive assessment to be offered entry into a CCRC. This is done when they reach the top of the waiting list and are near the time that they plan to move in. It is a standard risk management practice to reduce the risk of a high number of residents needing nursing care.

 

Financial Evaluation- Prospective residents must also prove that they have the financial resources necessary to live at a CCRC. A net worth statement and supporting documentation is generally required. Common metrics used by CCRCs are that prospective residents should have assets totaling at least twice the entry fee and income totaling at least twice the monthly fee.

 

CCRC Contracts- Most CCRCs have several contract options. The difference boils down to how much care is prepaid. Lifecare contacts prepay unlimited care with a level inflation-adjusted monthly fee for predictability of housing and health care costs. A disadvantage is pre-paying for care that may not be needed. Some people opt to pay less up front and more later, if necessary.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Financial Planning for Longevity

 

Longevity risk is the possibility of living longer than expected and having adequate income/assets for an extended period of retirement. I recently attended a webinar that predicted future life expectancy will increase due to medical technology advances such as CRISPR (modifying DNA).

The webinar also noted that many older adults no longer follow a linear lifeline (birth-school-work-retire-die) but, rather, a cyclical lifeline. They reinvent themselves in later life, often with additional education and new jobs or other meaningful pursuits. Lifelong learning is a key factor.

 

The webinar further explained that the 3-legged stool of retirement income sources (pension, Social Security, investment earnings) is very wobbly. Fewer than 20% of employers provide pensions and the Social Security trust fund is estimated to run out of money in 2033. At the point that reserves are depleted, FICA tax income will be able to pay only about 77% of scheduled benefits.

 

What to do? Below are seven financial planning strategies for “the age of longevity”:

 

¨   Develop a Long-Term Care (LTC) Plan- Consider various options including self-funding LTC expenses, moving to a continuing care retirement community, and LTC insurance. Buy a LTC policy with comprehensive coverage (in-home, assisted living, and nursing home).

 

¨   Optimize Social Security Benefits- Learn about various claiming strategies for Social Security. Consider delaying benefits up through age 70 to increase monthly payments if you are in good health, are financially secure, and expect to live a longer life span.

 

¨   Plan for Health Care Costs- Estimate health care expenses in retirement and work them into your budget. Costs include Medicare premiums, deductibles, copayments and other out-of-pocket expenses. Shop around for coverage during annual open enrollment season.

 

¨   Stay Healthy- Invest time and money in maintaining good health through proper nutrition, regular exercise, and preventive care (e.g., screening exams). Healthy habits can reduce health care costs and improve quality of life in “old old” years (age 85+).

 

¨   Consider a Reverse Mortgage- Evaluate the option of a reverse mortgage to tap into home equity for living expenses without having to move. Be sure to understand the terms of the loan and downsides (e.g., relatively high fees and smaller inheritance for heirs) before proceeding.

 

¨   Explore Annuities- Consider purchasing low-expense annuities to provide a steady stream of income in retirement. Compare different types (fixed, variable, or indexed) to find the best fit for your financial needs and investment risk tolerance.

 

¨   Get Advice as Needed- Consult with a financial planner, tax professional, or estate planning attorney for guidance on investing and tax-efficient asset withdrawal strategies.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Five Years of 55+ Community Living: Six Barbservations

 

In 2019, my husband and I purchased a brand new home in an age 55+ community located in Ocala, Florida. With five years of experience living here, now is a good time to reflect on this experience. Below are some insights for others who might be considering a similar move:

HOA Living- Our homeowners’ association (HOA) fee includes two community clubhouses; amenities (e.g., spa, pool, bocce and pickleball courts), landscaping, and a lifestyle office that organizes dozens of monthly events for residents. Cable, internet, and lawn mowing are not included. In 2019, our HOA fee was $200. Today, it is $245, a relatively modest $45 (22.5%) five-year increase driven by inflationary trends and improvements and additions to community amenities. There are many rules (e.g. no political lawn signs and specified house paint colors) and changes to landscaping and house exteriors require HOA approval.

 

Transitory Residents- I’ve been amazed at how many residents have moved away from- or even within- the community in just five years. Common “triggers” for moving have included an unhappy spouse, desire for a larger house or more land or a smaller house, inability to afford and/or maintain a home following widowhood, desire to live closer to family (especially following widowhood or the birth of a first grandchild), illness, and just plain aging and a need for assistance with activities of daily living.

