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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire on Time, a show that answers your retirement questions. My name is Mike Decker. I'm a licensed financial adviser and fiduciary. And joining me here, Mr. David Franson.
Mike:David, thanks for being here.
David:Yep. Happy to be here.
Mike:As always, we're gonna answer your questions. Text them to (913) 363-1234. And remember, this is just a show, not financial advice, so make sure to do your research and follow-up with whatever we talk about. David, let's begin.
David:Hey, Mike. We are looking for a retirement community to enjoy. What are the differences between buy in communities, co ops, and other options? I'm gonna interpret this question as the I don't need health care amenities Okay.
Mike:For this question. And the reason why is once you include a hospice or nurse care or all those other things, it gets more complicated. So let's kinda keep this question a little bit more simple. Generally speaking, you've got about four options. You've got the I wanna live in my home until I die, and that's an extremely common option.
Mike:And maybe it's not your home right now. Maybe you buy a home like a Rambler. It's all one floor, really simple to get around. And then the other extreme is the, was it, community living situation. It's basically like a cruise ship community.
Mike:Everything's just kinda taken care of for you. There's variations with that, but those are kind of the extremes. So one is on one level, you can own your home, but it's all on you. The lawn care, the maintenance, dealing with your HOA if you have one, all of the above.
David:Right. And so maybe there's multiple levels because you've raised your kids in the home, and it's just a big house, lots of bedrooms, a basement.
Mike:Yeah. It's common that people will retire in a different home Mhmm. Because they want the flat home. It's also common that some people will just say, well, we live on the 1 Floor, but when the kids visit, they just take the upstairs. Sure.
Mike:I mean, when I when I visit my in laws in Southeast Kansas, we just whenever we visit, we take the upstairs. I don't think they ever go out there. Mhmm. Like, I could rearrange their furniture, they'd have no clue. Right?
Mike:Because it's kind of for the kids when they come by. So that's one option on the extreme level, and then the other option is you've got this kind of all inclusive resort like feeling where you are the cruise ship analogy is the best I can come up with. There's activities. Right. There's clubs.
Mike:Foods are prepared for you. Now there's variation of how much is prepared. Maybe it's just lunches prepared. Maybe it's lunch and dinner. Maybe it's all of the above.
Mike:Maybe they've got planned activities. Maybe they don't. But it is a resort like feel for the rest of your life.
David:Yeah. Like fitness club, game room, social clubs Yeah. Pools.
Mike:Yeah. And you know that the advertisements for these because you'll see them when you're watching the golf tent or whatever. Uh-huh. You'll see the communities where they're they're driving around their golf carts all laughing and stuff, and then they got the bridge table. It's it's kind of a funny thing on how they position those commercials.
Mike:Yeah. Kinda mixed reviews. Some people say it's offensive, some people say that's exactly what I want. So I guess they're marketing towards their target audience, but that's kind of the other side of it. Now before I talk about the two middle ones, I wanna be very open about the resort like feeling.
Mike:If you want that living community kind of all inclusive thing, do your due diligence, because if you want the nice stuff, you've got to pay up for it. It is the more expensive option.
David:Yes.
Mike:Everything's taken care of for you, but someone's gonna pay for the food, someone's gonna pay for the workers, someone's gonna pay for all of the things that are going on here, and those can be very expensive. Remember the movie Happy Gilmore?
David:Yeah. I remember seeing that.
Mike:So they're losing the house. The mom's going into a facility that's supposed to be kind of like nice and happy and wonderful or whatever. And then you see Ben Stiller's character, like, forcing them to knit and stuff for his own profits or whatever. That doesn't actually happen. But there are some all inclusive communities that are cheaper that really aren't as happy or glamorous as they may suggest.
Mike:So just be aware of that. The easiest understanding or easiest way to measure it, in my opinion, is if you're paying more, you're probably gonna get more. If you think you're getting a deal, I doubt you're actually getting a deal because they have to stay in business. They're not a charity. Someone's gonna be paying for it.
Mike:So if you're getting a deal, maybe it's like a introductory deal of, like, six months. I don't know, whatever the deals are, But your fees are gonna go up. Can you afford them? Is it okay? Are you aware of what's going on?
Mike:Where were the expectations? If you live too long, what are the clauses on there? Like, you need to understand that they're running a business. And could things change? If prices could change, what does that look like?
Mike:Are they gonna raise rates in such a way that you might have to leave? Could they do that? Could they not do that? There are so many ways that they could be structured. You've got to dive into the details.
Mike:I mean, this is one of those situations where you really pump the brakes and do your research. Now where are the middle two?
David:Yeah.
Mike:So on the less costly options, you've got the 55 plus communities. In my mind, these are kinda like the nicer neighborhoods where you've got a beautiful neighborhood, beautiful homes. The homes are appreciating value. You've still got a lot of flexibility. Yeah.
Mike:The HOA is probably making you have your lawn look a certain way, and you've got some restrictions there. But overall, it's simple as expected, and the overall experience is kinda nice. And you've got a community center. I think of this as kinda like you've got your house, and maybe there's a community country club. You know, whether it's a golf membership like country club or tennis club or whatever it is, but there there's some sort of country club that you can use, and you're all paying in to support that facility.
Mike:But it's not like that facility is full of staff and servers and whatever.
