Senior Living: Considering a retirement home?

Table of Contents Breadcrumb Trail LinksArticle contentAdvertisementArticle contentAdvertisementArticle contentAdvertisementArticle contentAdvertisementArticle contentAdvertisementArticle contentShare this article in your social networkAdvertisementNP PostedThanks for signing up!Comments Breadcrumb Trail Links Life The options might be far more luxurious than you thought. There are many opportunities for recreation and physical activity at retirement homes. Photo by […]

The options might be far more luxurious than you thought.

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We recently had to put my mother-in-law in a retirement home and I must say, I was very reluctant at first. I really wanted my husband to continue with the current homecare. My mother-in-law has Alzheimer’s and is 94 years old. She has lived in her current home for more than 40 years, and I felt it would be better to keep her in her own home rather than an assisted-living residence.

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That is, until I saw it. I was completely blown away by how wonderful this new residence was. In fact, I myself wanted to move in too.

Now, I know this may be a foreign idea to most Canadians. It certainly was for me too. But after running the financial numbers, it definitely should be considered as an option. There are many retirees who still live in their homes with their mortgages paid off years ago.

Thanks to COVID, the house prices across the country have reached new highs again, but for someone on a fixed pension income that really means nothing. What if you liberated that equity in your home, invested the funds and created a new monthly income for yourself? Think about that. No more monthly repairs and maintenance costs, no utility bills, no condo fees, no snow removal or gardening, nothing to do but have fun, socialize with new people, make friends and be part of a community.

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Most retirement homes have a variety of living options, with many being like a resort-style atmosphere that you rent a condo-type living space from. Housekeeping and laundry services can be included, memberships to their in-house events, entertainment, outings, fitness classes, gym memberships, restaurants and snack bars are also often included.

I was in awe of this new home my mother-in-law was going to. It was not like the ones we all saw on the television in the early days of COVID. This home is family run and boasts a track record of zero-COVID cases — impressive! It has three restaurants, a recreational gym, swimming pool, free snack bars on every floor, on-site pharmacy, in-house nurses and doctors and many optional living situations for all stages of care. I must say, it is amazing.

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The cost per month for this retirement home is $5,000 per month per person including rent, all utilities, all meals and snacks, parking, laundry and housekeeping, memberships to all their clubs and recreational events, and 24-hour emergency alert monitoring if requested. The environment was upbeat, caring, and no matter when we went, I never felt nervous about leaving her there.

So why are people hesitant to consider renting versus owning? I have heard people say: “My home is paid for, so it costs me nothing to live here.” Really? Your home always needs maintenance, and you always have to pay utilities and taxes. Here’s another one: “I want to leave my home to my children.” OK, but what about you? You worked, scrimped and saved, and now the last years of your life are just continuing to do that? What if you could rent and travel (once COVID clears), have fun, buy a new wardrobe or new furniture for your rental unit, live a little — is that so bad?

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When we look at the Canadian S&P Index over the past 45 years, we know it has generated an average annual return of 9.67 per cent and the U.S. S&P 500 has averaged 14.284 per cent annually. It would be advisable to have an experienced financial adviser to assist you in determining your investment asset mix, but a conservatively diversified portfolio should be able to provide an annual return of 5.0 to 6.5 per cent.

So, let’s look at how you could fund this new lifestyle: The following numbers are based on a 6.5-per-cent annual return with a fixed monthly withdrawal from your investment portfolio for a period of 20 years. This anticipates there would be no deposits to the investment portfolio and is based on an inflation rate of three per cent. Your Canadian government pension incomes, employment pensions or any other incomes you receive would be in addition to these numbers. If you sold your home and invested the proceeds, here is an estimate of income you could expect monthly:

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$500K Investment Portfolio = $3,654.10/month

$800K Investment Portfolio = $5,846.56/month

$1 million Investment = $7,308.20/month

$1,250 million = $9,135.25/month

$1,500 million = $10,962.30/month

The option of renting in retirement, especially if you are single, makes a lot of sense. Do your homework and interview, tour and critique the retirement homes you may be interested in. The real benefit to this alternative living arrangement is that when your needs change over time, you can truly remain in your own apartment, while having access to additional support and care when you need it.

— Christine Ibbotson has written four finance books, including the bestseller How to Retire Debt Free & Wealthy. [email protected]

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