A growing number of retiring baby boomers are choosing luxury retirement living, and many say they’re doing it in part for their family’s peace of mind. In order to enjoy “high-end restaurants, manicured grounds and guest lectures,” these well-off retirees are plunking down entrance fees that can easily exceed $1 million, with hefty monthly rents on top of that. Many say their families are the main reason for their choices.
That was our take-away from this recent article in the Wall Street Journal, written by reporter Clare Ansberry. She takes a look at the choices some retirees are making to live in resort-like communities that promise all the security of a continuing care retirement facility (CCRC) along with amenities that few retirees would otherwise be able to afford. What’s more, in several instances, Ansberry found a surprising rationale among some of these high-end retirees: some of them told her, “We’re doing this for our kids.”
Is that a valid sentiment? And can those of more moderate income achieve the same degree of peace of mind for themselves and their families that the luxury retirees enjoy? Let’s look at the Wall Street Journal article – then get a few insights from Rajiv Nagaich.
Luxury Retirement Living: Big Fees, High Rents
Ansberry begins by painting this picture for us: “In the heart of Silicon Valley, well-off baby boomers enjoy meals of porchetta and cheesy polenta, prepared with herbs plucked from the community garden. Thirty-foot-tall windows offer a view on a quiet creek winding along manicured grounds.”
The community in question, Vi at Palo Alto, comes with an upfront entrance fee that can range from $1.17 million for a one-bedroom apartment up to $7.3 million for a three-bedroom unit. That’s not to mention ongoing monthly fees of about $14,000, which cover housekeeping, valet parking, and amenities, such as attending lectures by Stanford University professors, or experiencing performances by professional opera singers.
High-End Options for Wealthy Retirees Gain Popularity
“For wealthier Americans, greater options exist for how to spend their later years,” Ansberry writes. “A growing crop of high-end communities, called life plan communities, allow residents to start in an apartment and then move to more nursing-like care as they age.”
And these are becoming more and more popular, with occupancy rates rising above 80 percent for independent living units, according to NIC MAP Vision (which gathers senior housing data).
Ansberry explains, “Resident contracts typically work like a membership and, depending on terms, lock in rates so that costs don’t escalate when higher levels of care are needed. Inclusive care contracts come with higher upfront fees, but allow customers to sidestep having to find, and pay for, different levels of care as they age.”
Promise of Continuing Care is “A Gift to Our Kids”
There is a psychological landscape to this rise in luxury aging. Many baby boomers watched their parents or friends struggle to age in their homes and deal with the difficulties of nursing or home healthcare. These retirees are determined to do things differently, and give that peace of mind to their children, too.
Virginia Pollard, who lives with her husband David at Vi at Palo Alto, calls it “a gift to our kids.”
The residents say that finding the right retirement community is like looking at colleges. Ansberry explains, “The ideal is a place that feels personally comfortable, whether in the city or country, and where they can be among others with similar accomplishments and interests.”
Boomers Often Helped Care for Aging, Isolated Parents
In the article, we are introduced to Ron Litvak, 66, a retired lawyer in Denver. He and his wife are on two wait lists, one for a premier life planning community in Denver and another for La Costa Glen in Carlsbad, California. They plan to get units in each.
“Litvak saw his own parents grow isolated in their 17-story Denver condominium, his dad, with Parkinson’s, and his mom, with emphysema,” Ansberry writes. “Litvak brought them groceries and managed their care as their needs increased.”
Litvak himself says, “I don’t want my kids to do that,” adding that he thinks people live better and longer if they have a good social network. “If we could get ourselves into a community at a time when we are able to enjoy it and make new friends, I think it will make for a better existence for both of us.”
According to Tripp Higgins, president of education resource myLifeSite, life plan communities can have waiting lists ranging from two years to five or longer. While wait lists are tough on consumers, they are of great benefit to the communities because they can fill vacancies very quickly. “They rely on a long wait list to maintain high occupancy levels,” Higgins says.
Life-Plan Communities Offer Continuum of Care
Vi at Palo Alto may be on the high end of the scale, but entrance fees for life plan communities—which have both independent living and nursing care all on one campus—can average between $100,000 and $400,000, and can rise as high as $7 million. These upfront fees can be partially refundable depending on the contract, however, and tend to reflect the real-estate market locally.
“You’re not going to find a $6 million entry fee in the middle of Iowa,” says Lisa McCracken, head of research and analytics for the nonprofit National Investment Center for Senior Housing & Care, which tracks the estimated 1,900 life plan communities. Most of these communities are located in larger metropolitan areas, though some—such as Willow Valley Communities in Lancaster, Pennsylvania—are in smaller cities.
Monthly Fees Rising Rapidly in Recent Years
Monthly fees, while subject to annual increases that historically average about 3 to 4 percent in the last decade, average about $4,800. Ansberry notes that the rate of increase has been higher in recent years, according to NIC MAP Vision.
“Some communities offer a rental option, with no upfront fee, or have lower entry fees but charge more for nursing care,” Ansberry writes. “Others are adding an at-home option, with members paying a one-time membership fee that can range from $50,000 to $140,000 depending on age and coverage terms. There are also monthly fees of $400 to $700 for care and services at home.”
“A Whole Lot of Problems Coming Our Way”
The Pollards, who currently live in Palo Alto, had originally intended to age in their home on the Stanford University campus, where David taught earth sciences. They even added space in their home for a live-in caregiver.
But their plans changed when they started to see friends becoming more isolated as they grew frail. One acquaintance died after falling from a roof while doing home repairs, David says. Virginia adds that she and David always shared tasks around the house and they realized that if one of them got hurt or ill, the other would have to shoulder all of the work.
David’s own parents lived in their Napa Valley home a few hours away, and relied on private duty aides. If a caregiver didn’t show up, they would call him for help.
“We saw a whole lot of problems coming our way,” says David.
So, in 2019, the Pollards moved into a two-bedroom apartment at Vi at Palo Alto, which is one of 10 high-end Vi life plan communities in the U.S. “Their inclusive care contract offers access to higher levels of care with little to no increase in monthly fees. Monthly fees are about $12,000,” Ansberry writes.
Rajiv’s Take: “Giving to Your Kids” Doesn’t Require Luxury Living
We asked Rajiv Nagaich for his opinion about the Wall Street Journal article. As expected, he zeroed in on the stated desire of some of these high-end retirees to avoid becoming a burden to their own kids – especially those older adults who had assisted with the care of their own aging parents.
“This article may be all about the higher end retirement communities,” Rajiv said, “but the sentiment behind the decision on where to retire – the idea that ‘this is a gift to our children’ – really speaks volumes, doesn’t it? We all know that any future illness we experience will create impositions on our adult children, and most of us want to do all we can to avoid becoming a burden. The retirees in the Journal article all had the means to spend big dollars to buy into a continuing care retirement community where that lifetime of care is guaranteed, with plenty of luxury to boot.”
But, Rajiv adds, what about the average retiree who would never be able to afford an entry fee of over a million dollars and a hefty monthly rent on top of that? Are there ways for these people to achieve that same peace of mind? Clearly, says Rajiv, the answer is yes.
“My thinking is that anyone can give their children the same gift by careful, thorough planning,” he states. “Believe me, you don’t have to be rich. But in my experience, you do have to be open-minded enough and caring enough to anticipate the problems your kids might very probably face if you fall ill, and prepare a plan now to deal with your care. Make sure you can age in a place where the care can come to you and your kids know exactly what they need to do. It absolutely can be done. We’ll show you how.”
Rajiv Nagaich – Your Retirement Planning Coach and Guide
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(originally reported at www.wsj.com)