Me-Search Project: A Deep Dive into CCRCs

 

I recently taught a 90-minute class about continuing care retirement communities or CCRCs. My audience was about 60 older adults. I was a little apprehensive that class members might be shocked and/or angry when I described entrance fees for CCRCs, which are typically hundreds of thousands of dollars. Less than 5% of Americans have $1 million or more saved for retirement.

 

As it turned out, my fears were unfounded. Nobody seemed "sticker shocked" about the cost. Many students had already been researching CCRCs and several were on waiting lists. About a quarter also had long-term care insurance. In short, they were a class of future-oriented planners.

The class was very much a “me-search” project; i.e., research on a class topic that is intertwined with an instructor’s personal life. Full disclosure: my husband and I are on the wait list for a CCRC. While developing slides for the class, I reached out to staff and residents of three CCRCs to get a “real world” perspective. Below are take-aways that I shared with my students:

 

Contract Types- While specific details vary among over 2,000 CCRCs in the U.S., there are three general contract types: A, B, and C. The major differences between them are the cost of the entrance fee and the amount paid for long-term care (LTC) services (i.e., assisted living, memory care, and skilled nursing). The higher the entrance fee (Type A), the less residents pay for LTC and the lower the entrance fee (types B and C), the more residents pay for LTC.

 

Fee Refundability- Refunds vary by community and contract. For example, 50%, 75%, and 90% partial refunds. Refunds offer an opportunity to preserve estate assets and recover funds if a CCRC resident decides to relocate. CCRCs with refund options generally charge higher entrance fees compared to those with non-refundable fees. The community needs to factor in the cost of returning all or part of the entrance fee to residents or their estate if they leave or pass away.

 

Financial Qualifications- Prospective residents must complete intake forms listing their assets, debts, income, expenses, LTC insurance details, retirement account beneficiaries, and more. A general rule of thumb is that assets should equal at least 2x the entrance fee and income should equal at least 2x the monthly fee. However, all three CCRCs that I interviewed actually used computer software with an algorithm that includes monthly income, age, and amounts in savings.

 

Health Qualifications- There is a quote in the book Retirement Communities 101: “It is better to be two years early than two minutes too late.” When people wait too long to consider a CCRC and develop a health issue, they may not be approved. A “we’re not ready” mentality could lead to a missed opportunity. The key is to move to a CCRC (independent living) before you have to.

 

Other CCRC Details- Pets are allowed at most CCRCs, but restrictions typically apply including pet type, size, breed, and number. Trends in meals at CCRCs include more dining venues vs. one standard “main dining room” and flexible monthly “dining dollars” vs. a fixed number of meals per month. Common reasons why people move out of a CCRC are wanting to be closer to family after the first spouse in a couple dies and dissatisfaction with aspects of communal living.

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.

 

Finding Meaning and Purpose in Later Life

 

The statistics are startling! According to a 2020 study, 28% of retirees suffer from depression. That’s almost 3 in 10 older adults! As blogger Fritz Gilbert wrote in his Retirement Manifesto blog, “that’s a shockingly high number and far too little is written about this problem.” He went on to note that “those forced into retirement (i.e., through downsizing or illness) are especially prone to experiencing the challenge of depression.”

 

One reason so many older adults are depressed is lack of a fulfilling sense of purpose (a.k.a., a motive “to get up in the morning” or, as the Japanese call it, ikigai, loosely translated as an overriding passion that adds joy to life). Gilbert notes, “retirement is a big adjustment, with the loss of many of the non-financial benefits once received from the workplace (sense of identity, purpose, relationships, structure, etc.) coming as a surprise to many.”  

Research indicates that people with a strong sense of purpose are happier, healthier, and live longer. Below are five strategies to navigate retirement to find meaning and purpose in later life:

 

Develop a New Descriptor- As I note in my book, Flipping a Switch, retirees need a new off-the-cuff answer to the “What Do You Do?” question to avoid awkward silences or outdated descriptions of previous work. Responses can reflect new jobs, volunteerism, creative works, or care-giving roles. They can also be humorous; i.e., “whatever I want” or “as little as possible.”