David:And do some of these also have like maintenance, like they'll change your light bulb or
Mike:Yeah. Mean, kinda like a nicer version of an HOA. So you're paying more for that, but this one would be more in the they take care of the outside, not the inside of your house.
David:Mow your lawn, trim your hedges, whatever.
Mike:Yeah. You you can have that paid for, but and there's a lot of variations with this one. But it's the idea is that you're not having 16 year old kids pumping loud music, going down your street. Sure. They're kind of more secluded, a little bit more private, a little bit more calm, and you've got a closer knit social community.
Mike:They're a lot of fun. But I will say this. It's kinda like dating when it comes to communities. Date the community if at all possible. Maybe if you're looking to buy a house in one of these communities, talk to the neighbors, maybe go to lunch with a couple of them.
Mike:Because if the community is clickish, you might end up in a community that's just hell because you don't connect with them.
David:Well, it's like high school again or something. Humans don't
Mike:grow up. They just get older. So something to be aware of that people don't really think about at the beginning. Yeah. Okay?
Mike:And then you've got kind of the next tier up, which is the co op. Now the co op, you're basically you're not buying necessarily real estate in this situation, you're buying fractional ownership of the co op. Okay? Okay. So you are sharing the cost in most of these situations for the outside maintenance, for some help here and there, for the communities.
Mike:It's just it's a level up to where you're trying to share expenses, but also you're trying to contribute to the community as well. So very community friendly, but it just it kind of increases the responsibility of what you're giving in those. So they're great for budget friendly individuals, but you gotta put in some work. You gotta be a part of it. You gotta be active in the community, which I would say can actually be a help to your health overall.
Mike:If you have to have a reason to get up in the morning, if you're connecting with people, if you're serving other people, which the co op does allow, it's not about self indulgence. You are helping other people, and that's that's good for your health. That's good for the soul. But that yeah. The co op is one that a lot of people enjoy.
Mike:It's not about which one's right for retirees. It's about which one's right for you. So don't walk into this thinking, well, this is the best bang for my buck. They all offer different benefits and detriments, and each within their own sleeve, there are a lot of variability. There's a lot of variations with it.
Mike:So I don't know. This I feel like it's a cop out answer. It's not intended to be a cop out answer. It's just what's your budget? What's your plan look like?
Mike:Which can you afford? And what features do you want? And what features do you not want? Don't pay for features that you don't want.
David:Probably a big sticker right there. Like, don't pay for what you don't want. You might sort of feel like you have to, or maybe you're hey. What if your kids try and talk you into something higher? Like, oh, but mom, this would be, wouldn't you like this?
Mike:Yeah. And maybe you include the kids in the conversation. Hey. When I'm getting older, like, what are my options? What what's expected?
Mike:Some people will say, well, we're gonna go down this route so my kids don't have to take care of me. Mhmm. Some people just save up extra money so they can afford to live in their house and bring in skilled nursing or whatever it is into their house so they don't have to leave. So you can solve this problem in a number of different ways, and they all are right. It's like, what's the best car?
David:Mhmm.
Mike:I don't know. Do you want a small car? Do you want a big car? Do you want a fast car? Maybe you want safety features.
Mike:Maybe you want different safety features than there are other safety features. Maybe you want the cheapest car possible. Everyone drives a different car for a reason. So all of these options, even within their own category, are gonna offer different benefits and detriments. Now because this also is a podcast, which by the way, everyone listening, you can catch it on YouTube if you're not or wherever you get your podcast, but people listen to this all over the country.
Mike:There are some shortcuts to be aware of in this. When I say shortcuts, deals. There are certain states that are more expensive than other states. There are certain communities that are more expensive than other communities. If you're trying to go to the nicest neighborhoods in Florida, you're gonna pay a premium.
Mike:If you're going to certain communities, let's say in the Midwest, you're probably gonna pay a lot less. So these are also things if your kids are all over the country, there's no home base anymore, and you're trying to figure out a more budget friendly way, maybe you pick a different state with a different climate, with a different living situation, but you still get the the activities that you want. I know a lot of people that have moved to Texas for retirement. Know I a lot of people that have moved to the Midwest for retirement. I know a lot of people that have moved to the coast for various reasons.
Mike:It is very common to see people relocate when they get to an older age, or even when they don't get like, when they first retire just to kind of get more established, knowing their next step and the other steps past that. So step one, two, and three. These are conversations that should be included in your planning process to just understand how to budget for them. And another one of the reasons why I have heartburn over putting all of your assets into an annuity with guaranteed income for life, maybe you want that for a part of your income. But what if you you have a plan, you wanna eventually go to a co op, you eventually wanna go to a living community situation, and all of the prices increase, and you're on all fixed income.
Mike:You don't want inflation to erode your future options. You wanna have enough dynamic flexibility in your plan so that as you plan for these things, that you're able to dynamically adjust things along the way to maintain the reality of the future that you want. That's why we talk about your lifestyle and legacy potential, your future, what do you want, how do we maintain the flexibility to adapt to the ever changing environment, especially when it comes to health care and living communities. I mean, 10 to 12,000 people retire every single day in America. It takes a lot of time and effort to build these communities.
Mike:I believe that as demand increases and supply doesn't keep up with it, these prices are gonna go up. Are you prepared for that? Are you planning for that? Things to consider. But overall, it's not just income planning for you today.
Mike:It's income planning for your future, including the options that maybe you do or you don't want some of these things, but it's nice to have the option available to you. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist.
Mike:Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.