Planning for senior living is crucial for ensuring a comfortable and secure retirement. Unfortunately, it’s not as straightforward as enjoying senior discounts. It requires careful consideration of income streams, healthcare costs, estate planning, budgeting, senior housing, retirement communities… you get the idea. It is a lot to plan for, but we’re here to help!
Assessing your financial present can be daunting, but your financial future is well worth it. You’ll thank yourself when you’re sipping your drink of choice and enjoying the lush scenery at your senior community.
In this blog post, we provide a comprehensive guide to financial planning for seniors. We discuss the cost of retirement communities and how to save up for assisted living. We offer insights and practical tips to help you and your loved ones navigate this essential adventure. Of course, no single blog post can completely encompass powers of attorney, estate planning, and every other aspect. So, we link to helpful resources to help you along your journey.
An Overview of Financial Planning for Seniors
The biggest financial questions are about retirement. When can I retire? Will I have enough for the rest of my life? What kind of care communities or independent senior living communities will I be able to afford? What about my healthcare costs?
According to Edward Jones, 75% of those actively planning for retirement have not calculated how much they’ll need in their golden years. Most of us save for retirement, but very few plan for it. So, let’s get into the nitty gritty of senior living.
The national average cost of a senior living community is around $4,000 to $6,000 per month. Retirement communities have the advantage of bundling amenities with essential costs like assisted living with senior housing. However, costs can vary depending on the location, community type, and your needs, such as memory care.
Senior Income Streams: Ensuring a Steady Flow of Funds
Luckily, there are various income streams available so you can enjoy the retirement home of your dreams. Retirement accounts, pensions, social security, and part-time employment opportunities are all potential resources for you.
Retirement accounts
If you are researching retirement communities, you probably already have at least one retirement account. You understand retirement accounts are basically investment portfolios with a purpose. When was the last time you reviewed your retirement plans? Where are your assets allocated? What is your risk tolerance? What are your withdrawal strategies?
Planning for senior living is a good time to examine your retirement savings and adjust accordingly. For example, if you are unhappy with how much you’ve saved, you can make “catch-up” contributions. If you’re eager to move into your perfect retirement home, see how soon you can withdraw without incurring penalties.
You probably already know about 401(k)s. Most residents enjoying a senior living community today have one. It’s an employer-sponsored plan where your contributions are matched by your employer and placed within investment options.
Individual Retirement Accounts (IRAs) are similar to 401(k)s, except they are hosted by a financial institution, not an employer. Some clever senior living residents currently enjoy steady income streams from both a 401(k) and an IRA.
Pension plans are another type of employer-sponsored account, but they are more common in government jobs than in the private sector. Pension plans pay employees a specific amount upon retirement based on years of service and salary history. Only a small percentage of senior community residents have a pension plan.
Social Security
According to a 2021 fact sheet from the Social Security Administration, nine out of 10 seniors receive Social Security benefits—and you’ve earned them! Social security comes from a payroll tax. If you’ve worked for over 10 years, you’ve paid 10 years of social security withholdings and are eligible for benefits. To learn more about your benefits, create a free Social Security account. It’s another way to enjoy the fruits of your labor while enjoying your senior community.
Part-time Employment
You might be thinking, “Working in retirement? Retirement is about relaxing and enjoying my senior living community.” You’re right. You’ve worked the majority of your life and deserve to enjoy the fruits of your labor. However, many seniors working part-time say it provides a sense of purpose and greater social connections. Of course, the extra income helps. You could use the skills from your past career to become a consultant or freelancer. You could help the next generation by tutoring or teaching. It is possible to enjoy an amazing senior living community and a fulfilling, part-time career at the same time.
Managing Healthcare Costs: Preparing for Medical Expenses
U.S. Bureau of Labor Statistics’ Consumer Expenditure Surveys report that seniors spend about $6,668 on health care each year. That makes sense because as we age, we become more prone to chronic conditions. The Centers for Disease Control and Prevention (CDC) says 86% of seniors are experiencing at least one chronic condition. As you search for assisted living homes or care communities, ask about their nursing and therapy services.
While you’re exploring retirement communities, you should also ask about memory care, even if you don’t need it. No one ever plans on needing memory care, but it is better to be aware than unprepared. Cogir Senior Living’s CONNECTIONS program is unique to Cogir’s care communities and takes a holistic approach to memory care. A CONNECTION director meets with every participant to create a personalized plan. CONNECTIONS considers all aspects of health, such as diet, exercise, sleep, and social connections, to improve quality of life. It is designed for Assisted Living residents experiencing early memory loss and enables them to age in place without entering Memory Care.
Medicare
Medicare is complicated. However, it can greatly supplement your medical expenses. Medicare Part A covers hospital insurance, while Part B covers necessary outpatient services and preventive care. Together, they make up Original Medicare. However, they don’t cover dental, vision, hearing, and long-term care, all essential to senior living.
Medicare Part C are optional health plans provided by private companies to supplement and improve Original Medicare. These Medicare Advantage plans may include routine dental care, including x-rays and dentures, as well as vision care for glasses and contacts. The key word is “may,” as there are many health plans to choose from with varying prices and coverage. Evaluate your needs whether you’re exploring assisted living or senior living options.
The key takeaway is to examine your existing health plan. What’s covered and what’s not? Will your plan support your changing needs within your senior living community?
Long-Term Care (LTC) Insurance
Long-term Care insurance covers the costs of long-term personal and custodial care. It covers assisted living services— the help needed when one can no longer perform activities of daily living due to aging, chronic illness, or disabilities. Long-term care policies generally include skilled nursing care, rehabilitative therapy, and personal caregiving.
