Personal Finance

A couple I know recently moved into a venerable life-care community here in Phoenix. They’re not that much older than I am… She has Alzheimer’s in her family and is beginning to show the earliest signs, and he is about ten years older than she. Their two-story house was getting hard for them to negotiate, so they figured now is the time. Another elderly couple — my current role models, come to think of it — are resisting being warehoused in a kennel for old folks, and getting by in their home pretty well, so far.

Within weeks after my mother died and was reduced to an urnful of ashes, my father moved himself out of their house in Sun City and into a Baptist-run old-folkerie called Orangewood. It was one of the early life-care “communities.” (Don’t you hate when the word “c0mmunity” is used to describe some development?) The idea with life-care is that you will move into an apartment in the joint, where, in exchange for a staggering amount of money, you will receive a variety of amenities, and, when the time comes, you will be guaranteed access to a halfway decent nursing home.

This expensive and, in my view, depressing arrangement turned out to be the biggest favor my father ever did for me. It relieved me of the responsibility of having to care for him as he declined into old age and death. He was only 69 when he moved himself in there, but he lived to be 84, and at the age of 80, he had a heart attack that reduced him to a cardiac invalid. Had he still been living in Sun City, I would either have had to get him into a nursing home at that point or would have had to move him in with me. Either scenario would have been a screaming nightmare.

So, occasionally I think I should do the same favor for my son.

But you know…I don’t want to live in one of those places.

For a dark little three-room apartment with an “efficiency” kitchen of the sort you see in motels (a hot-plate-like two-burner stovetop, a small sink, and an under-the-counter fridge), my father and his third wife forked over a $50,000 nonrefundable “endowment” and a monthly payment that was as much as my then-husband and I were paying for a 3,000-square-foot house on a third of an acre of the choicest real estate in North Central Phoenix, with a pool, five bedrooms, a huge country kitchen with breakfast nook, a vast family room, three bathrooms, fireplace, and pool. When I realized what he was paying for the little dump he and Helen were living in, I was just floored.

Now, they did get some amenities:

• Access to the institution’s nursing home and, if a lesser level of care was needed, to a studio apartment adjacent to the nursing facility. This was roughly equivalent to long-term care insurance, for which I now pay $107 a month, a figure that can be expected to rise steadily from now into perpetuity.

• A dining hall where they were required to take one meal a day and could also choose to take breakfast or a light supper.

• The option to have these meals delivered to their apartment. This cost extra.

• Semi-weekly light housekeeping.

• Electric bills (including air conditioning) were covered. Of course, this meant the institute would decide when the AC would be turned on in the spring…

• Access to an on-call doctor. Nevvermind that the guy was a dangerous, irresponsible quack who was enriching himself by defrauding Medicare. (Yes: my father caught him charging Medicare for visits after he (father) had told him and the institute that the guy was to stay away from him. Like all the other old folks there, he was afraid to report this abuse — getting into bad odor with the management would be counterproductive.)

• Access to a hobby room. Whoop comma de-doo.

• Access to a swimming pool that no one ever used.

• Access to a beauty parlor/hair salon/barber shop that dispensed dumpy-looking haircuts.

• “Free” shuttle-bus rides to doctors and a grocery store. Nevvermind that this meant once you were done seeing the doctor or dentist, you could sit in the waiting room for several hours until someone came to pick you up — it did defray some of the costs of transportation after one reached the point where one could no longer drive.

•  Oh, and also please nevvermind that every time some kitchen worker came to work sick or failed to wash her hands after using the bathroom, a wave of dysentery would sweep through the entire population.

{sigh} Every time I think about the possibility of signing myself into one of those places, I recall not only the amenities but also the limits to the amenities. And I think how much I absolutely positively do NOT want to be warehoused into a kennel for old folks.

So, here’s the question:

Is it possible to stay in one’s paid-off home through one’s dotage by cloning those amenities, for no more than it cost my father to live in Orangewood?

Today, those inflation-adjusted fees are much higher. One newer outfit here in town charges an entry fee of $310,00 to $1.1 million, with monthly fees that range from $2,400 to $4,100 — for one person. The place where my father and his wife lived has been torn down and completely rebuilt, so it now commands an entry fee ranging from $279,900 to $389,900, with monthly fees from $3,040 to $8,130. Entry fees, however, now tend to be at least partly refundable, an improvement over the pay-it-and-lose-it arrangements of the early days.

