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Many people approaching retirement express a desire to age in place, living in their current home or community until it is no longer physically possible.
To do that, however, it's best to budget the dream into your financial plan. By doing some preparation, you have a greater likelihood of being able to stay where you are, or moving on your own terms — not because you're forced financially to make a change, said Roger Roemmich, chief investment officer of ROKA Wealth Strategists and author of the book "Don't Eat Dog Food When You're Old."
Because so many people want to stay put during retirement, it's becoming more common for financial planners to put extra focus on the unique costs involved with aging in place when formulating their clients' financial plans, said Janice Cackowski, a financial planner with Strategic Wealth Partners in Independence, Ohio. "We're trying to build in a basic cost into the financial plan… so that they do have the ability to update their house or build a ramp," she said.
Here are some tips to consider if you want to spend retirement in your home.
An important start to an aging-in-place plan is making sure you'll have a monthly cash flow that will exceed your expenses, Roemmich said. This is best done before retirement begins.
Otherwise, you could discover years after retiring you have insufficient funds to stay in your home, covering necessary upgrades, taxes, insurance, utilities, maintenance, and possibly a mortgage — as well as other necessary and discretionary costs, from visiting grandchildren to dining out.
"I don't like to see people who have made the decision to retire too early or retire completely [at an early age]," Roemmich said. "A lot of times, it's the difference that allows them to age in place."
Also, defer taking Social Security as long as you can, to get the most out of your entitlements, said Charles Bennett Sachs, principal and wealth manager of Private Wealth Counsel in Miami, Fla. By not taking Social Security payments until you're eligible for the full benefit, you guarantee higher cash flow in the future. "Anything that allows you higher income down the road is important," he said.
For some, reverse mortgages are a good option for increasing cash flow, Sachs added.
If you’re not factoring medical expenses into your retirement savings strategy, you could be setting yourself up for a financial shock.
People tend to underestimate medical costs in retirement, figuring that Medicare coverage will suffice, Roemmich said. They can end up with large, unexpected bills if they don't plan for health-care costs in retirement. Those costs can crush your finances, making it less likely that you can maintain your current residence at the same time.
That's saying nothing of the long-term care that many Americans will end up needing, given longer life expectancies. "More people will be living into their 90s and beyond," Roemmich said.
Living longer increases the chances of needing long-term care, whether you need an in-home caretaker or eventually require a move to a facility that can provide more assistance.
Some may opt to purchase long-term care insurance, though policies can be somewhat expensive, Cackowski said. Others choose instead to invest money specifically for long-term care, should they end up needing it, she said. Either way, it's important to have a plan.
Occasionally, customers will ask Vittorio Lisi, co-owner of JVA Construction Services in Baldwinsville, N.Y., to examine their home to see what it would take to make it more accessible as they age. That helps people estimate their future remodeling costs.
Suggested improvements could include moving the laundry from the basement to the first floor, creating a roll-in shower without a threshold, installing raised toilets, changing the door knobs to door levers and installing roll-out shelves in kitchen cabinets, he said. Sometimes, doorways need to be widened, to allow wheelchairs or walkers to pass through. Sometimes, exterior ramps are needed if the homeowner can no longer walk up stairs.
Some of the work can be done in little steps along the way, as needed, Lisi said, and homeowners can budget for that. Keep in mind, however, that you may save if you do some projects together, since it cuts down on the number of trips that the remodeler needs to make to your home, he added.
Improvements in the bathroom are among the most common in increasing a home's accessibility; it's likely to come with a price tag of between $12,000 and $17,000 for a basic bathroom remodel, Lisi said. Just changing the shower area (including taking out the tub, creating an entry without a threshold and adding some other safety features) can run between $8,000 and $10,000, said Dan Bawden, president of Legal Eagle Contractors in Houston.
And the expenses add up. Widening a doorway from two feet to 34 inches can cost between $1,700 and $2,500, since it often also involves moving light switches, Bawden said. Changing out just one doorknob for a door lever can cost $50, given labor and materials, Lisi said.
Often, the sum cost of all the improvements needed to make the average existing home more livable can reach between $70,000 and $100,000, Bawden said. His advice to people who know their home will need these tweaks in the upcoming years? Start saving now.
"What I tell the clients who are looking at [the cost] and are balking at it, I ask: 'Do you know what it costs in your area for one year of assisted living or a nursing home?'" he said. "'Which is better, living in the home you love and paying the $70,000 once,'" or paying it many times over, by living in an assisted living or nursing home, he asks them.
"People think they want to stay in their home because that is what is comfortable to them," Cackowski said. "Especially when they're older…it's difficult for them to part with the familiar."
If the home isn't conducive to staying for the long run, however, a couple may be wise to consider a move sooner than later — when their significant other is still alive so that they can make the decision, and the eventual move, together. When put that way, many people, her parents included, don't like the possibility of the survivor doing the move on his or her own, Cackowski said.
They move together, and sometimes sooner than anticipated, instead.