This month’s blog post comes from Warren A Ward, CFP® of Warren Ward Associates based in Columbus, Indiana. Warren has been working in the finance industry for 26 years, and opened his private practice in 1991, garnering 18 years of experience working on the side of the client. I hope you enjoy his post.
Downsizing to a smaller home is one of the choices available to ‘empty nesters’. As I reflected on the concept, I thought a more appropriate title for this article might be rightsizing. It’s a word (and spin) that some companies use as they reduce their workforces. According to Google, it began to appear in print in 1983 or ’84 with its popularity peaking around 2000.
Consultant and author Aldonna Ambler says there’s a fundamental difference between ‘right’ and ‘down’ sizing: one is proactive and the other reactive. Because it’s our job to help our clients make good decisions, I’d like to think we’re taking the more proactive approach to the question. Companies that successfully reduce their employee count are able to do so because of careful planning. The same holds true for those considering the transition from a home they’ve lived in for years. This is especially important because more than half of people polled by the National Council on Aging have been in place for more than twenty years.
According to the NCA’s most recent (2015) State of Aging survey, 75% of older adults plan to remain where they are for the rest of their lives. This correlates closely with our own anecdotal evidence that virtually all of our clients hope to remain in their homes until their death. There are a number of ways to achieve that end economically. Some possibilities for rightsizing include moving to a smaller home, locating a roommate with whom you share costs, moving to a co-housing community where you own a small home but share community spaces or even using Airbnb to rent out a room from time to time.
Planners used to think of retirement income as a three-legged stool consisting of a company (or union) -provided pension, Social Security and personal savings and investments. These days, very few people have pensions they can count on, so a more apt description might be a ladder involving multiple steps/resources such as getting a part time job, renting out a room (or taking in a roommate), removing cash from whole life insurance policies or taking out a reverse mortgage on the home in question.
There was a time when a reverse mortgage, more accurately described as a Home Equity Conversion Mortgage, was a poor choice. New government regulations have made it a much more sensible option. Because of newly mandated insurance coverage, closing costs are fairly high but you can arrange a steady monthly income or allow a line of credit to grow. Regardless of how you access your equity, that insurance means that you’ll never face being forced out of your home. These improvements have led to a rash of ads on late night TV, so let me pause here to make a suggestion: never buy anything – especially a financial product – based on an ad featuring someone who used to be famous. Your planner will be much better resource for help with a decision like this than anyone answering the phone in a call center.
What might it take to remain in your current home until death? Some obvious issues are mobility – will you be able to move around a home with narrow doorways and steep stairways? Bathing – will you be able to step in and out of a traditional tub? Meals – how long will you be able to shop for and prepare your own meals? How about dressing, using the bathroom and even continued continence? While not very pleasant to think about, maintaining these Activities of Daily Living constitutes one of the challenges to remaining in your home through your entire life.
On the positive side, there are many kinds of assistance available to help compensate for diminished capabilities. Eldercare Services are available from a variety of sources including both non and for -profit agencies. Perhaps you have a friend or relative who can help but might need a break from time to time? Adult day care and respite care may be able to reduce the work load. The national Meals on Wheels program can provide at least one hot meal per day and at least one point of personal contact too.
It is even possible to remain in your home if health issues become insurmountable. Hospice is a service which can often provide palliative care in a residential situation, in addition to the more robust services available in a hospital or a dedicated hospice campus.
Although most people would prefer to remain in their home, sometimes it’s just not feasible. When home care ceases to be enough, people find themselves considering assisted living. While such a facility isn’t the same as living in your home, you do have your own apartment with your own furnishings. In order to make life easier, many services are available on site. These include meals in community (or your room), reminders to take your medicine and even field trips. Should more regular medical care be required, you must go a step further – to a nursing home. These are usually a more confining alternative, along the lines of a two person hospital room with little allowance for personalization. It’s also possible to find an institution that offers assisted living with a transition to nursing care, all in one facility. Known as Continuing Care Retirement Communities, these include a very wide range of living options and services within a single entity and deserve a description all their own.
Should a move to one of these communal living arrangements begin to make sense, there is a systematic way to compare them. Courtesy of the US government, you can turn to the Medicare website where you can sort by ZIP code, then by the results of health care inspections, staffing, quality measure or, simply, an overall rating from 1 to 5 stars. According to the Wall Street Journal, around 1100 of the nation’s 15,600 nursing homes are owned by local governments. This might be important for those rightsizers who aren’t wealthy. Just like Medicare, costs are subsidized by tax revenues, tending to make these facilities less expensive than those which are privately-owned.
Most veterans of military service have a range of additional types of support available, from medical services at a VA facility to financial assistance known as Aid and Attendance for those trying to remain in their home. As far as I know, there is a veterans service officer in every county in the United States. Unfortunately, there are nearly as many dubious agencies that will charge you for services, including completing forms, that the Veterans Administration provides free. These local representatives are veterans themselves and are available to help with any of the numerous VA-provided services that are available.
In an Op-ed piece in the LA Times, physician Haider Warraich (who has written a book on the subject) states that being allowed to die at home, even with the assistance of Hospice services, is far from assured. It depends on the type of disease, where the patient lives and sometimes even race. One way to help ensure that your wishes are carried out is to update your estate planning documents, especially the living will (advanced directive), a durable power of attorney (which remains in force even in the event of your incapacity) and the naming of a health-care representative. While we recommend that you make an appointment with an attorney to be sure the documents express your precise wishes, there may be low cost or even free alternatives through your local library.
Perhaps even more important than the documentation is the clear communication of your wishes to your family. There was a time when children never moved far from home and families were in regular face-to-face communication. In the modern age, social media is likely to have replaced that personal element and your kids – the ones who may actually be making these decisions for you – could be years out of touch with your wishes. Here again, your planner may be able to facilitate things by guiding the discussions and clarifying questions as they arise. These are not necessarily easy conversations to have but they’re extremely important ones.