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This Is How Much You Should Budget to Live in a 55 and Older Community | Retirement
Many people like the idea of living in a retirement community – particularly one aimed at adults 55 and older that offers amenities such as fitness centers, swimming pools and cooking classes. These communities often resemble country clubs more than senior living. Oftentimes, however, this lifestyle comes at a steep cost.
“Most people way, way underestimate the costs of needs and long-term care during retirement,” says Thomas Mitchell, a certified financial planner and the senior vice president at OneAZ Wealth Management in Phoenix.
So how much should you budget to live in a 55-and-older retirement community? Here’s a look at what these communities include and the costs to expect.
What Is a Retirement Community?
A retirement community is a neighborhood or housing complex designed for older adults. These housing options may also be called senior living communities, independent living communities or active adult communities. Retirement communities aren’t assisted living facilities or nursing homes, yet some include those components, which allow residents to opt into assisted living services as they age or move into a nursing home on the property. These are often referred to as continuing care retirement communities, or CCRCs.
Perks of retirement communities may include:
- Free housekeeping (often a few times a month).
- Free public transit.
- Paid utilities.
- Cable.
- A swimming pool or jacuzzi.
- Gated community.
- Salon or barber shop.
- Library.
All retirement communities are different, but they typically require at least one person living in a home to be 55 or older. Some retirement communities may have age-related rules, such as no residents under the age of 18, while others may be more flexible.
How Much Should You Budget for a Retirement Community?
Costs vary depending on the community and area of the country, but living in an independent living community typically costs $1,500 to $4,000 a month, according to AssistedLiving.org. Meanwhile, assisted living centers range in cost from $3,500 to $10,500 per month. Caregiver resource company A Place for Mom says the median cost of senior independent living in the U.S. is approximately $3,000 per month.
You’ll also want to factor in any entrance fees. On average, entry fees are around $402,000, according to A Place for Mom, although it notes that you or your beneficiaries may get some of the fee back if you move out or die.
Entrance fees can be significant, says Timothy Kirch, a certified financial planner and owner of Nashville Financial Planning in Tennessee.
“I’ve seen entrance fees as low as $100,000 with some creeping up closer to $1 million,” Kirch says.
Many people sell their homes and pay the entrance fee with the proceeds, Kirch says. That said, he cautions anyone considering an expensive retirement community with a high barrier to entry to do their due diligence and understand what they’re getting.
A retirement community may work out well for many retirees, Kirch says, especially if it’s one with a lot of amenities. “A lot of their needs can be handled by the community, so they could actually have less costs overall if they can afford the entrance and monthly fees,” Kirch says.
Still, Kirch encourages everyone to read the fine print of the contract. “Depending on their health at the time of entry, they could lose a significant amount of that initial fee as part of their legacy if they aren’t even there all that long,” he says.
Pros and Cons of Moving Into a Retirement Community
Thinking of moving into a 55-and-older retirement community? Here are some benefits and drawbacks to consider.
- You may make fast friends. After all, you’re living among people close in age and in the same stage of life.
- If you can afford a retirement community, you may find that you save money by taking advantage of the amenities.
- You’ll enjoy the convenience of entertainment options, services and shops nearby.
- The community typically covers home maintenance, so you can remove that from your to-do list.
- Retirement communities are expensive.
- If you change your mind and decide to move elsewhere, you may lose money.
- If you like to march to the beat of your own drum, you may feel suffocated by the rules of a retirement community.
- You may miss living among people of different ages.
When to Move Into a Retirement Community
There are essentially three stages of retirement, according to Thomas, and you’ll spend different amounts of money in each.
“They all go about 10 years each,” Thomas says. “You’ve got from about 65 to 75 years of age – the ‘go-go’ years. You’re going and going and traveling and doing all the things you wanted to do that you couldn’t when you were working.”
He says during the first 10 years of retirement, people often spend more money than they did while working. “That’s because you have all of this free time. What are you going to do, sit on a chair all day? No,” Thomas says. “Every day is Saturday.”
Ages 75 to 85 are typically the “slow-go” years. During this time, Thomas says, “you’re still doing things, just not as often, and you don’t spend as much.”
The last stage tends to be from age 85 to 95, Thomas says, and he calls these the “no-go” years, when you may need assisted living or more specialized care, and therefore your costs begin to rise again.
These spending stages are worth considering if you’re thinking of moving into a retirement community. It may be better to wait until your spending slows, or you may see some wisdom in diving into the retirement community scene as early as possible.
That said, Thomas recommends moving into a retirement community before you need to, perhaps somewhere in the middle of the go-go years, and he points out that some places have waitlists of three to five years.