 

Plentiful Activities- There is literally a formally organized club or interest group for everyone. I joined several that reflect my interests (bocce, computer, culture vultures, and travel). In addition, there are plays put on by community residents, concerts, music bingo games, food truck nights, seminar speakers, and more. On top of that, the city of Ocala has so many events and cultural activities, all within a short drive, including those at the World Equestrian Center.

 

Conversation  Topics- People don’t spend a lot of time talking about work they used to do or, like me, are still doing….unless it is a conversation with someone who is also working. It turns out, there are a number of us. We now have a Facebook group just for residents who own small home-based businesses and I was amazed to see the variety (e.g., artists teaching painting classes, hairdressers, real estate agents, pet sitters, airport drivers, etc.). Top conversation topics among those who are not working include family members, health issues, community events, HOA rules, the price that departing neighbors’ houses are listed and selling for, and travel.

 

Peace, Quiet, Security, and Socialization- My community is located away from major roads and gated, which provides a decent level of security. Compared to our New Jersey house, it is also very quiet. There is no street noise or wild parties by neighbors with teenagers. Our houses are only 10 feet apart from each other so people know their neighbor’s names and often help each other out. We also have monthly ladies lunch groups to socialize with neighbors.

 

It May Be Temporary- Many people leave when their health deteriorates. Age 55+ communities are great when people can live independently. Not so much when they have major health issues, especially when they are solo agers (i.e., people without a spouse and children) or have family members that live far away. My husband and I have already made plans to move into our final home in a continuing care retirement (a.k.a., lifecare) community in 2033 for a seamless continuum of care in later life. 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Planning Ahead for Widowhood: Changed Income and Expenses

 

I live in an age 55+ community in Florida and have observed conversations among residents (primarily women) who are mentally preparing for widowhood. They know the statistics about women outliving men and have done the math. This is especially true for those who are younger and have better health habits than their husbands. 

A few have plainly stated “as soon as he dies, I’m outta here,” to reduce expenses or to live closer to family or in a lifecare community or assisted living facility.

 

This post describes five changes in income and expenses that widowed persons can expect:

 

Reduced Income- I heard this example at a recent seminar. A married couple has four monthly income streams: $2,500- husband’s pension, $2,000- husband’s Social Security, $800- wife’s pension, and $1,500- wife’s Social Security for a total of $6,800 ($81,600 annually). If the husband dies first, the wife is left with $1,250 (50% of husband’s pension), $800-wife’s pension, and $2,000 (highest Social Security) for income of $4,050 ($48,600 annually). This is a 40% “haircut,” which some couples cover with spousal gifts, annuities, and/or life insurance.

 

If the wife dies first, the husband might receive a higher pension benefit because there will no longer be a reduction for spousal benefits. The wife’s pension and Social Security would go away, however, which could still result in a decrease in household income. For simplicity, this example did not include savings like IRAs, which would provide an additional income source.

 

Reduced Expenses- Monthly expenses will likely decrease when one spouse passes away. Some estimates project a 20% to 30% drop, which can help offset a drop in income. A car might be sold, thereby reducing costs for loan payments, gas, and auto insurance. In addition, less food is needed and the cost of the deceased’s health insurance ends. Entertainment and travel expenses may also decrease when a surviving spouse loses their “traveling companion.”

 

Tax Considerations- Income taxes often increase for the surviving spouse, who will be filing a tax return as an individual instead of as a married couple filing jointly. Single taxpayers have lower income ranges for each of the seven marginal tax brackets currently in effect as well as lower income “triggers” for tax on Social Security benefits, the Medicare premium surcharge called IRMAA (income-related monthly adjusted amount), and the net investment income tax.

 

Changes in Housing- Widowhood often precipitates a change in housing if the surviving spouse feels that the marital home is too large to maintain or too expensive to afford on one income. Other rationales for moving include wanting to live closer to, or with, family members and the need for care in an assisted living facility or continuing care retirement community.

 

New Household Expenses- New household expenses are common to provide services that a deceased spouse performed previously. Examples include lawn mowing, tax preparation, and driving to an airport. In addition, older widowed persons who live alone may decide to get a medical alert system or a monitoring service that checks in on their well-being daily.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Financial Planning Tips for Self-Employed Older Adults

 

Earlier this year, a new Facebook group started in my 55+ community: a group for self-employed residents with small businesses including hair styling, dog-walking and grooming, airport drivers, real estate sales, website design, computer repairs, wood-working and crafts, and more. 

As a financial education solopreneur who works from home, I was happy join a group of kindred spirits to share information about each other’s products and services.