Well, think about it: $2,400 to $4,100 for base living expenses for one person strikes me as passing exorbitant, especially considering that person likely will find herself in a cramped one-bedroom apartment, with walls through which she can listen to the hard-of-hearing neighbor’s TV blaring.

My base nondiscretionary budget is $620/month. That includes all utilities, phone, DSL, yard care, and long-term care insurance. Add another $167/month for property tax and another $79 for homeowner’s insurance, and about $52 for car insurance, and you get a total nondiscretionary cost of $918 a month. As a practical matter, these expenses come in lower during the fall, winter, and spring, because the budget is based on summer costs, when power and water bills are at their highest.

Everything else, I class as “discretionary.” This category includes clothing, gasoline, food, entertainment, dog care, hair care, personal care and cleaning products, house and pool maintenance, and whatnot. The discretionary budget presently is $1100/month, although sometimes I overspend. Ruby’s endless veterinary bills caused a $300 overrun this month, resulting in $1,400 in discretionary spending for the current budget cycle. So let’s figure that’s a typical range for discretionary spending: $1,100 to $1,400.

What that means is that for everything — all my routine costs, which include nursing home insurance — I’m spending $2,018 to $2,318. That is less than the lowest rate for a mid-range life-care community. And what do I get for the price?

• A private pool that I can use any time of the day or night I please, that I can skinny-dip in; and I know who has been in it and what they’ve been doing in it.
• A large, low-maintenance yard with fruit trees, climbing roses, and three private garden “outdoor rooms.”
• The privilege of keeping pets.
• A garage (not an open carport) in which to park my car.
• No one on the other side of any of my walls.
• Central location.
• Brand-new light-rail going in within walking distance.
• A large, bright kitchen with a gas stove.
• My own propane grill.
• More living space than Carter has oats.

Sooo… What do I not get that, say, my father had at his old-folkerie, and what would be entailed in acquiring those amenities?

• Access to a nursing home.

The long-term care insurance I have plus Social Security and a 4% drawdown from savings should amply cover foreseeable nursing home costs. As for getting me into it? That’ll be my son’s problem, I suppose. As a practical matter, not all elderly Americans ever need nursing home, and often such care can be delivered in one’s own home (my insurance covers in-home nursing care). At age 60, your lifetime chance of needing nursing care is only 50%. If you have a policy with a 90-day elimination period, a typical 60-year-old’s chance of using that policy drops to 35% — meaning you have a 65% chance of dying or recovering within 90 days of admission.

• A dining hall providing two meals a day.

It’s impossible to describe how dreadful those meals were! Since eating and drinking are the two major pleasures of my life, I would be suicidal if I had to live in a place that served up swill like that, especially given that about twice a year the stuff made everybody in the institution good and sick.

• Option to have meals delivered, for an extra fee.

What part of Chinese order-out is hard to understand?

Okay, that’s flippant. But as a practical matter, many excellent meals can be delivered, for a reasonable price. On the low end, there’s a social service agency called Meals on Wheels, which provides healthy food for seniors in need. For those of us who can afford to buy groceries, grocery stores deliver these days! And most grocery stores stock various kinds of prepared meals, either in the frozen-food cases or at the deli. Here in Phoenix, both AJ’s Fine Foods and Whole Foods sell complete, fully cooked gourmet meals, and both stores deliver. 

Would having groceries and take-out meals delivered raise your food bills? Sure. But I’ll bet it wouldn’t add another $2000 a month to my existing bills. And the cost would be offset by lower gasoline bills.

• Light housekeeping

The going rate for a cleaning lady here is $80/visit. So two house-cleanings a month, which is what my father got, would set you back all of $160. Like food prep, this obviously costs more than DIY cleaning, but it’s not prohibitive…and it would not increase costs much more than I’m spending.

• Electric bills covered

For $4,000 a month? Seriously? Utility bills in these places are not free; they’re included in a staggering monthly fee.

• Access to an on-call doctor.

