Recently I was in Calif and I visited my aunt and uncle who live in a very nice retirement community which has 3 levels of care. They are in the lowest level, which doesn’t have any care at all. They are completely independent. They moved there to get away from the responsibilities of their big family home (which they sold).
My cousin, who often gets info wrong, told me that my aunt and uncle had to pay $750k cash for their 2BR2BA very small apt, and they also have to pay $9k a month …and when they die, their kids will only get about $400k back from that initial $750k.
The place is nice, and provides 1 nice meal a day in a restaurant like setting. Of course, it has many amenities, pool, game room, etc, etc.
This sounds odd. I can understand that perhaps there’s some sort of “reverse mortgage” going on, but why when they’re already paying $9k per month?
We have relatives in similar place—>$1,000,000 buy-in for 2 bedroom independent apt. They pay >$7k/mo for 1 meal/day for 2 people, but can have more meals added to their tab. There is shuttle service, concierge, valet, housekeeping weekly which washes bedding and light cleaning, classes & speakers, etc.
Their estate will get back 90% of buy-in and there is 2-4 year waiting list. Current residents have priority if higher levels of care are needed—assisted living, memory care, nursing home.
You can also hire additional help for a fee.
Oh yeah, the “buy in” fee at the CCRC doesn’t qualify as a purchased principal residence. It’s a medical expense, per the facility. It is a very expensive community.
Effectively the concept is prepaid long term care insurance bundled into the retirement living package. The monthly fee is mostly the cost of renting your apartment, while the entry fee is more like your prepaid care insurance. See https://paloalto.viliving.com/how-vi-works/pricing for example.
If you use it then great, if not then it seems like an expensive place to live. But if you think of it like insurance, then it makes more sense: those who need the care are subsidized by those who don’t.
Of course the potential pitfall is much like that for any long term care insurance plan: costs may rise more than expected and so they may have to raise the prices. While California real estate is booming that may not be a concern since the entry price (and to a lesser extent the monthly fees) can go up in line with what new residents are selling their houses for. If house prices crash then it could all unravel, due to a lack of new residents (who aren’t needing care and so will subsidize existing residents in the short run) able to afford the entry fee and the ongoing monthly fees.
They have these in CT also at similar price points. I have heard that it is not always possible to achieve a 90% return of funds, but I can’t recall why the units do not sell for their current selling prices.
@SOSConcern, off-topic but you indicate you had long term care insurance in place well before being diagnosed at 52/53? I was diagnosed with same (Stage 3) at 50. Now 52, so yet not cancer-free as long as you - your good news is of course always welcome news - congratulations. We had not yet contemplated LTC insurance - will the fact that I had breast cancer preclude getting LTC? Does it depend on how many years you’ve been a survivor?
For senior communities, they screen people - you can’t be ‘too sick’ to buy in - worst case for them is if both needed skilled care in a short time and lived a long time. So they make sure someone doesn’t come in spending more of the corporate/group funds right away…
@Turquoise52 we got the insurance in 2003 and I was diagnosed with the cancer at 2009.
The LTC insurance has totally changed. IMHO no LTC insurance plan will touch you with the cancer. You may wish to see about H. Talk to your financial person and insurance agent, and read up on what is available.
The available through my employer LTC plan excludes any tumor (benign or cancerous) or blood cancer, any stage. The only exception is the minimum coverage that the employer pays for - $2k a month for 3 years. That one does not require any medical questionnaire. Any spousal coverage needs a questionnaire.
I had breast cancer in 2005 that was treated with lumpectomy and radiation. I have been cancer-free ever since. My H had prostate cancer in 2001 that was treated with surgery and radiation. We were able to get LTC insurance in 2009. I guess it all depends on whether you’re considered “cured”?
DH is a govt EE and LTC was first offered in 2002, six months after I was diagnosed with leukemia. I couldn’t get the top-level coverage, but I got the max without doing the full health questionnaire. I was 41 at the time. Still have the policy. It’s not terribly expensive and I feel fortunate I was able to get it.
Also got a personal term life policy at 29 and doubled it when I was 31 and pregnant with S2. When I was diagnosed, at least I knew I had enough coverage to pay for their college if something happened. I still have that policy; I could never get another one.
Thank you all for the explanations. This was so different from what was done for my MIL. There wasn’t this huge buy-in, but there was the similar hefty monthly payment. She was also in low-level care.
Good article. But we have not ruled out taking SS security before full retirement age. In the pre-Medicare years we will have high medical costs and likely more adventurous/expensive travels.
One recent minor thought we had about letting the savings grow is that the kids can inherit 401k, but not SS payments. (In our case no spouse factors - our projections are about the same). Of course our own financial health will be the major priority. We’ll model the options with a financial planner when retirement is closer.
There is an article in Sep 4 issue of WSJ that poses the same question as the OP, and the answer is “much more than you think.” The article is behind a paywall, but there is a lively discussion on another forum the name of which starts with R, and someone posted the link to the WSJ spreadsheet.
I just filed for my Social Security benefits, because I’m about to turn 70. It will be a wonderful amount to add to my other monthly income. I’m delighted I was able to wait until now so it’s a nice chunk of change. I’ll receive my first payment in December.
That’s a pretty extravagant lifestyle embodied in that spreadsheet. How do you spend $400/week on groceries when you are eating out 3 times a week? We will hopefully have neither rent nor mortgage payment when we are retired, and if we do it won’t be $4000/month. And I guess we are cheap but we don’t spend $90/week on presents for people.
I went through it and plugged in more normal (to me) numbers, got rid of things like the country club membership and horseback riding, and came in at well under half the original amount in that spreadsheet.
Yes, before H retired, I found a very simple spreadsheet with pre and post retirement categories if spending and plugged our estimates to reassure us we would be perfectly comfortable in retirement.
It helped us see that with OUR desired expenses and lifestyle, we’d have more than enough funds in retirement to live comfortably—no horses or CClub, also no more es expenses nor mortgage nor rent. H has been retired for 5+ years and we still live very comfortably below our income.
The Wall Street Journal does have a rather wealthy reader demographic, probably including some whose spending habits tend to increase as income and wealth increases.
Apparently, the numbers in the spreadsheet are from the article (like $4k a month on housing payments).