Budgeting Move to Independent Living Facility (am I missing anything?)

[Sunset]

OP- Wouldn't it be simpler to figure out your parents total current income (easy to look at last year tax return).
Figure out their total investments (stocks, bonds, real estate).
That is the numbers that a CCRC will look at to determine admission.

The CCRC or just retirement homes will as for financial statement and income sources and decide if they are 'rich' enough for that home.

For example a retirement home we looked at required: $300K in assets and SS. This was because they wanted to be sure to be paid for 3 years (at cost of $100K/yr), and after that if a person ran out of money they would keep them in the same room and services and accept Medicare payment plus most of the SS each month.

A CCRC we looked at (Friendship Village), which has gone bankrupt and is up for Auction right now wanted $500K deposit and supposedly you would get most back when the room was re-rented, plus it cost $120K per year.

Basically in my experience having looked at our local places, as person needed $80K per year income at a minimum for the lower cost places. The $100K ones were better. So to me the budget is $100K for the first person plus ~$40K for second (if sharing room) plus $20K to spend.

If you work out they have a budget to last their life and it's $80K then it doesn't work. Better to spend all their money in a retirement home in the first few years and go on medicaid. For many folks living at home doesn't work at a certain point.

 

[harllee]

There are some nonprofit CCRCs (like the one where I am living and the one where my mother lives) that have a Trust fund set up that pays the monthly fee for residents to be able to stay at the CCRC when they run out of money. Where I live (a Class A Life Care community) they allow each person to retain $50,000 when the trust fund kicks in. Right now there are a couple of ladies on the trust fund, both of whom are over age 100. The trust fund (which has millions of dollars) gives me great peace of mind.

 

[bevette]

There are some nonprofit CCRCs (like the one where I am living and the one where my mother lives) that have a Trust fund set up that pays the monthly fee for residents to be able to stay at the CCRC when they run out of money. Where I live (a Class A Life Care community) they allow each person to retain $50,000 when the trust fund kicks in. Right now there are a couple of ladies on the trust fund, both of whom are over age 100. The trust fund (which has millions of dollars) gives me great peace of mind.

This arrangement would bring great peace of mind to both my parents and our family. Is there a directory of nonprofit CCRCs to identify them?

 

[braumeister]

This arrangement would bring great peace of mind to both my parents and our family. Is there a directory of nonprofit CCRCs to identify them?

That's not a feature that is easy to find without talking to the people at individual CCRCs.

Plenty of sites with info, but here's one you can start with:
https://www.caring.com/senior-living/continuing-care-retirement-communities/

 

[ncbill]

Given the enormity of this responsibility to set a budget my parents can’t outlive for the senior living chapter of their lives, I’ve decided to hire a fee-only financial professional to conduct this analysis. This will also give my parents peace of mind to have a professional assessment. I’ve reached out to two advisors to interview for this project and are waiting to hear back.

However, while researching advisors, I saw some people talking about using an elder care attorney to set a budget for senior housing. I was surprised to read this in varying places. I now realize I have no idea what elder care attorneys do.

Has anyone used one? What did they assist with? Just because my parents are in their mid-80s should I select one? Is it inevitable that everyone would benefit from one?

For a fee, here is a database of advisors where every firm is a RIA:

https://adviceonlyfinancial.com/advice-only-fees

 

[harllee]

That's not a feature that is easy to find without talking to the people at individual CCRCs.

Plenty of sites with info, but here's one you can start with:
https://www.caring.com/senior-living/continuing-care-retirement-communities/

Don't know where that list gets their information but neither my nor my mother's nonprofit CCRCs are on that list.

 

[harllee]

This arrangement would bring great peace of mind to both my parents and our family. Is there a directory of nonprofit CCRCs to identify them?

To my knowledge the only ones with such a trust fund are nonprofit CCRCs that have a fairly large entrance fee. Maybe if you told us the area where you are looking someone would know if there are any CCRCs with trust fund in your area.

 

[bevette]

For a fee, here is a database of advisors where every firm is a RIA:

https://adviceonlyfinancial.com/advice-only-fees

That is the db I used. So far, none of the advisors I reached out to have responded. But not all is lost. I’ll use an advisor from the list to review my own retirement plan before I pull the trigger. I’m hoping that’s very soon. Just waiting for voluntary separation packages to be offered.

