By Roberta L Nestor
Assisted living facilities (ALF) are growing in popularity and are a viable choice for many seniors. Assisted living is part of a continuum of long-term care services that offers services, in combination, with housing, personal care services, and health care that can help residents in need of assistance with daily activities in such a way that promotes maximum independence. Our tiny state has over 80 assisted living communities and that is up 20% over the past two years.
Selecting an ALF is a life changing event and most often the task of selecting the ALF is not made by the aging individual, but more often, it is a family member who is making the decision as to where to place mom or dad. Unfortunately, there are many common mistakes families make when selecting an ALF. Starting with underestimating the long term cost of care. A careful analysis with all of the “what ifs” is essential to be sure that living in the ALF can be affordable for the long term. Moving a loved one from place to place can be emotionally and physically detrimental to the senior, especially if that senior is experiencing signs of dementia which make adapting to change very difficult.
Let’s assume someone has a monthly fixed income of $3,000 between social security and pension, the ALF costs $5,000 each month and this person has $200,000 from the proceeds of selling their home. In this example the individual would have to draw off $2,000 a month from their savings. Without any gain or loss to the principal, and assuming there are no increased fees or increases in the monthly cost, she could afford to stay at the ALF for 8 years.
Now let’s put the “what ifs” into the equation and assume that the ALF increases the monthly fee by 5% each year. With the same assumption of no gain or loss on her $200,000 and no additional fees, the safety net goes from 8 years to 4 years. Be aware that every additional service provided by an ALF has a cost, whether it is to give medication to a resident or watching the resident actually swallow the medication. So, when you are looking at affordability, it is important to do a detailed analysis to understand the probability of running out of money.
Another common mistake family members make when selecting a facility is that the ALF be in close proximity and convenient for themselves versus the senior. Chances are that the senior individual has been a part of his or her community for a number of years. Moving outside of their community means getting used to a myriad of new things, be it church, grocery shopping, where they have their prescriptions filled, even when it comes to friends being able to visit. Most ALF residents don’t expect to see their family members more often just because they moved out of their home. Make sure the location is convenient for the resident.
Lastly, many families don’t read the fine print and only find out about extra costs after the fact. For example, communities generally raise their prices at an approximate annual rate of 5%, which is actually twice the rate of inflation. Unless your contract clearly specifies a rent freeze or “locked rate,” your fees increase each time you renew your contract. You might find separate fees for the apartment and an additional fee for personal care. There could also be fees for laundry, transportation to grocery store, medical supplies, medical delivery, etc. Don’t do it alone and take your time comparing these communities. Don’t just visit once, go a few times and at different times during the day or early evening. Learn more about the existing residents, the average stay and spend time with different staff members to understand their function. Don’t make quick decisions and try to involve your loved one in the process as much as possible.
Roberta L. Nestor is a financial advisor practicing at 491 New Haven Avenue in Milford, CT offering retirement, long term care, investment and tax planning services. She also offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network – a member FINRA/SIPC and a Registered Investment Adviser. Fixed insurance products offered through Nestor Financial Network are separate and unrelated to Commonwealth. Commonwealth Financial Network or Nestor Financial Network does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. Roberta can be reached at Nestor Financial Network, 203-876-8066 or firstname.lastname@example.org.