 

We are not alone. The number of self-employed older adults has been steadily increasing in recent years driven by factors such as longer life expectancy, changing attitudes toward work in retirement, and technology advancements that enable remote work. 

Other factors are a desire for flexibility and work-life balance (i.e., more time for leisure activities, travel, and family) and ageism, which is easier to mitigate when you “hire yourself” and are your own boss. 

Below are five financial planning tips for older adults who are newly self-employed:

 

Keep Good Records- Use an Excel® spreadsheet or other easy-to-use record-keeping method to track business income and expenses (e.g., office supplies, equipment, travel, marketing, and professional services). It is also easier to keep personal and business finances separate by maintaining dedicated bank accounts and credit cards for business transactions.

 

Stick to a Schedule- Invoicing clients promptly and following up on overdue payments can maintain healthy cash flow and avoid disruptions to personal finances. Set aside a portion of self-employment income to send to the IRS for quarterly estimated tax payments (and/or over-withhold on a pension or Social Security) to ensure compliance with tax regulations.

 

Continue Retirement Plan Contributions- Older self-employed adults can continue to contribute to Roth or traditional individual retirement accounts (IRAs) and simplified employee pension (SEP) or SIMPLE IRAs. Contributions to non-Roth accounts are often tax-deductible, thereby reducing adjusted gross and, ultimately taxable, income. Also remember that self-employed older adults will continue to pay FICA tax equal to 15.3% of net business income. They can be on Social Security and Medicare while earning money from self-employment.

 

Don’t Overlook Health Insurance Tax Premiums- Self-employed older adults who pay their health insurance premiums (including Medicare) may be eligible to deduct these expenses as an adjustment to gross income. This includes premiums for medical and dental insurance for themselves and their spouse as long as their business income exceeds the health care expenses and they do not have retiree health insurance from a previous employer.

 

Consider Business Insurance- Depending on the type of enterprise, types of business insurance that can help protect business and personal assets include an E&O (errors and omissions) policy, business property insurance, and liability insurance. Also, some airport drivers in my community drive their clients’ cars to avoid business use of their own vehicles.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Reinventing Retirement: Customizing Your Third Third

 

People’s lives can grouped into three basic chapters: youth/education, career, and post-career (a.k.a., retirement). In the first chapter, our lives are controlled by parents and teachers and, in the second, people have career and/or family responsibilities. 

It is not until the third chapter that many people have the ability to decide what they want to do and who they want to be.

 

People spend about 30% of their adult lives in retirement. I recently attended a presentation called Reinventing Retirement and below are seven take-aways about this final phase of life:

 

Freedom and Flexibility- Later life provides a long-awaited opportunity to “customize” your lifestyle. Of course, people have different tastes, interests, and personal situations that influence what they expect but, for most older adults, it’s about having more time, freedom, and flexibility than before. The question then becomes what to do with that time and freedom.

 

Retirement’s Many Faces- Lifestyles in retirement include completely stopping work, pursuing a new line of work or starting a business, more actively volunteering, spending more time traveling, pursuing hobbies and interests, caring for loved ones, and more. A phrase used several times during the class was “If I’m not dead, I’m not finished.”

 

Current Retirement Trends- Baby Boomers have more discretionary income than previous generations of retirees. They are redefining the meaning of retirement in many ways including retiring later, continuing to work, and unretiring; finding new ways to make and maintain social connections; increased focus on health and fitness; and pursuing lifelong learning.

 

Retiring “To” Rather Than “From”- It can be stressful to leave the working world, particularly for people whose identity was wrapped up in their job. It is, therefore, essential to plan your next move. Without having something to retire to, people can feel a loss of importance and daily time structure and miss work-related interactions and friendships.

 

Ageism and Discrimination- Just because many older adults want to work does not mean they can easily find a job. Ageism and age discrimination in the workplace are commonplace and an AARP survey found that two-thirds of older adults have seen or experienced it. Increasingly, older adults are getting around that problem by working for themselves or buying franchises.

 

The Social Side- Many of today’s retirees do not live in close geographic proximity to family. Instead, they create a sense of family with people who are not necessarily blood relatives. A growing trend among people who choose to relocate is recruiting friends to become neighbors.

 

Life-Long Learning- Intellectual stimulation isn’t just for the young. Continuous learning is an important investment in brain health and a key anti-aging strategy. It can also help older adults discover and develop new talents. There are always new things to learn and try. One recommendation given at the class was to set a goal to try something new every month.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.