I have access to an on-call doctor. Young Dr. Kildare’s office is within walking distance of my house. And he is not an incompetent, dishonest quack who hands out sedating, brain-dazing, addictive pills like candy. If I need help on a weekend, I call his office and get the doctor who is on call.

• Access to a hobby room.

Be still, my heart! I have two spare rooms, one of which is now dedicated to my jewelry-making hobby. My office (which would not exist if I lived in an old-folkerie, because of course the presumption would be made that I do not need office space) is fully equipped, spacious, and dedicated fully to my writing and editing business. And I don’t have to share it with anyone.

• Access to a swimming pool that no one ever used.

I use my pool several times a day during the summer. Cost is nominal, and the light jobs of cleaning and maintaining it amount to mild, healthy exercise. If and when I reach the point where I need someone to clean and dose it with chemicals, regular pool service runs about $100/month and includes the chemicals.

• Access to a beauty parlor/hair salon/barber shop that dispensed dumpy-looking haircuts.

Granted, I can spend a startling amount on Shane: $70 for a haircut. However, my hair looks incredible, and as it gets longer, it has to be done less and less often. At this point I’m visiting him about once every six months. Here, too, this seeming “benefit” is not free to old-folkerie residents. You pay for it with your amazing monthly fee, and if you don’t care for dumpy-looking haircuts and drugstore coloring kits, you end up having to track down and pay the likes of Shane anyway.

• “Free” shuttle-bus rides to doctors and a grocery store.

What cost a free ride? Is it really worth spending three, four, even five hours sitting in some doctor’s waiting room, just to save a few bucks? Another circumstance, I’d say, that would lead me to consider suicide.

With grocers, drugstores, and Amazon delivering for little or no cost, I think I could afford a taxicab for the few trips I’d need to take around town. The amount saved on car registration, auto insurance, gasoline, depreciation, maintenance, and repairs would probably cover most of the cab fare.

It looks very much to me as if I can turn my own home into a life-care facility, if need be, with surprisingly little effort and, compared to an expensive institution, not all that much more cost than I’m already paying to live in my home.

Let’s consider what those extra costs would be:

Lifecareifying the house
Item	Cost	Times/month	Total
Light housecleaning	80	2	160
Extra yard care	75	2	150
Groceries, Whole Foods	6	4	24
Groceries, AJs	6	4	24
Groceries, Safeway	12.95	1	12.95
Pool care	100	weekly	100
Lightrail rides	32	monthly pass	32
Cab fare (senior citizen)	$12/$40 ride	2	80
Less monthly gasoline	$80+/month	2 refills/mo.	-80
Total added cost:			502.95

So, the additional cost, above and beyond what it costs to live now, to approximate the added benefits of living in an old-folkerie, comes to about $503. Innaresting.

Let’s see how that translates when added to the existing cost of living here at the Funny Farm.

Discretionary	1100
Nondiscretionary	620
Added old-age costs	503
50% Murphy’s Law	251.5
Total old-age cost	2,474.50	/ month
Total annual old-age cost	29,694
Percent of savings:	4.60%

This assumes a 50% “Murphy’s Law Tax” on the projected old-age costs. And it produces a figure to cover ALL costs, including whatever indulgences one pleases, that is comparable to the BASE costs on the low end. Total annual drawdown to cover this amount would in theory be 4.6%, but in fact it would be significantly less, because Social Security would cover more than half of it.

Suppose, though, that Murphy’s Law applied to the TOTAL projected costs of living after one can no longer drive. Then what?

Discretionary	1100
Nondiscretionary	620
Added old-age costs	503
Plus 50%, Murphy’s Law	1112
Total old-age cost	3,335	/ month
Total annual old-age cost	40,020
Percent of savings:	6.20%

In this scenario, we end up with a cost comparable to the mid-range cost of living in a life-care community, totaling about 6.2% of total savings. But here, too, some $14,400 of the cost is covered by Social Security, meaning the drawdown from retirement savings would be significantly less than that: just under 4% per annum.

So, even in the worst-case scenario, aging in place ends up costing the same as or less than residing in a life-care community. And for the price, I get a house — not an apartment in a people warren — plus the cuisine of my choice, the doctor of my choice,  privacy, and independence.