Step-by-Step  Guide to Understanding Common Senior Living Costs and Building Out a Lifelong Retirement Living Budget

As you age, your living needs will inevitably change. For many seniors, this means transitioning into a senior living community. However, with a wide range of senior living options available, it can be mind-boggling to understand the associated costs, contracts, types of communities and so much more that goes into your decision.

At The Glebe, we understand the complexities of senior living costs and financial planning — and how planning a budget for a future that includes senior living can be an overwhelming task. This overview of senior living costs and financial planning should give you a firm foothold from which to create your retirement budget.

Understanding Senior Living Costs

The first step to understanding the cost of senior living is to recognize the differences in various kinds of senior living communities and the different types of contract types and associated fees.

What is an Entrance Fee?

An entrance fee is a one-time payment required to reserve your residence and move into a Life Plan Community, or CCRC (Continuing Care Retirement Community). Your entrance fee also guarantees you a spot in the community and priority access to care including assisted living, memory care, skilled nursing and rehabilitation services, often on-site within the community. A portion of your entrance fee may even be tax-deductible but be sure to consult your tax advisor. When a resident leaves the community, a portion of the entrance fee may be refunded to the resident’s estate, depending on the terms of the contract.

Rental Communities Vs. Continuing Care Retirement Communities

In rental senior living communities, residents pay a monthly rent for their living space and access to community amenities and services. There is usually no entrance fee required, but residents are subjected to the ever-changing market rate of care depending on their needs, which has increased 3% year over year. That means residents in rental communities don’t have the same financial comfort as residents of Continuing Care Retirement Communities (CCRCs) if they ever need higher levels of care like assisted living, memory care, or long-term skilled nursing.

Life Plan Communities, or Continuing Care Retirement Communities (CCRCs), on the other hand, require a one-time entrance fee payment to move into the community, and then monthly fee payments. Generally, your entrance fee goes toward the costs of higher levels of health care if you ever need them. Your entrance fee also locks in predictable monthly rates that do not increase with the open market rate of health care, and barely change no matter if you’re in independent living or long-term skilled nursing care. Your monthly fee can vary depending on the type of residence, the number of occupants, and the entrance fee refund option you choose. Monthly fees are also adjusted annually based on the cost of community amenities and operations.

Life Plan Community Contracts at The Glebe

Many Life Plan Communities offer a range of contract options to fit different lifestyles and budgets. Here at The Glebe, we’re no different. We offer two different contract types, both with entrance fees and monthly fees. In both options, you’ll have the peace of mind that comes with knowing you’ll always have access to a full continuum of high-quality health care right here on campus. Plus, a portion of your entrance fee can be refundable under both contract options.

 Life Care Contract

With a Life Care contract, you’ll pay an entrance fee starting at just $172,000 and a monthly fee as low as $3,869 per month. This contract provides you with residency, our full range of services and amenities, and most importantly, care for life. It’s the ideal contract for predicting your future needs because as your health conditions change, you’re able to remain on campus and seamlessly move between independent living, assisted living, memory care and skilled nursing care. Additionally, your monthly fees stay the same as your care needs and service levels increase. While monthly fees don’t increase for changes in levels of care, they are subject to annual adjustments. All in all, Life Care shields you as a resident from rising costs of care on the open market and provides a truly carefree and fulfilling lifestyle with the added confidence that you’ll always receive the care you need when you need it — even if you outlive your financial resources.

 Fee-for-Service Contract

Like our Life Care contract, with our Fee-for-Service contract, you’ll pay both a one-time entrance fee and a monthly fee for lifetime residency here. You’ll have a choice of one of our beautiful apartment homes or cottage homes as well as all of our services, amenities and activities. The difference is when it comes to higher levels of care. If you ever need short- or long-term assisted living, memory care, or skilled nursing care while you live here, you’ll pay for those additional services when the need arises. The benefit of this contract is that you gain the flexibility to use your existing long-term care insurance policies as you see fit. The entrance fee for our Fee-for-Service contracts start at $145,000 with monthly fees starting at $3,306.

Financial Planning for Retirement

Financial planning is an essential part of retirement planning. It involves creating a budget, managing income and expenses and investing for the future.

The first step in financial planning for senior living is to determine your retirement income. Retirement income includes income from Social Security, pensions and retirement savings. According to the Social Security Administration, the average monthly Social Security benefit for retirees in 2021 was $1,543. Pensions vary widely, but according to the National Institute on Retirement Security, the average pension benefit is $9,262 per year. Retirement savings can include 401(k) plans, IRAs and other investments.

There are four financial phases of retirement for which you should plan: pre-retirement, early period, middle retirement and late retirement.

Pre-Retirement

During the pre-retirement phase, which typically occurs in the final 10-15 full-time working years, you’ll start to seriously consider your options, budget and lifestyle. Now is the time to start a retirement budget planner to track and predict your expenses and income, including pensions, annuities, savings accounts, investments and Social Security payments. It’s also the perfect time to start researching senior living options for independent living and comparing pricing, location, and perks of the communities you’re interested in. 

Early Retirement Period

In the early period of retirement, which typically occurs from age 62 to 72, you’ll choose the age at which you’ll retire and be able to determine how much income you’ll receive from Social Security, as well as plan when to utilize your IRAs, 401(k) accounts, or pensions. In this phase, it’s important to create a preliminary budget based on your post-retirement income. You may have more discretionary income to spend on travel, hobbies and other activities. It’s also important to budget for these expenses while also considering the potential for unexpected healthcare costs.

Middle Retirement

During middle retirement, ages 70 to 80, you may have reduced income and increased healthcare costs. It’s important to continue to budget for healthcare costs while also considering potential long-term care needs. You can likely begin to refine your budget more clearly in this phase.

Late Retirement

In the final phase, late retirement, when you reach age 80 and older, you may have significant healthcare costs and may require assistance with daily living activities. While your lifestyle expenses will likely be low during this phase, it’s important to plan for additional care expenses and consider options for long-term care.

Make sense of senior living costs with help from The Glebe.

Understanding the costs and contracts associated with senior living communities doesn’t have to be an overwhelming process. At The Glebe, we do everything in our power to help you make an informed decision that’s truly best for your lifestyle and your budget. We value financial transparency, which is why our pricing and contract types are listed in detail on our website. Call us today at 1-540-795-2224 or contact us through our website to see how easy it is to make a financial plan that works for you when you choose The Glebe.