 

[bevette]

To my knowledge the only ones with such a trust fund are nonprofit CCRCs that have a fairly large entrance fee. Maybe if you told us the area where you are looking someone would know if there are any CCRCs with trust fund in your area.

I toured a non profit buy in property in my parents preferred geography today. Came away with a bit of sticker shock. I may be subsidizing the buy in fee. But it’s worth it for the peace of mind. At least you seem to get what you pay for. It was quite nice.

 

[Sunset]

I toured a non profit buy in property in my parents preferred geography today. Came away with a bit of sticker shock. I may be subsidizing the buy in fee. But it’s worth it for the peace of mind. At least you seem to get what you pay for. It was quite nice.

Be sure to ask a LOT of questions about their financials and the 'buy in" fee rules.

Many people are out of money when Friendship Villiage went bankrupt and it is the largest CCRC in IL

https://therealdeal.com/chicago/2023/06/12/schaumburg-retirement-community-files-for-bankruptcy/

There were signs of trouble a couple of years before the bankruptcy. People not getting their refundable part after parent died, even though it was over a year later..

I feel lucky as we had toured it, it looked nice and it was on our list, and we would have been screwed out of ~$400K or so.

 

[harllee]

I toured a non profit buy in property in my parents preferred geography today. Came away with a bit of sticker shock. I may be subsidizing the buy in fee. But it’s worth it for the peace of mind. At least you seem to get what you pay for. It was quite nice.

Did this CCRC have a trust fund to pay if the resident runs out of money? There are several CCRC threads on this Forum you might find helpful. I have a thread about moving into my CCRC--I have been here a couple of months.

 

[ncbill]

That is the db I used. So far, none of the advisors I reached out to have responded. But not all is lost. I’ll use an advisor from the list to review my own retirement plan before I pull the trigger. I’m hoping that’s very soon. Just waiting for voluntary separation packages to be offered.

Then I'd contact Harry directly to point that out & ask him for assistance.

 

[G-Man]

That is the db I used. So far, none of the advisors I reached out to have responded. But not all is lost. I’ll use an advisor from the list to review my own retirement plan before I pull the trigger. I’m hoping that’s very soon. Just waiting for voluntary separation packages to be offered.

I watch a lot of retirement videos from a guy named "Rob Berger". In one of his videos, he used a fee only advisor to review his retirement plan. Start at 14:31 in the video below.

https://robberger.com/low-cost-financial-advisors/

 

[bevette]

Be sure to ask a LOT of questions about their financials and the 'buy in" fee rules.

Many people are out of money when Friendship Villiage went bankrupt and it is the largest CCRC in IL

https://therealdeal.com/chicago/2023/06/12/schaumburg-retirement-community-files-for-bankruptcy/

There were signs of trouble a couple of years before the bankruptcy. People not getting their refundable part after parent died, even though it was over a year later..

I feel lucky as we had toured it, it looked nice and it was on our list, and we would have been screwed out of ~$400K or so.

Thank you for this warning. I will research the CCRC they liked. It is part of the Erickson Senior Living, which had a bankruptcy during the housing crisis. Need to see if they are on solid footing now.

 

[bevette]

Then I'd contact Harry directly to point that out & ask him for assistance.

Harry said I could request a refund no questions asked. However, I will likely not do that because I will still benefit from using the list to identify a financial advisor for my personal use.

 

[bevette]

I watch a lot of retirement videos from a guy named "Rob Berger". In one of his videos, he used a fee only advisor to review his retirement plan. Start at 14:31 in the video below.

https://robberger.com/low-cost-financial-advisors/

Thank you very much for this list. I subscribe to Rob's channel but I'm not sure I'd seen this video (or I'd forgotten it). In his video, he states he uses New Retirement software. I also recently signed up for the paid version.

 

[bevette]

Did this CCRC have a trust fund to pay if the resident runs out of money? There are several CCRC threads on this Forum you might find helpful. I have a thread about moving into my CCRC--I have been here a couple of months.

Thanks for reminding me about your CCRC thread from July. I remember reading it with interest, and I had no idea how relevant it would be to me. Your thread reminded me that since my parents have LTC insurance, a CCRC is completely overkill. Best to focus on financially viable lease-only options.

 

[G-Man]

Thank you very much for this list. I subscribe to Rob's channel but I'm not sure I'd seen this video (or I'd forgotten it). In his video, he states he uses New Retirement software. I also recently signed up for the paid version.