 

Focus on Four Pillars- Research by the investment firm Edward Jones and Age Wave noted that there are four key pillars to a fulfilling retirement: good health, family, a strong sense of purpose, and financial security. The Edward Jones online My Priorities quiz is a useful tool to identify personal values from among competing spending choices.

 

Find Role Models- Older adults who are living a joyful and fulfilling life can provide valuable insights. Take the time to interview them and ask questions like “What is a typical weekday like?,” “What activities bring you joy and purpose?”, “What are new activities that you tried for the first time in retirement?”, and “What part of your former job do you miss the most?”

 

Use Planning Tools- Activities in later life typically don’t happen without planning. On page 83 of Flipping A Switch is a reproduceable Financial Bucket List worksheet with over dozen lines to list planned activities (e.g., visiting national parks, sky diving, writing a book, starting a business, taking courses, reconnecting with family or friends, and family genealogy). Another popular planning tool is a Retirement Vision Board with photos or clippings that show memories that people want to create in the future (e.g., travel, encore career, and volunteering).

 

Practice Identity Bridging- Not everything associated with peoples’ pre-retirement life needs to disappear after their final paycheck. Far from it! Instead, retirement transition experts recommend asking the question “What activities (e.g., professional association memberships or volunteer roles) do I want to carry over from my past into my future?

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.

 

 

 

Money After 70: Financial Opportunities and Challenges-Part 2

As noted in last week's post, I am creating a new Money After 70 course for older adults. Below are 10 more changes, opportunities, and challenges for septuagenarians (people aged 70 to 79):

Lasts and ROLE Calculations- As people age, their time orientation changes. As I wrote in my book, Flipping a Switch, people start doing return on life expectancy (ROLE) calculations. In other words, “mental math” comparing how long things might last in relation to their age and life expectancy and whether certain expenses (e.g., an expensive dental crown) are “worth it.”

 

Spending Down- Another topic in Flipping a Switch is switching from a saver to a spender in later life. A difficult challenge for “super savers” is spending down accumulated wealth and seeing account balances decrease as withdrawals are made for taxes on RMDs and health care.

 

Increased Risk of Diminished Capacity- The risk of mild cognitive impairment (MCI) or dementia increases with age and accelerates rapidly in the mid-70s. By age 82, the chance of MCI or dementia is over 50%. Therefore, a thorough estate planning review is warranted.

 

Shortened Investment Time Horizon- There is a frequently cited “100-age formula” for the percentage of stocks in someone’s portfolio, as well as 110-age (higher risk tolerance) and 120-age (aggressive risk tolerance). With each one, stocks are half or less of 70+ year olds’ portfolio to reflect the fact that they don’t have much time for market “bounce backs” to replenish losses.

 

New Housing Considerations- Throughout their 70s as life events (e.g., health issues, income loss, widowhood) occur, some people may reconsider where they live and explore options such as a reverse mortgage, continuing care retirement community (CCRC), and living with family.

 

RMD Withdrawal Increases- As a taxpayer’s age increases, the percentage of their tax-deferred account balance that must be withdrawn increases. At age 73, the RMD divisor of 26.5 is 3.78% of an account balance and at age 79, it is 21.1 (4.74%). At ages 80, 90, and 100, the taxable account withdrawal percentages increase to 4.96%, 8.20%, and 15.63%, respectively.

 

Communication With Loved Ones- Many people put off conversations about “hard topics” (e.g., dying, feeding tubes, care-giving expectations, bequests in a will) for decades. One’s 70s are the time to open up with family members and personal representatives (e.g., executor). Current U.S. life expectancy is 79.11, although it averages in the mid 80s for those at age 70.

 

Long-Term Care (LTC) Planning- At age 70+, LTC insurance is prohibitively expensive or may be unavailable due to health issues. As a result, many 70-year olds address LTC needs “on the fly” with strategies such as self-insurance, selling assets, moving, and Medicaid divorces.

 

Simplification and Downsizing- An eighth decade of life increases the urgency to do this. Strategies noted in Flipping a Switch include creating a financial inventory, closing subpar accounts, consolidating “like” assets (e.g., IRAs), and shredding unnecessary documents.

