We’ve written several blog posts recently that have garnered attention, including one on the growing market for luxury retirement communities, and a post on the ever-increasing number of affinity retirement communities. But as we’ve noted, it is important that the senior living industry also continue designing solutions that work for the so-called “Forgotten Middle” — middle-income retirees who make too much money to qualify for financial assistance, but may not be able to afford many retirement communities or even the care services they need. This is where several innovative solutions from names you will recognize are hoping to step into the middle-market senior living landscape.

Sizing up the “Forgotten Middle”

Located at the University of Chicago, The National Opinion Research Center (NORC) is an independent research organization that studies and analyzes important social and economic issues. The groundbreaking “Forgotten Middle” Study was originally published by NORC in 2019, with an update released in 2022 to capture more of the Baby Boomer generation, who will be ages 69 to 87 in 2033.

Among the researchers’ findings:

  • From 2018 to 2033, the number of middle-income older adults (those age 75 and up) is expected to increase by 7.5 million (89%) to 16 million.
  • Among all of those middle-income seniors, researchers expect that more than half (54%) will have three or more chronic conditions, 56% will have mobility limitations, and nearly a third (31%) will have cognitive impairment.
  • In 2033, it is anticipated that 72% of those middle-income older adults (11.5 million) will have less than $65,000 in annual income and annuitized assets (excluding home equity), which is the projected average amount that will be needed each year to private pay to live in an assisted living community.

>> Related: Senior Living and Care Industry Must Create Solutions for Middle-Income Seniors

The high cost of care hits middle-income older adults

Of course, not everyone will require long-term care services such as assisted living or skilled nursing care … but the odds are pretty high. The U.S. Department of Health and Human Services (DHHS) estimates that around 70% of people over age 65 will need some level of long-term care during their lifetime. 

Bearing this statistic in mind, perhaps one of the most concerning findings from the “Forgotten Middle” Study is the researchers’ projections that even when including home equity, by 2033, 39% of middle-income older adults — 6.1 million people — will not have adequate financial resources to private-pay for an assisted living community.

So then, who will care for those who can’t afford to pay for the care services they need? In many cases, caregiving is unpaid — provided by a partner or adult child. Yet the study team also expects that by 2033, a majority of older adults will be unmarried and fewer will have adult children or will have children who live nearby. All of these factors will only increase the demand for paid caregivers, which will in turn exacerbate the high cost of that care.

View the complete findings from the Forgotten Middle Study 2022 update.

>> Related: The Long-Term Impacts of Fewer Births and More Soloagers

Innovating middle-market senior living

Affordability is always a hot topic when it comes to retirement planning and costs. The “Forgotten Middle” Study lays out in stark numbers the senior living and care cost challenges that will increasingly be faced by not only middle-income retirees but also senior living and care providers.

It is critical that the industry, government, and our society devise new, innovative options to help middle-income older adults live comfortably during their retirement years — whether they decide to age in their current home or move to a retirement community, and whether or not they eventually require care services.

But as you know, necessity is often the mother of invention. This is why some within the broader private business sector are stepping up with new solutions to help address this growing middle-market senior living challenge.

>> Related: Many People Underestimate Their Future Cost of Care

One-stop-shop … and live … at Costco

Costco is perhaps the pinnacle of big-box stores. Step inside and you can get printer paper, tires, eyeglasses, fresh flowers, a rotisserie chicken, a bag of two dozen apples … and a hot dog in the food court. So it makes almost perfect sense that Costco would eventually start offering housing.

The new concept of the so-called “Costco Apartment” is a mixed-use multi-family housing development built adjacent to or within close proximity to Costco warehouse store. One of the first locations is being built in Los Angeles, a city that is desperate for affordable options for middle-market senior living as well as other younger middle- and lower-income demographics.

Costco Apartments’ rent will not only come in at a reasonable price point. These developments will offer residents the added benefit of easy, walkable access to all of Costco’s affordably priced products and services — things like groceries, household items, pharmacy, clothing, an optometrist, and more.

To further sweeten the deal, Costco recently added a new benefit for members: online health care. Administered through Sesame, a direct-to-consumer health care marketplace, the service provides Costco members with virtual primary care visits for $29, health checkups (a standard lab panel and a virtual follow-up consultation with a provider) for just $72, and online mental health visits for $79. (While this low-cost care model could be a great solution for the middle market for basic health care, it is worth noting that it doesn’t provide for long-term care or nursing care needs. We could envision such services growing out of this model at some point down the road.)

Add in close proximity to public transportation, low-maintenance residences, and amenities like pools and overflow storage space, and the Costco Apartment model could be a great solution to meet the needs of the middle-market senior living prospect who would like to downsize and stay within their budget.

>> Related: How Retirement Income Affects Senior Living Affordability Calculations

Amazon eyes adding middle-market senior living to their menu

Did you know that the Amazon logo is the visual representation of its tagline, “Everything from A to Z”? Well, now Amazon is adding yet another thing to their near-endless offerings: affordable housing, including communities designed specifically for older adults.

As part of their Housing Equity Fund, Amazon has committed $2 billion to preserve and create more affordable housing communities in three target markets: the greater Washington, D.C. area; Nashville; and the Puget Sound area of Washington State.

One of the first such Amazon-backed senior living developments is The Residences at Benning Road, an affordable assisted-living community (AALC) in D.C.’s Ward 7.  An AALC is a senior living residence that is considered affordable to those age 60 years and over, as well as for other qualified residents who need assistance with at least two activities of daily living (ADLs).

The Residences development will feature 157 new affordable assisted living apartments for qualified older adults as well as other D.C. residents who are Medicaid-eligible. It is conveniently located within one block of the Benning Road Metro station.

Representatives from Amazon’s Housing Equity Fund note that projects like The Residences have offered them valuable insights from a development and operations perspective — lessons on scalability that can be applied to future middle-market senior living projects.

For instance, economies of scale around design elements and furnishings can help reduce development expenses, which make these senior living projects more attractive to additional investors, and in turn, bolster the long-term success of such communities. Another key, as Amazon has learned from The Residences, is the importance of attracting and retaining high-quality employees.

Do the big boxes hold the keys to the future of senior living?

As shown by the “Forgotten Middle” Study, the need for affordable middle-market senior living and care options will only grow as more and more Baby Boomers reach retirement age. The industry must create new, reasonably priced solutions to meet the needs of this key demographic.

With major players like Costco and Amazon dipping their toe in the senior living arena, perhaps other organizations will begin to explore the financial feasibility of developing more affordable middle-market senior living options. Could we see Wal-Mart senior living communities come online in the future? Or perhaps big retailers like Home Depot and Aldi could join forces to launch an affordable retirement community product?

FREE Detailed Profile Reports on CCRCs/Life Plan Communities
Search Communities