Financial Planning for Independent Living

Many people have goals and dreams for their retirement. Maybe you want to retire to the mountains, somewhere warm, or stay close to family. Perhaps you are eager to fill your days with new hobbies, volunteering, or relaxation. Retirement offers a host of exciting new opportunities, including moving to an independent living community.

Retiring requires careful financial planning for travel, medical expenses, and everyday costs. Numerous retired adults choose to move into independent living communities or retirement communities for the vibrant social benefits. Just like with all other aspects of retirement, independent living requires financial planning. Let’s explore how independent living costs are different from assisted living and the financial steps you can take to prepare. 

The Financial Difference Between Independent and Assisted Living

Independent and assisted living communities are not the same, and neither are their costs. While assisted living communities provide housing, personalized medical care, and support with daily activities, independent living communities are designed for adults aged 55 and older who don’t require much daily assistance. 

Both types of communities offer valuable social opportunities and housekeeping support. The main difference between the two is the additional medical care given to residents in assisted living communities. Independent living communities are about lifestyle preference; they are not a type of senior care. 

Due to the extra support given at assisted living communities, they are typically more expensive than independent living and retirement communities. Even though independent living communities are usually more affordable, they are unlikely to be covered by Medicaid, Medicare, or insurance. 

5 Tips for Financially Planning for an Independent Living Community

Planning for an independent living community involves planning for the rest of your retirement expenses. Thousands of people find retirement communities to be beneficial for the social aspect. However, living in an independent living community requires additional budgeting for special amenities that you wouldn’t have access to if you lived outside of one. Retirement communities typically offer the following amenities:

  • Daily social opportunities and activities
  • Exercise programs
  • Community outings
  • Housing in apartments, townhomes, or cottages
  • Restaurant-style dining
  • Personal kitchens
  • Housekeeping
  • Yard work services

Depending on your location and the number of amenities, independent living communities can cost between $1,500 and $4,000 per month. If an independent living community sounds ideal for you, consider these five tips to help you plan your finances.

1. Review Investments

While independent living communities are open to people aged 55 and older, keep in mind that you won’t receive Social Security retirement benefits until you’re at least 62 years old. If you delay your benefits until age 70, your benefit amount will increase.

Before your Social Security benefits come in, you will need to solely rely on the money you saved for retirement. Most people’s primary retirement savings come from specialized investment accounts, including:

  • 401(k)
  • 403(b)
  • 457(b)
  • Profit-sharing
  • Individual retirement account (IRA)
  • Roth IRA

Be sure to review your investments regularly to ensure they provide the desired returns and meet your lifestyle needs. Certain investment accounts may be more profitable than others, but they may also pose a higher risk. For more security, you may need to switch your high-risk investments to investments with a steady rate of return.

2. Consider Downsizing

If you want to move into a retirement community, it may end up being more financially viable than staying in a large home and paying for lawn care, utilities, phone and internet, and more. Before making the move, consider downsizing your belongings and selling them.

If you are moving from a large home to an apartment or townhouse in an independent living community, you may be able to sell many items, such as:

  • Tables and chairs
  • Couches
  • Desks
  • Washers and dryers
  • Clothes
  • Books
  • Lawnmowers
  • Kitchen appliances
  • Toolsets
  • Pool tables, ping pong tables, and other recreational items
  • Mattresses and bed frames

Many independent living communities come fully furnished or at least require less furniture and appliances than you would need to provide in a home you own. Take advantage of downsizing into a retirement community and sell household items you no longer need. You can use the money to contribute to monthly rent at a retirement community. 

3. Create a Budget

The only thing more important than creating a retirement budget is sticking to it. While it’s essential to develop an initial budget, keep in mind that you will need to regularly adjust it to match your spending habits. 

Create a monthly budget that details your fixed expenses, nonessential purchases, and emergency funds. Compare your total costs to your retirement income and make adjustments if needed. Every budget should detail both needs and wants.

  • Essential items (needs): Food, shelter, clothing, health care, and life insurance
  • Nonessential items (wants): Travel, entertainment, gifts, charitable donations, and new home items

As you write out your budget, reference these comprehensive lists of essential and discretionary expenses:

Essential Items

  • Rent
  • Medical insurance (Medicare, Medigap, and supplemental insurance) 
  • Dental and vision insurance
  • Home and auto insurance 
  • Utilities (gas, water, electric)
  • Cable, phone, and internet service
  • Groceries
  • Transportation (gas or bus passes)
  • Life insurance
  • Outstanding debt
  • Federal and state taxes

Nonessential Items

  • Optional home furnishings
  • Dining out
  • Travel
  • Live entertainment
  • Hobbies
  • Gifts
  • Charitable donations
  • Alcohol and tobacco
  • Nonessential personal care services (hair styling, nails, massages)
  • Nonessential vehicles 

4. Plan for Eventual Long-Term Care 

Even if you are considering moving to a retirement community because you don’t have any significant health concerns or difficulties with everyday tasks, keep in mind that you may eventually need to take advantage of assisted living, memory care, or a nursing home. According to The Henry J. Kaiser Family Foundation, one in three people turning 65 will need nursing-home care at some point in their life. 

Don’t ignore the possibility of long-term care in your retirement budget. If the day comes when you need more help with everyday tasks or your health begins to weaken, you want to have the financial backup to fund the services you need. 

5. Work With a Financial Advisor

When it’s all said and done, one of the most beneficial ways to plan for retirement living is to meet with a financial advisor. A financial advisor will be able to give you expert advice about all the tips covered here and more. They can help guide your investments, create a budget, and tackle tax strategies. 

Complex financial decisions like selling life insurance policies or using a reverse mortgage are best made with the help of a financial planner. Even just one meeting with a financial planner can boost your confidence before you pursue independent living.

Start Planning for Independent Living as Soon as Possible

If you believe you could benefit from the social atmosphere and helpful amenities at an independent living community, it is wise to start planning your finances as early as possible. Even though retirement communities are more affordable than assisted living communities and other forms of senior care, it is still important to allocate your finances. 

Frequently check on your investments, downsize belongings you no longer need, create a thorough budget, plan for long-term care, and work with a financial advisor so you can feel confident navigating your finances in retirement. If you’re ready to learn more about independent living, reach out to New Perspective Senior Living today to find an independent living community near you