Can I Afford A Retirement Community In A Down Market?
Can I Afford A Retirement Community In A Down Market?
The number one issue facing many seniors today is not whether they want to live in a retirement community but rather can they afford to live in a retirement community.
Financial planners are frequently asked “Can I afford a retirement community in a down market?”. The best response – asking two more questions. Can you afford not to move into a retirement community? And does the market really matter? Trying to time the evaluation of or move to a retirement community based on the fluctuation of home or investment values is not the best way to consider the question of affordability.
Consider instead what you want in your retirement years and whether a retirement community provides the lifestyle you are looking for. This decision is first one of lifestyle and happiness - not timing or market performance. If a retirement community is the answer for you, then focus on the affordability of the decision today – instead of considering factors outside of your control. Next, evaluate the affordability of a retirement community based on your personal financial situation and future goals.
Determining affordability requires an assessment of 3 major factors: assets, income, and expenses.
Assets are that which are owned and can be used in a financial manner to provide income to support lifestyle goals.
Income is any source of income that is received on a monthly basis (pension, social security, etc).
Expenses include what is spent on a monthly basis to cover needs and wants.
How does the combination of current income sources and current assets match up to the monthly (or other) costs at a retirement community? The answer is an assessment of affordability.
The question of whether or not it is the best “time” to move based on how the “markets” are behaving is not important. It is your definition of retirement lifestyle goals combined with an assessment of current assets, income and expenses that determines whether you can afford a retirement community.
It’s important to note that there are other factors to consider financially. These range from liquidity needs (or how to best turn your assets into spendable cash), potential need for higher levels of care (and thus their costs), legacy and wealth transfer issues for family, and how much risk seniors should take with their investments. All of these qualitative points should be discussed and factored into the question of affordability while focusing on what’s important to you.
Ask the question again – what am I looking for in my retirement years? If a retirement community is the answer for you then determine affordability and start looking for the right community to call home. You’ll be glad you did.
Brad Shepherd is a Chartered Financial Consultant with Brooks Financial Group specializing in wealth management planning for individuals and businesses. He can be reached at:
Brooks Financial Group, Inc.
1020 Cromwell Bridge Road
Towson, MD 21286
Tel: 410-308-9800
Fax: 410-308-9801
Email: info@brooksfinancial.com
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