Retirement Living: Buy on Knowledge, Not Price!

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Navigating the unfamiliar world of shopping retirement communities can result in an initial sticker shock that is misunderstood.  With just a little research one realizes the gap between your current cost of living versus moving into a retirement community is much smaller than originally thought.  It may even be less costly living in a retirement, and with additional benefits.  Follow these steps to understand the changes in your costs.

 

Step 1: Understand the costs of the community

Generally, there is a monthly payment to the community.  It is important to understand what is included in these costs.  Ask what additional services are available to ensure you know all your options, for example is it extra to have the apartment cleaned etc.  The community will have a list they can share with you and explain how it all works.

 

Step 2: Understand your current costs and what will change

Often people compare their mortgage to the cost of the retirement community.  They may throw in a couple other items like groceries. There are many potential changes that need to be anticipated.  Some missed expenses can “raise” your current expenses, for example other home costs besides the mortgage and if you have additional care at home.  There are also considerations that may significantly lower your costs, for example going down to one car and entertainment (much is built into the community living).   

 

Step 3: Do you own a home?

The home is a major component of the comparison that is not well understood.  Your home can have two major impacts – one positive and one negative.  This may be more complicated than the other steps as you need to understand how your tax rate, equity, and deductions impact your comparison.

  • Home equity and the earnings it generates can offset costs for the retirement community. The more equity in the home, the larger potential cash flow generated. 
  • You may lose deductions when selling your home which negatively impacts cash flow. Remember some of these deductions have caps and need to be assessed in conjunction with your standard deduction.

 

There are many factors to consider when evaluating the costs of retirement community living.  Once a thorough assessment is done, the initial surprise of the costs may not be as severe as formerly anticipated.  Now you can look at the true picture and decide on knowledge and fit, rather than price.

 

Hirsch Serman, MBA, CPA is a financial coach and the founder of Lifecycle Financial, a company that helps those going through Divorce and other life cycle changes to navigate the financial pitfalls of a new life dynamic.  The company was founded through personal experiences in divorce and watching the changes in an aging parent.  He has worked in finance for over 20 years (including financial planning and tax) and has taught on the university level as well as conducted seminars for high school youth on personal finances.  Hirsch is a member of the American Association of Daily Money Managers (AADMM).

Tune in to his radio show Tuesdays at 9am CST / 10am EST: www.facebook.com/singlesTalkRadio

INC., KKHT Radio, MomsBlog.com, DivorcedMoms.com, The Divorce Coaching Hour with Christy Stratton, The Memphis Business Journal, The New Southern, and Funding Sage media outlets have all covered his work in Divorce and Hirsch was selected to be a New Orleans Entrepreneur Week Fellow.  Hirsch has a passion to serve others and has worked with numerous non-profit boards including the United Way and is a trustee of Texas College.  Please reach out with any comments to hirsch@lifecycle.financial.

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