How do I know if I’m financially qualified to move to a senior living community?

A good senior living community sales counselor will be more than happy to review your finances with you. They can explain costs and tell you which residences you’ll be able to afford in their community. Plus, they’re generally aware of competitors’ prices and, if needed, they can often recommend an alternative community for a better financial fit.

But before you make the call or visit to discuss your finances in detail, you can prepare yourself with these two general guidelines.

Net Worth

In an entrance (or buy-in) fee community, you should have a net worth of 1.5 to 2 times the entrance fee amount. Note that once you’ve paid the entrance fee …

• You no longer have access to those funds, unless you leave the community before any amortization periods are completed (as with non-refundable entrance fee contracts) — or if you leave the community and a refund is due to you or your estate (as with refundable entrance fee contracts).

Household Income

Every community will require you to pay monthly service fees:

• These fees cover almost everything you need for daily living, freeing you from paying a variety of individuals and companies each month for services such as utilities, upkeep and home improvements, daily meals, fitness center access, and property tax. It’s one of the cool benefits of choosing to live in a senior living community, where almost everything’s included in one monthly fee.
• These fees don’t cover absolutely everything you need in your independent living lifestyle — because you still may want to take a vacation, dine out, attend arts and sporting events, cook a few of your own meals, etc. A good rule of thumb is to expect the monthly service fee to make up about 60-70% of your monthly expenses.

Bottom Line

Reputable senior living communities will make sure you’re financially qualified to pay their residency fees — entrance fee and monthly service fee — before you can reserve a residence in their community. In particular …

• Non-profit communities — which frequently promise that you’ll never be asked to move out if you deplete your financial resources through no fault of your own — will verify you have the required financial resources before move-in.
• Lease communities’ requirements may be less stringent. Their contracts usually include a clause that you’ll be asked to leave if you can no longer pay your fees. Due diligence in advance, therefore, can help you avoid an uncomfortable situation later.

So, the bottom line is clear: You want to be sure you can afford a senior living community lifestyle, and the community wants to be sure about that, too. Fortunately, the sales staff will confidentially, respectfully and professionally help you determine if you’re financially qualified — and probably provide guidance if you’re not.