As with all insurance, it’s best to buy before you need it. Experts recommend purchasing a policy between the ages of 50 and 65— before entering senior assisted living.
Estate planning: securing your legacy
No one wants to talk about their mortality, much less plan for it, but estate planning is essential to securing your legacy. Powers of attorney, trusts, and wills can be daunting concepts, but they ultimately protect you and your loved ones.
Trust and Will
A last will and testament is a legal document that specifies how your assets should be distributed and to whom. Those receivers are called beneficiaries, but your will also needs an executor responsible for carrying it out. Many people use the same estate planning attorney who made their will as their executor.
Trusts are independent legal entities that hold assets for beneficiaries. They offer more control over the assets by the trust creator (grantor). Because trusts are legal entities, it’s best to work with an estate planning attorney and potentially a financial advisor.
Powers of Attorney
Powers of Attorney (POA) grants a person of your choosing the authority to make decisions on your behalf if you are unable to do so. There are three major types of POA.
- The general/financial powers of attorney grants an agent to make financial decisions on the principal’s behalf. If the principal becomes incapacitated due to dementia, the agent will pay bills, manage investments, and file taxes.
- An agent with the Medical/Healthcare Powers of Attorney is sometimes called a healthcare proxy. If a principal enters a coma, the agent will interpret medical information from the healthcare provider and make decisions on the principal’s behalf.
- The Limited Powers of Attorney grants an agent specific authority in a limited scope and for a limited time. For example, an agent could be scoped to handle a real estate transaction.
It can be scary to lose your ability to advocate for yourself, but that’s what the Powers of Attorney are for. It grants someone you trust the legal right to advocate and care for you when you can’t.
Healthcare Directives
Healthcare directives are similar to those Powers of Attorney, except that they are legal documents, not people. They often work in tandem. These documents express your wishes regarding medical treatment and end-of-life care.
A living will outlines a person’s choices for life-sustaining treatments. It informs their healthcare provider and Medical Power of Attorney what kind of interventions they do or do not want.
Physician Orders for Life-Sustaining Treatment (POLST) are similar, but they involve a collaboration between a physician and a patient who wants more control. These instructions are more specific and can guide Medical Power of Attorney.
Discussing end-of-life treatment can certainly be frightening. Yet these hard conversations are vital for joyful senior living. Having these talks with your medical providers and loved ones will save you and them a lot of stress in the future.
Budgeting and Financial Management: Making the Most of Your Resources
Everyone’s financial situation is different. The best way to make the most of your resources is to speak to a professional. At Cogir Senior Living, we have worked with the supportive professionals at ElderLife Financial for years.
They understand every aspect of transitioning to senior living, the emotional and the financial. What sets them apart from other financial advisors are their Financial Concierges®. They listen and understand your needs, goals, and timeline to make personalized recommendations. A Financial Concierge® will walk you through all the funding options to help you cross the finish line into your senior community. We’re proud and thankful to have them as a partner.
Until you meet with them, let’s combine everything we’ve learned into a budgeting plan. Fidelity recommends having 10x your annual salary saved by age 67 to maintain your current lifestyle during senior living. Others recommend that your retirement income be 80% of your pre-retirement income. Here is a link to AARP’s retirement nest egg calculator to help.
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- When do you want to retire? Most people assume 65 is the magic number for wonderful senior living. Situations vary, and it can be a balancing act between growing your investments and maximizing benefits.
- How do you want to spend your time in retirement? Sipping mimosas with your friends in your senior community? Exploring passions like painting and crafts at a senior living community? Supporting the wider region by volunteering for local causes? The possibilities are endless! However, they normally involve downsizing from your senior home into a senior living community. Many seniors find the efforts and costs of home ownership to be burdensome. Especially when they want the low-maintenance, leisurely lifestyle available in retirement communities.
- How much money will you need every month? Add up or estimate the expenses of your senior living. Remember to include debt payments, entertainment, groceries, healthcare, senior housing, insurance, transportation, and travel. Some care communities include expenses like food, transportation, and entertainment in their price.
- Finally, estimate your benefits. How much will you earn in retirement?
Build an emergency fund
No matter how well you plan for senior living, something unexpected can throw it all off. So plan for the unexpected! Build an emergency fund to cover unexpected expenses such as sudden medical bills or repairs. Steadily add money to a liquid account with about three to six months’ worth of living expenses.
Avoid Scams and Fraud
Unfortunately, scams of all kinds are becoming increasingly common. Scammers are also becoming more advanced with their schemes. We recommend reading our Top Tips to Protect Yourself From Scammers blog. The FBI reports that hundreds of thousands of senior Americans fall victim to some type of fraud each year. Protect yourself and enjoy peace of mind in senior living.
Taxes
Taxes are complicated, but they can get more complicated in retirement when you’re eligible for different credits and deductions. See this resource from SeniorLiving.org for more information. We recommend consulting with a tax advisor to earn the most in senior living.
Financial planning for senior living is a vital step toward ensuring a secure and comfortable future.
Understanding income streams, managing healthcare costs, engaging in estate planning, and effectively budgeting will help you happily retire to a marvelous senior community. Utilize the resources above and receive professional advice for your peace of mind. For more helpful advice on enjoying senior living, contact us.
What sets Cogir Senior Living apart is the company’s devoted approach to creating healthy, vibrant communities that offer residents exceptional independent living, assisted living and memory care lifestyle options. Cogir Senior Living develops, owns and/or operates 64 lifestyle communities throughout the United States. For more information, visit www.CogirSeniorLiving.com.
