Living on your own or moving to a retirement community: which would be more cost-effective?

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This is the million-dollar question, literally. On the one hand the idea of continuing to live where we have always lived is very appealing, though it also raises the question of “but what happens when we get very old?” On the other, the thought of whiling our days away in  peace and quiet, surrounded by people of a similar age group and inclinations is also attractive, the cost can be a major damper.

So this is by no means an easy question to answer. There are many considerations involved, all of which together will have a bearing on the cost-effectiveness of your decision, whichever you take. That said, we take a look here at some of the most important factors to consider before arriving at a decision.

The estimated cost

The cost is perhaps the biggest and the most important factor in deciding which way to go.

Ask yourself some simple questions which will go a long way in determining whether you should continue living on your own or join a seniors’ community.

  • Do you have a house of your own that looks good to last at least a few decades?
  • Do you foresee any expensive upgrades to it?
  • Is the mortgage paid off?
  • Are there any loans to take care of?
  • How much would your property sell for if you were to put it on the market as it is, i.e. without any upgrades?
  • If you are seriously considering moving to a retirement community, where would the money for it come from?
  • Your retirement fund? Or would the money recovered from the sale of your property cover it?

Let’s do some basic math now.

An average American lives for 77.97 years, with females averaging at 80 years and males at 75 years, while the average age of retirement in this country stands at 61.

The average retirement savings stand at about $44,000 as per one report. Another puts the median savings of those 10 years from retirement at a shockingly low figure of $12,000, further stating that of those “between 55 and 64, one third have not saved anything for retirement.”

Let’s assume you do not belong to that one-third and have saved around $50,000 for your retirement.

Now onto a hypothetical scenario (for the sake of which we may use numbers erring on the conservative side):

Let’s say you live in the South, where as per the latest data, the median prices for existing home sales stands at $181,000. You have saved up $50,000 for your post-retirement life, which means the existing pool of financial resources immediately available to you stands at $235,000.

It’s difficult to arrive at the average cost of living in retirement communities and homes as they vary widely from community to community, region to region, and also depending on the type of accommodation. The nursing home costs have risen to $80,000 per year, but you are still only 65 so you don’t have to worry about that at the moment.

What concerns you is the idea of living in a retirement home, and it won’t be a stretch at all to put the entry fees to such a place at $20,000, with living costs coming at $50,000 per year, so let’s assume those really are your figures (even if they look conservative). Add up the two and deduct $70,000 from the $235,000 you have in hand and you are now left with $165,000.

You are in your mid-sixties and in the pink of your health. Assuming you will live at least till 80, you have 15 more years of bills and health care to consider.

Now divide $165,000 by $50,000 (the average annual living cost at a retirement community) to see how long it lasts you. The resultant figure is a dismal 3.3, meaning a little over 3 years. You still have at least 15 years to go.

And these are the costs of just one person moving to a senior community. If you are a couple, your costs will double (and maybe also your retirement funds, but the proceedings from the sale of your house will be split into two as well.)

Your answer is pretty simple: continue living at home.

Even with the mortgage costs, the maintenance costs, and the insurance costs, you would still save thousands of dollars each year.

Other factors to consider

But what if you do, in fact, have at least a couple million saved up and are counting on another million or so from the sale of your private and commercial property?

Should you consider the move then?

In the previous point we looked at the tangibles, which are easier to handle. We are moving to the intangibles now.

A lot depends on your age and your health. If you have recently retired and don’t have any health conditions, you have many years of activity ahead of you.

Which would you prefer – living it out in a setting of seniors or in the middle of a bustling city, where you are based currently?

What is your support system like?

Do you have a spouse? How old are they? Do the two of you like living in your house where you have spent many years together?

What about your children and/or grandkids? Are they willing to be there for you when both you and your spouse are into your 80’s and likely will need special care? Those who are divorced, widowed, or just alone, and in the need of companionship of their peers, are more likely to move to a place where they don’t feel the odd person out.

For all the costs associated with retirement communities, they also give you the assurance of having medical professionals at hand so that you are never wanting for care. Alternatively though, if you have the money you can hire a private nurse when you feel the need to and don’t necessarily have to move to an old folks’ home for that. It all depends on what you need, what you’d prefer, and if you can afford it.

We realize that this is a lot to consider but our aim is not to overwhelm you. We are simply laying in front of you the costs and benefits of living on your own or at a seniors’ home, so that you are able to make the best decision for yourself.

Tracy is a Community Manager at Thehartford.com, which offers sustainable multifaceted financial services, including the auto insurance and contractors insurance. She’s @TracyVides on Twitter.

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