In the “I’m Not Ready Yet” blog series, we will be taking an in-depth look at some of the most common reasons why people put off a move to a continuing care retirement community (CCRC) or other senior living community.
In last week’s post, we talked about one of the common reasons that people put off their move to a continuing care retirement community (CCRC or life plan community) or other senior living community: They don’t feel like they are ready to tackle the downsizing process. It can be a big undertaking, but as discussed last week, deciding what goes in the “Keep” pile (versus the Sell, Giveaway, and Trash piles) is doable with a little help and motivation. However, there’s another common reason that people say they are not yet ready to make a CCRC move: concerns about cost and long-term affordability.
The “running out of money” fear
Many seniors worked hard for their entire adult life and diligently saved for retirement. They paid off their home mortgage to reduce their monthly expenses as well as boost their assets. But transitioning from the wealth accumulation and planning phases of retirement planning to the distribution phase — spending that money you saved — can create anxiety for some.
In certain cases, seniors might look at the costs associated with a move to a CCRC and have their fear of “running out of money” triggered. Add to the equation the thought of “trading in” what is oftentimes a person’s largest asset — their home — in order to pay for senior living, and that worry can be further exacerbated.
At first glance, some CCRCs can seem pricey — or even cost-prohibitive for those seniors who are particularly worried about long-term affordability and their retirement savings holding out. It is by no means an irrational concern.
Depending on which type of CCRC contract you choose, you may have to pay a sometimes-hefty entry fee, which can be a six-figure amount. (In many cases, seniors will pay their entry fee using the proceeds of their home sale.) In addition, most CCRC residents pay a monthly service fee. Again, depending on your contract type, that monthly fee may be set or could fluctuate should care services eventually be needed.
On the surface, it is easy to understand why these costs initially cause concern for some people who struggle with a fear of running out of money. However, it is worth looking at this affordability issue from a different angle. Consider what CCRC residents are actually getting for their money, and for some people, that value can put the cost into perspective.
>> Related: What’s the True Cost of Staying in the Home?
Cost versus value
While the price of a CCRC might seem high, what exactly are you getting for that money? Does the CCRC provide you with a valuable “product,” making it worth the cost?
If you are looking at an entry fee community, some portion of that entry fee may be refundable to the resident or the resident’s heirs (depending on your contract type). So, while it might seem like a large output of money up front, you (or your heirs) may recoup some or most of that initial investment.
But what about the monthly service fee at a CCRC? That amount typically covers the cost of the residence, utilities, property taxes, and a meal plan that covers at least one meal per day (additional meals can be purchased). In many CCRCs, that monthly fee may also include amenities and services like weekly housekeeping, events and classes, social opportunities, outings, transportation, and more.
Bear in mind, there are still expenses that come with staying in your current home, even if it is paid off. For instance, you have utility bills, property taxes, homeowners’ insurance costs, maintenance costs, and food costs. There are also sometimes-hefty unforeseen costs (and oftentimes, headaches!) associated with deferred maintenance — like when the furnace goes kaput or the roof starts to leak. Many of these costs of homeownership are eliminated for people who opt to move to a CCRC.
>> Related: The Cost of a CCRC vs. the Value to Residents
The biggest cost X factor
But perhaps the biggest unknown cost variable that goes along with remaining in your current home is the potential cost of care services, should you need them.
According to Genworth’s Cost of Care Survey, in 2021, the monthly median cost of a home health aide or homemaker services is around $5,000. That would of course be on top of your other homeownership-related living expenses.
If a higher level of care is needed, that cost of care would be even higher. The monthly cost of an assisted living community averages $4,500, and a private room in a nursing home is around $9,034 per month. This is per person, of course, so for a couple, if one person needs care, and the other doesn’t, the homeownership costs do not go away.
This is perhaps where the value of a CCRC becomes most clear for some people. Residents of a CCRC have contractually guaranteed access to a full continuum of care services, should they need them, ranging from assistance with a few activities of daily living to full-time skilled nursing care at the healthcare center.
Depending on your contract type, your monthly service fee may or may not increase should you or your spouse/partner require such services, and it’s important to be sure you understand exactly what you are getting for your money. However, many people who ultimately decide to move to a CCRC do so because of the value they put on having peace of mind that, should they need it, care services will be available to them, making a CCRC well-worth the cost.
Overcoming the CCRC cost taboo
A lot of interesting research has been done on the psychology and sociology of spending money. For instance, data from the Bureau of Labor Statistics’ Consumer Expenditure Survey found that members of the Baby Boomer (born from 1946–1964) and Silent/Greatest (born 1945 or earlier) generations are often more willing to spend money on “wants” (entertainment and apparel, for instance) than on “needs” (e.g., food and housing). Think of the person who is loading the groceries they frugally bought from Walmart into their new Mercedes.
Another study examined the “pain of payment” that some people feel when spending large sums of money. Researchers found that this is not merely a metaphor. Using brain imaging, they determined that some folks experience actual psychological pain when making large monetary purchases. This is affective (i.e., psychological) pain, not physical pain, but the feeling certainly can impact a person’s willingness to spend money.
Indeed, CCRCs must find ways to help prospective residents overcome the taboos surrounding senior living costs. Research has confirmed that financial hesitancy is one of the top reasons why CCRC prospects do not pursue additional information on a community.
Case in point: Roobrick is a company that creates readiness assessments to help people understand what level of care they or their loved one may need. In a recent survey, Roobrik asked those who completed one of their online questionnaires, but who then did not ask to be contacted by a community, why they declined to be contacted. Eighty-one (81) percent of respondents said it was because they did not think they could afford to live in that senior living community.
If a person thinks they cannot afford a CCRC or other senior living community, they eliminate it as an option even if the reality is that they could afford it. The industry therefore needs to find effective ways to promote their lifetime affordability. For example, when you factor in what you get for your money at a CCRC (the value, as discussed above), the cost over the long haul may not be vastly different from the cost of remaining in one’s current home.
A senior living cost decision informed by facts
While there are certainly emotional aspects to making a decision about senior living, it is also a financial decision. But don’t let financial hesitancy make your senior living decision for you.
Crunch the numbers. When you factor in the value of what you get when you live in a senior living community, including the peace of mind that comes with living in a CCRC, the cost may be much more affordable than you had thought.
myLifeSite’s MoneyGauge lifetime affordability tool is one way that CCRCs can help prospects get a better handle on their community’s lifetime affordability and overcome the cost taboo. When a prospect uses MoneyGauge, they often realize that they can, in fact, afford a CCRC. On average, communities that add this lifetime affordability tool to their website convert over 15 percent of all assessment respondents (and often much more than that) into financially qualified leads, 60 percent of which were not currently on an active lead list.
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