Sponsor and consumer desired outcomes really come together when we can position our senior living options as a prudent and necessary financial planning decision. There are at least 25 senior living personal financial and investment positioning and planning strategies. Here are six:
1. Offering hassle-free living that avoids the increasing hidden costs and growing complexities of home ownership for seniors over age 75. The key challenges these seniors face are increasing real estate taxes, complicated home maintenance and upkeep, and escalating insurance and energy costs. A common concern is the loss of future home value appreciation when opting for senior living. But this financial concern is usually more than offset by the more controlled total cost of senior living, while seniors realize the returns by investing their liquidated home equity.
2. Hedging many of the risks of runaway health care service delivery costs by accessing reliable, high quality services on an as-needed basis within a senior living campus. This is frequently a high value alternative to premature nursing home admissions, ineffective and costly home health services or the delaying of necessary preventive or corrective health care initiatives.
CCRCs offering various levels of guaranteed life care can deal with this consumer concern very effectively. But remember, the actuarially driven financial risks to the offering life care sponsor can be significant.
3. Recogni
zing that a senior’s home equity is really at the core of most senior’s financial planning resources. Progressive communities are showing seniors how to put their liquidated home equity to work while frequently preserving most of the cash value of this asset plus their current savings portfolio principal as a future legacy to their estate. If you charge up-front fees, you should also show a direct or indirect return on the senior’s investment.
4. Structuring prudent spend-down plans may be necessary for some seniors in order to private pay for desired services that maximize independence and quality of life. Over 70 percent of the patient-days in institutionalized nursing homes are Medicaid reimbursed because many of the patients have spent down their assets at a much faster pace than is really necessary with today’s senior living options. You should show seniors how to avoid unnecessary spend-down, while offering moderate income seniors reasonable approaches to prudently planned spend-down that will not leave them destitute within the period of their remaining expected life.
5. Tax shelters and financial arbitrage are not just for high rollers or sophisticated Wall Street investors. Advise seniors that, under specific conditions, they can deduct a significant portion of the monthly service fees and entrance fees paid to the community as a medical tax deduction.
6. Creative pricing by some sponsors are showing seniors how to put their home equity to work now. As stated earlier, preserving much of their home equity proceeds and their current savings portfolio value as a legacy to their estate is a major objective for many seniors. Let’s face it, when you start talking about entry fees, refundability, monthly fees and spend-down, many people start to get nervous and possibly tune out. Sure, they may be getting tangible benefits for the cost, but you’ve got to go the extra mile to clearly communicate those benefits. If you think you have trouble really understanding and explaining your entry fee actuarial analysis, imagine how an 80 year old senior must feel!
Call to Action
It’s time to take a new look at an old problem. Most of us try to prudently hedge future lifetime risks. We have wills, trusts and life insurance and sometimes even long-term care insurance. We try to make sure that we have enough retirement income to live a normal lifestyle. But after age 75, many seniors’ lifestyle is far from normal and surprisingly little specific thought is frequently given to preserving an estate accumulated over a lifetime of conservatism. The sobering reality is that there can be a large gap between a comfortable and financially responsible retirement and the final reading of the will. Many older seniors resist the realities of planning for the future. Astute senior living sponsors can provide significant help while sharpening the favorable market positioning of their senior living community.
A senior’s final years should never be seriously compromised in order to just maximize the financial aspects of their estate. We have an opportunity and an obligation to show seniors how that final phase of life can be executed as an optimum, financially responsible plan.
The above content was taken from Jim Moore’s book Independent Living and CCRCs: Survival, Success & Profitability Strategies for Not-for-Profit Sponsors and For-Profit Owner/Operators. For a copy or to set up an appointment with MDS, call (817)731-4266 or email Jim at JimMoore@m-d-s.com