June 6: DOES A LIFE PLAN COMMUNITY MAKE FINANCIAL SENSE?
From the maintenance-free lifestyle to the accessible amenities and services to the continuum of care that allows residents to age in place, there are countless reasons to consider a Life Plan Community as you plan your retirement future. However, the perceived price tag associated with this form of senior living tends to turn some away before they’ve had a chance to truly investigate.
With that in mind, here are four things to consider as you decide if a Life Plan Community makes financial sense for you—or for your loved ones.
Many Life Plan Communities require paying a sizeable entrance fee prior to move-in. These fees can range anywhere from the low six figures to over a million, depending on the community. But, don’t let that deter you from looking into the benefits that come with such a substantial deposit.
For starters, in most Life Plan Communities, a portion of the entry fee is refundable—in some cases up to 90%. This entrance deposit not only secures residence within the community, it also remains secure, allowing residents to maintain those funds without the concern of depreciation over time. And because a considerable portion is refundable, residents and their loved ones are provided with valuable estate protection, should they decide to leave, or after passing on.
Ultimately, your ability to afford retirement in a Life Plan Community will depend on your net worth, as well as the market where the community is located. It is also important to note, simply selling a home may provide the money necessary for the entry fee, as well as ongoing monthly fees.
In addition to the entrance fee, many Life Plan Communities also require a monthly service fee. This service fee is a simple, single monthly bill that varies based on the apartment home and number of occupants, and typically covers almost all regular living expenses, including utilities, cable, internet, telephone, property taxes, a generous dining credit, and more.
In many cases, this monthly service fee can be more affordable than managing all these costs separately. Additionally, when you consider the various expenses associated with regular home maintenance and unexpected repairs, the cost of living in a Life Plan Community provides more than just financial savings. It also saves you time and worry, as well.
When assessing the affordability of a Life Plan Community, it may be beneficial to perform a *cost-of-living comparison between your current expenses and those of the community.
Locking in the Fees
In many ways, the payment model of a Life Plan Community can be compared to an insurance policy. Residents pay more at the outset when they are relatively healthy. However, those payments are made with the understanding that they’ve locked in that price for having access to a greater level of care (including assisted living, memory care, skilled nursing, or rehabilitation) should their health needs change in the future.
According to the 2018 *Genworth Cost of Care Survey, the median cost of a private room in a skilled nursing facility is $8,365 a month and is expected to rise to $11,242 in the next 10 years.
Considering the continued rise in senior living costs, having the ability to lock-in your fee is not only a wise long-term decision but also a financial benefit you—and your family—will greatly appreciate years from now.
As with any major life decision, planning is essential—especially when finances are involved. Whether you’re planning to move into a Life Plan Community or simply considering your retirement options, there’s no denying the fact that costs will inevitably be involved. That’s why it is vitally important to look into Life Plan Communities while you’re still in good health, as well as work with a financial planner or retirement counselor to ensure affordability before making a commitment.
After all, moving into a Life Plan Community should not be a financial burden. It should offer a great retirement with the peace of mind you deserve.