The Hard Truth About Assisted Living

Steve McDonald By Steve McDonald
Bond Strategist, The Oxford Club

Two-Minute Retirement Solution

Here’s another tale from the retirement belt. It’s about how long people are living, how long they’re staying in their homes in their final years, and what it all means for their wealth and their families.

A close friend of mine, Jake, has a father who is suffering from dementia. Both of his parents are well into their 90s and have stayed in their home. Jake’s mother was his father’s caregiver until recently.

I say “was” because Jake’s mother fell and fractured her hip. His father was left with no one to care for him.

So, being the good son Jake is, he moved his dad into an assisted living apartment. His mother will move in after she recovers. And that’s where things get sticky…

The cost of the facility where his parents now have to live is $19,000 per month ($315 per day per person). Not for the quarter… not a year… per month!

His parents have enough money for three months.

As you might expect, the first thing they have to do to help cover their expenses is sell their home. That’s exactly what Jim is trying to do, and that’s where the situation really goes downhill.

Their home is in a great neighborhood, and based on estimates, it should sell between the high $300,000s and $425,000. But with the house in its present condition, they’ll be lucky to get $200,000.

People in their later years who have limited resources often pass on big-ticket maintenance… a leaking roof, painting, plumbing repairs, electrical issues, etc.

That’s exactly what Jake found.

The roof is leaking and has been for who knows how long, and there’s extensive damage to both the attic and the second floor. Down here in Florida, it’s what we call a knockdown. They’ll get the value of the land.

And if you do the math, after closing costs, the sale will pay for only 10 to 11 months of their assisted living expenses.

It’s a horrible situation but one we had better get used to. Eighty-six percent of us want to age in place, not in a facility. But as Jake is finding out, the reality of that choice is another issue entirely.

Seventy percent of us will require some kind of long-term care, and only about 14% of us have long-term care coverage. And 20% of us will require five years or more of long-term care.

Add to the mix the terrible retirement savings numbers for the boomers and our longevity bonus… and you have a nightmare.

I’ve said it before, if you aren’t taking aging and retirement funding seriously, you’re whistling past the graveyard.

Good investing,