Retirement living: Are you prepared?

Key Points

  • While most retirees want to stay in their homes, 70% will need long-term care at some point
  • Depending on location and amenities, downsizing doesn’t always mean lower expenses
  • Assisted-living costs aren’t covered by Medicare, so planning ahead can be crucial

For many retirees, the family home becomes a gathering spot for generations of family members. For others, transitioning to a low-maintenance abode that allows for travel and activities outside the home is more desirable. And some are looking to live among others with similar hobbies and interests in a community that caters to their lifestyle.

After determining the lifestyle you’d like to have in retirement, cost can be the second most important factor in determining where you’ll live. Whether you’d like to age in place, downsize or enter a senior living community, the price tag can vary considerably.

Case in point: While most retirees say they’d prefer to stay in their own homes, nearly 70% of older adults will need long-term care later in life, according to Harvard University’s Joint Center for Housing Studies.¹

Keep in mind that long-term care doesn’t have to mean moving, especially with home health aides becoming more common. Either way, today’s ballooning assisted-living costs mean it’s wise to budget ahead of time. 

Here are some key considerations to keep in mind when deciding whether to stay put, scale back or relocate to a community — as well as typical costs incurred with each of these options.

Aging in place


Universal design elements such as zero-step entrances, single-floor living, and wide halls and doorways can better enable you to stay in your own home — yet only 3.5% of homes offer all of those features.2 That means you may have some remodeling jobs on the horizon.

Major renovation of a house to accommodate an aging homeowner could cost more than $30,000.3 That includes remodeling a bathroom, installing wheelchair ramps, widening doorways, adding pull-out cabinets, changing the height of electrical switches, changing door handles and changing kitchen faucets.

A report by Remodeling magazine pegs a bathroom remodel alone at about $16,000,4 which includes, among other things, replacing the bathtub with a walk-in shower, installing a taller toilet, reinforcing walls to support grab bars, and installing a sink and faucet with lever handles. 

Additional improvements for accessibility will inflate the grand total. A residential elevator, for example, can cost anywhere from $7,000 to $50,000, according to HomeAdvisor.5

It’s also important to anticipate the cost of care in the home, since many homeowners will need professional assistance in the future. Full-time employment of a home health aide (for 44 hours a week) is currently about $49,000 a year.5 Need homemaker services as well? Help with housekeeping, meal preparation, errands and transportation to appointments costs about $48,000 a year on average.6 

Downsizing

Selling your current house and downsizing offers an opportunity to find a better-suited home, such as one without stairs. Moving to a less expensive home also can improve a retiree’s cash flow if it means reducing or eliminating a monthly mortgage payment, or cutting the costs of running and maintaining the home.

But the benefits of downsizing can come with pitfalls, too.

Not everyone successfully reduces costs when they move. Changing locales, for instance, could mean your dollars don’t buy as much house, or taxes could be higher. Moving to a condominium means monthly assessments, which could be a few hundred dollars for basic building maintenance or more if there’s a gym, pool or other amenities. Plus, consider the costs of selling your home, including agent fees and moving.

Only downsize if housing expenses would decrease by at least 25% according to the National Endowment for Financial Education.7

Relocating

Senior housing is an option for people who need a higher level of care now — or may need it down the road. Options include both rental and ownership housing, and costs for services vary greatly. This makes it essential for consumers to question what’s included with every fee before signing a contract, according to the AARP.8

Independent living or active adult communities will sometimes reflect the costs of the area’s general housing market, with fees for services including activities and meals tacked on.  

Assisted-living facilities are options for those who need regular help with daily activities but not the extensive care of a nursing home. Keep in mind that Medicare generally does not cover the costs associated with either assisted-living or nursing home facilities.

Assisted living costs about $45,000 per year for a private, one-bedroom unit, including care.6

Other communities offer a continuum of care, which allows people to start in independent-living homes and add assisted living, skilled nursing, memory care or rehabilitation services as needed.9 In addition to the monthly costs, these “life plan communities” can include entry fees.

Talk to us

Trying to decide whether to stay put or move in retirement? Your advisor can help do a cost-benefit analysis of the options you’re exploring, adjust your overall financial plan, if needed, and help you live your retirement goals.