Evaluating Independent Living Retirement Communities -Action Economics

Someone I know recently made the decision to move from her home to an independent living retirement community, we will call her Barb for the purposes of this article.

Barb’s husband passed many years ago and she has lived alone in a 3 bedroom 2 bath home on some acreage since. She recently had an injury and is recovering well. The injury brought her concerns on aging to light and she decided to look into moving to a retirement community. Barb is in her early 80s.

Non Monetary Factors:

Taking money out of the equation here are some factors to consider:

Safety: This is the big one. At the independent living facility there are pull chains in the apartment so that if help is needed, pulling the chain will send an alert. The apartments are also of course close together so yelling will likely also alert someone else if there was an issue. Barb’s current home is over 1,000 feet from the nearest neighbor.

At the facility being looked at they take an additional step and ask residents to call if they will not be eating in the cafeteria for a meal. If a resident does not show up and has not called, the staff will check on them.

The facility is within a half mile of a major hospital, which is much better than being 20 minutes away, especially if an ambulance is needed.

Stuff: A lifetime of belongings may become a burden over time. Downsizing from a large house to an apartment will necessitate evaluating belongings and reduce the amount of things that can become a burden.

Reduction of chores: Most independent living facilities provide significant services that reduce the daily chores needed. Most offer meal services so no cooking or dishwashing is needed. They offer bi weekly cleaning services, and sometimes provide laundry services as well.

Community: They have many communal spaces and many residents to become friends with. Isolation is becoming a larger problem for aging adults. In 1950 10% of people over 65 lived alone. Today almost a third do. This particular independent living community has several sitting rooms, a game room, a library, a fitness center, a creative arts studio, and a woodworking shop.

Transportation: Barb lives about 20 minutes from a small town. Driving is the only transportation available, and very few delivery services will come to where she lives. At the independent living facility she would be in town and able to use her car, but most destinations would be within a mile instead of 20, and they provide shuttle services to many destinations on a daily basis.

Simplicity of Costs: Barb currently has about a dozen different bills she has to pay each month. She doesn’t trust auto payments and writes physical checks for all her bills. It is very easy to lose track of things and miss a bill. With Independent living the vast majority of the costs are put into a single monthly bill. I’m the opposite. I need autopayments. If I didn’t have auto payments I would probably be getting my utilities shut off a few times a year!

Cost Advantages:

Independent living facilities cost a lot of money, but they may not be as costly as it seems when everything is factored in. When Barb told me what the place cost my heart sunk in my chest, until I learned about what all bills would be replaced in a community like this.

Barb is looking to pay $2,400 per month for a 1 bedroom apartment.

That sounds like a lot in an area where a 1 bedroom apartment is normally around $900 per month. Here is how that $1,500 difference per month gets made up:

In that rent a major part of the cost is the meals. 3 cooked meals a day are included in that price and they are good! It is like having a restaurant in your home. They have a calendar showing the meal options each day and there are also replacement meals available. At $10 per meal, this has a value of $900 per month. The average retiree likely doesn’t spend $900 per month on groceries, but if you factor in some eating out and even some door dashing and it is possible to get real close. You can also factor in some savings in electricity, propane, and water for not having to use the oven or wash dishes. We are at $900 of the $1,500 difference with just the meals included.

All utilities including heat, electricity, water, sewer, trash, cable, and wifi are included in the rent. Barb has propane heat at her home, and all of these bills combined add up to over $500/mo. With these utilities included we are now at $1,400/ $1,500 difference.

Free local shuttle services are also included. They will provide free transportation to doctor appointments, the grocery store, and other nearby places. Barb needs to go to town roughly 3 times per week. Rather than driving 120 miles per week, she is being driven. This is 6 gallons of gas a week, so roughly $80/mo. She doesn’t need a car or car insurance so that adds up another $400. We are now in surplus territory at $1,880 / $1,500.

Barb has been paying $200/mo to have her lawn mowed as well. This puts us further into surplus, now at $2,080 / $1,500. From my perspective this place provides more total value than an average apartment when all the amenities are added in.

The Big Value Change: The Ability to sell her home:

Barb’s home has long been paid off. By moving into an assisted living facility, Barb is able to sell her home and access her home equity for spending. Her home is likely worth around $200,000. Having this equity as spendable cash will increase her standard of living for her remaining years. With an estimated remaining life expectancy of 7 more years, this would allow her to spend an additional roughly $2,400 per month. Another way of looking at her specific situation is that likely the sale of her home will pay for this assisted living apartment for the rest of her life.

For Barb and for most retirees this isn’t how it would work in practice. Most retirees would use a combination of Social Security, Pension, and 401K withdrawals to fund living in a community like this and then have the home sale money available for any large purchases or to add some value to monthly spending amounts.

Financial Risk Reductions With Selling Her Home:

If the roof leaks Barb doesn’t have an expense
If the water heater goes out no expense
If the Furnace/AC goes out no expense
If the stove, washer, dryer, fridge goes out…no expense.

A lot of home repairs that we run into are things that I just do myself. As we age this gets less and less practical and we need to hire people for those tasks. I shoveled 6″ of snow off of a roof this morning and broke up a large ice dam due to a water leak. That’s something most of us will not be able to do in our 80s (and those who can probably shouldn’t!). Owning a home therefore gets more expensive as we get older.

What About For Couples?

For a couple the monthly rent increases by $500 per month, which makes the economics even better. Effectively this is just covering the meal costs for the facility. Even for a couple that loves each other very much a 1 bedroom apartment can feel cramped. For another $500 they could get a 2 bedroom apartment.

This particular facility has several buildings attached to each other and has multiple floors (with elevators of course.) This makes getting out of the apartment and going somewhere easy, regardless of the weather outside.

I really like the idea of everything being 1 bill and the meals being included. With the average Social Security retirement payment being $2,000 per month, a couple could reasonably stay here in a 2 bedroom unit and it be fully covered just by Social Security, and their pension or retirement savings would all be discretionary income. If a spouse died then perhaps moving to a 1 bedroom unit would be needed.

Would I Want To Live Here?

This is a tough one. I am fiercely independent and love isolation. If you’ve ever watched the TV show “Mountain Men” I am a big fan of Tom Oar and his wife Nancy who live in the middle of nowhere Montana and he still engages in physically demanding risky behavior. We love our home, but it is a tri-level and those have big challenges with aging. There is no getting to a bedroom or a bathroom without going up or down steps. I have noticed the last few years I have less desire to do a lot of the big yard projects that I loved the idea of 15 years ago.

On the flip side, I love the idea that I can walk down to the cafeteria and have fresh cooked meals with no dishes to wash, but I’m not sure if I could trust myself with that lol. I would gain 5 pounds a month! Although Barb is in her 80s there are people who choose to live in communities like this in their late 50s.

What do you think of independent living communities?