 

Getting Help- Even the most dedicated “do it yourselfers” may need help in their 70s due to inexperience or physical challenges. Examples include tax preparation after RMDs start, financial planning, legal assistance, house cleaning, lawn mowing, and in-home care. 

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 Security and Happiness in Later Life: Reflections from Recent Webinars

Being the author of a book about transitions in later life, I am always looking for new information about this topic. I recently attended a number of webinars about retirement planning.

Below are 10 of my top take-aways:

 

Knowledge is Power- While new state financial education mandates are getting lots of media attention (and rightly so), financial education works for everyone! This includes topics of interest to older adults in later life such as required minimum distributions (RMDs), taxes on Social Security benefits, and Medicare premiums. Recent research provides clear evidence of the positive effects of financial education on financial behaviors.

 

Limited Investment Alternatives- Stocks have not been doing well during most of 2022 but neither are bonds, cryptocurrencies, or cash equivalent assts (money market funds and CDs) that are losing purchasing power to inflation. The best thing that older investors- in fact, all investors- can do right now is to maintain a diversified investment portfolio and “tough it out” and not panic and sell securities at a loss.

 

Recovering Losses is Difficult- In one webinar, an example was given of stock originally purchased for $100 a share and sold in a panic at $66.66 a share, a 33% loss. In order to get back to $100 a share, an investor would have to have a 50% gain because $33.33 is 50% of $66.66. Also, the sequence of investment returns matters. The 4 L’s of retirement income optimization are Longevity, Lifestyle, Legacy, and Liquidity.

 

Decumulation is Different- One webinar presenter noted that “investing for distribution in retirement is different from investing for accumulation” and used the analogy of climbing a mountain (investing for retirement) and “making it safely down the mountain” (not running out of money during your lifetime). Key risks in retirement include longevity, health care expenses, taxes, and inflation.

 

Reverse Mortgages Uses- In addition to providing a lump sum or regular income payments in later life, reverse mortgages have other uses. For example, they can serve as a “delay bridge” so people don’t have to withdraw  assets during market downturns. Borrowers age 62+ can also use reverse mortgage proceeds to pay premiums for a long-term care insurance policy so they don’t lapse it (due to increasing premiums) before it is needed.

 

The Great Resignation- Millions of Americans quit jobs in 2021-2022 and remote work went “from the margins” to mainstream in many industries. Key reasons for older adults to leave jobs included increased asset prices (many of which have plummeted since 2021) and health/safety reasons. Ageism can make it difficult for older adults to earn their previous salary if they decide to return to the labor force. Many have to settle for less.

 

It’s What You Keep- Retirees with tax-deferred savings in traditional IRAs and 401(k)/403(b) and similar employer savings plans cannot forget about taxes due on this money. It is not all theirs to keep. Sometimes, mandatory RMD withdrawals can even push them (or their heirs) into a higher tax bracket. An option that some people consider is donating these assets. When a charity is a beneficiary of retirement accounts upon someone’s death, no taxes are due and the full amount of the account balance can benefit recipient non-profit charities.

 

Diminished Capacity is a Concern- One webinar speaker suggested having a “trust circle” of trusted family and friends when you have a major financial question or decision. Many financial services firms also request the names of trusted third parties for older clients. Shockingly, 1 in 6 people age 60+ have experienced some type of financial abuse (i.e., withholding, stealing, or restricting the use of money or financial information).

 

Inflation Impact- Older adults are uniquely impacted by inflation because they are often living on a fixed income and are unable to earn more money to mitigate the impact of inflation. Some people are buying inflation-adjusted TIPS (Treasury Inflation-Protected Securities) and Series I bonds for inflation relief. The spread between TIPS and regular Treasury securities is the market’s best estimate of future inflation. Retirees worried about inflation can bump up the assumptions used in their financial planning projections and analyses.

 

Your Future Self- Many people avoid planning for later years of retirement and focus on beautiful imagery (travel, beaches, etc.). A speaker advised putting your fears and plans on paper and put “structures in place” to address them. Start by making a list of five things you do now that you want to continue doing. For example, if you really enjoy working, maybe you shouldn’t retire at all in the traditional sense. Play pickleball or golf on the side. Also, discuss your preferences with others. Without dialogue, nobody knows what you are thinking.

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.