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Retirement 101: Why You Should Consider Where You’ll Spend Your Golden Years, Today

Kimberly Rotter

Image © Ryan Gessner

For some of us, our golden years are still pretty far away, but that doesn’t mean we shouldn’t start thinking now about the big questions we’ll need to answer. After all–if you’ve been saving those pennies for years and years, you might as well make the most of them. And, for those of us who aren’t quite ready to think that far down the road, it may be worth discussing with your parents what their plans are for the future.

Sure, many of us look forward to the day when we can stop working and settle in to enjoy our retirement, but first, we’ll need to closely examine our income and expenses before giving up full-time work. A big part of the retirement financial equation is the residence. So, what are the options and why should you think about it now? We know–it’s scary, but let’s take a look.

Why talk about it now?

Safety and boredom are two primary considerations when deciding whether to move. Consider the elderly relative or neighbor who lives alone and refuses to move. Often, this person has lived in his or her home for many decades, perhaps in days gone by with a now-deceased spouse. It’s not hard to find compassion for these old folks. But neither is it hard to find things to worry about. Brittle bones break easily in falls; absent minds develop a propensity for leaving food on the stove too long; reflexes slow; senses weaken. The overwhelming majority of us are bound to arrive at an age when living alone is simply more dangerous than not.

Even the sharpest and most agile of us must consider boredom and loneliness. Living alone amongst neighbors of mixed ages and interests could prove to be as isolating as living on the moon. And the sad fact is that as we get older, we watch our friends die. If you outlive all of your canasta partners, how will you make new friends?

Where to go?

Retirement communities bring together people of similar circumstance. People whose lives may still be active, but who don’t want to live in isolation and who might need an extra layer of safety built into their daily life. Retirement communities vary in price, style and services provided. In many states, over-55 rental communities serve to stabilize rents for people who expect to be on a moderate fixed income for the rest of their lives. They also result in neighborhoods of aging Americans who live completely independently. For those who can afford it, private retirement communities offer services like cafeterias for those who don’t want to cook, shuttle vans for those who don’t drive, and planned activities for those interested in more socializing. And when we need the most care, we turn to nursing homes.

In 2011, the average cost for a one-bedroom unit in a private retirement community was $2,750 per month (in addition to any move-in fee required). Assisted living, which generally includes a room, two meals per day, housekeeping and some personal care assistance, averaged around $3,500 per month. For those who require a higher level of care, the average price for a bed in a nursing home was between $6,500 and $7,300 per month (shared room and private). Over-55 rent prices vary (the sky’s the limit), but generally start between $550 and $750 per month, depending on location.

Another option is to move in with family. A common sentiment on the part of the retiree is that they don’t want to be a burden to the younger generation. Just as often, the younger generation insists that the parent isn’t a burden at all – just stubborn. Of course it’s hard to get used to a roommate situation as mature adults, which is ultimately what it may feel like. But what may be even harder is to accept the love and help that the family member offers. Such help understandably makes the older person feel old. And no one likes to feel helpless. Family dynamic dictates these decisions, one by one.

When should you sell your home?

If you are retiring now, or soon, and were depending on money from the sale of your home to fund your retirement, you’re likely frustrated by the slow housing market rebound. But it doesn’t make any sense to wait if you would otherwise sell now. Many homes will not regain their highest value in our lifetime. Know when to write off a loss and move on. If you own your home free and clear, remember that losing value isn’t the same as losing money. You’re fortunate to be in a cash-out situation, even at a lower sticker price. In sell-buy situations, the housing value losses balance out and so become irrelevant – in other words, if you sell your home and buy a place closer to where your children and grandchildren live, the lower values will feel like a hit when you’re selling, but a boon when you’re buying. Furthermore, millions of homeowners face the same loss of value, and the retirement communities are feeling the pinch. Many of those communities have lowered entrance barriers to address the shortage of eligible new residents. Here’s a seller’s checklist.

If you’re planning to give your home to a child or other relative, you should consult an estate planning attorney to maximize the tax advantages and protect your assets. For example, many people want to take advantage of significant estate tax exemptions that will expire at the end of 2012. But giving away your home could make you ineligible for Medicaid benefits for five years. For more tips on giving away or selling your home, look at this recent post in the Wall Street Journal’s House Talk section.

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Published October 4, 2012 Updated: February 18, 2014
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