No problem. This forum has provided me a lot of good advice over the years. Just trying to give back to others.

 

[harllee]

Thanks for reminding me about your CCRC thread from July. I remember reading it with interest, and I had no idea how relevant it would be to me. Your thread reminded me that since my parents have LTC insurance, a CCRC is completely overkill. Best to focus on financially viable lease-only options.

I am having difficulty getting my mother's LTC insurance to pay--I also have a thread on that. I have worked for 3 months to get the insurance to pay and have not seen a penny. In my opinion LTC insurance is worthless.

 

[bevette]

I am having difficulty getting my mother's LTC insurance to pay--I also have a thread on that. I have worked for 3 months to get the insurance to pay and have not seen a penny. In my opinion LTC insurance is worthless.

Harllee - I'm so sorry to hear that. Have you retained an elder care attorney?

 

[harllee]

Harllee - I'm so sorry to hear that. Have you retained an elder care attorney?

Yes I have retained an attorney and a consultant specializing in Long term care insurance, but no success

 

[pb4uski]

The idea for a SPIA comes from Wade Pfau’s research that they fill the income gap for core expenses while providing peace of mind. My parents are risk averse and nervous about outliving their nest egg. Both of my mother’s parents lived into their upper 90s, and my father has zero health issues at age 86.

Only short term CDs currently have a decent rate, and there is still longevity risk with them. Why are SPIAs a poor option for a couple on their 80s?

Well, to start, Pfau is well known as a schill for the annuity industry. Second, is Pfau's recommendation for a SPIA for a couple in their mid-80s?

The main problem that I have with a SPIA for people of that age is a common problem with SPIA's generally, if the annuitant dies shortly after buying the SPIA then the money goes "poof".

The payout for a joint life annuity for life with 10 years certain for an 86yo male and 84yo female according to immediateannuities.com is 10.54% so you don't get any return at all until you are ~9-1/2 years in so that is 95-1/2 and 93-1/2.

Below is the IRR of a $120,000 premium and $1,054 monthly benefit for an 85 year old. Note that you don't start getting a positive return until age 94-1/2... for those first 9-1/2 years you are just getting your own money back... and you don't get a "return" comparable to a CD/bond ladder until age 98. OTOH, if you live beyond 98 then the returns are attractive compared to a CD/bond ladder. All things considered, I just don't see it as a good investment. YMMV.

Age	n	Cash flow	IRR
85	0	-120,000
86	1	12,648
87	2	12,648
88	3	12,648
89	4	12,648	-27.4%
90	5	12,648	-18.1%
91	6	12,648	-11.7%
92	7	12,648	-7.1%
93	8	12,648	-3.6%
94	9	12,648	-1.0%
95	10	12,648	1.0%
96	11	12,648	2.5%
97	12	12,648	3.8%
98	13	12,648	4.8%
99	14	12,648	5.7%
100	15	12,648	6.4%

ETA: According to the Society of Actuaries Longevity Illustrator, there is only about a 25% chance of a healthy 86 yo male living to 94 and a 84yo female living to 95, so the expected return is very low.

Probability	Him	Her	Either	Both
90%	0	1	3	0
75%	2	3	6	1
50%	5	7	9	3
25%	8	11	12	6
10%	11	14	15	8

 

[ncbill]

No, it doesn't have to stop when you die given "period certain" payout options for single or joint SPIAs.

E.g. "life & 10 year period certain" for your couple in their mid-80s.

 

[pb4uski]

No, it doesn't have to stop when you die given "period certain" payout options for single or joint SPIAs.

E.g. "life & 10 year period certain" for your couple in their mid-80s.

Agreed, but in the example if you take the life & 10 period certain option and die before the end of the 10 years so benefits are paid for 10 years and then stop, you barely get your money back... the IRR is only 1% so effectively 1% interest for 10 years... you would have been much better off with a CD ladder.

 

[Out-to-Lunch]

The main problem that I have with a SPIA for people of that age is a common problem with SPIA's generally, if the annuitant dies shortly after buying the SPIA then the money goes "poof".

I agree with your points, but therefore the object of the SPIA is not superior payout. The point is longevity insurance. Transfer some of that risk to an insurance company in exchange for less upside for your heirs if you kark earlier.