Perhaps you've seen ads for a new "over 55" luxury condominium development in your town. Or another winter of shoveling has finally convinced you that it's time to move to a warmer climate. You're looking forward to life in a retirement community, but with so many options, how do you choose the right one?
Beginning the search
The first step is to think about where you want to live, how you want to spend your retirement years, and what type of home you can realistically afford. All retirement communities are designed with the needs of older adults in mind, but they provide different living arrangements, activities, and services.
One option that's become increasingly popular is the "active adult" community. Usually centered around a fitness facility, a clubhouse, or a golf course, this type of community offers many social and recreational opportunities, such as clubs, meals, and walking trails.
Other retirement complexes are geared toward individuals who want flexible living arrangements and services. These complexes may contain a variety of housing types, including independent-living, assisted-living, and long-term care facilities. They often offer extended assistance with daily tasks such as shopping and housekeeping, and emphasize easy access to health care.
For example, increasingly popular options for those 62 or older, who meet financial and health thresholds, are continuing care retirement communities (CCRCs) and fee-for-service continuing care retirement communities (FFSCCRCs). These adult communities offer, under one contract (and usually all in one location), an independent living unit (typically an apartment or cottage), residential amenities, and access to a continuum of long-term care services as residents' health and social needs change over time. These are just some of the options--many others are available.
The cost of convenience
Homes available within retirement communities can be as diverse as the communities themselves, and range from small apartments in the city to luxury homes on the ocean. No matter which type of home you choose, make sure it will meet your needs both now and in the future. More and more homes in retirement communities are incorporating universal design features, a trend that's likely to continue. These features include one-level living, extra lighting, easy-to-open doors and cabinets, and security systems that make day-to-day living simpler and safer for people of all ages.
But the convenience of retirement living usually comes at a price. That price includes not only rental or mortgage payments, utilities, and insurance, but also any up-front or ongoing fees you'll owe. For example, a retirement community may charge a hefty fee for "buying in" to the community. One ongoing fee you may need to factor in is a homeowners or community association fee that may add hundreds, or even thousands, of dollars to your monthly housing costs. In general, the higher this fee, the more services or amenities are included, but make sure you understand what you're getting for your money. And don't forget about taxes. Even states with no state income tax may have high property taxes, sales and restaurant taxes, or "hidden" taxes on luxury goods or investments. A financial professional or tax advisor can help you determine the impact taxes will have on your finances.
And so that there are no unpleasant surprises, you should also consider the potential for costs to rise. Living in a community where costs for housing and services are constantly on the upswing is at best annoying, and at worst, financially devastating.
Try before you buy
Popular communities often have waiting lists, so it's a good idea to do your homework in advance. Start with a visit. If you're traveling out of town, find out if the community you're visiting offers a special travel package for potential residents--many do. If you're searching locally, visit each prospective community at least two or three times.
A checklist of questions to ask can come in handy when researching retirement communities. Here are a few items to include:
Roy Larsen, CFP®, AAMS® is a CERTIFIED FINANCIAL PLANNER™ practitioner, financial advisor and wealth manager. Roy is President and CCO of Larsen Wealth Management, LLC, a Fee-Only Registered Investment Advisory firm in Cumming, Georgia. Roy is an expert in successful retirement living and specializes in holistically managing the multiple planning and investing issues surrounding the receipt of a large lump sum. Roy Larsen, CFP®, AAMS® is available in all 50 States. He can be reached for comment at 678-456-8138,firstname.lastname@example.org or www.investinretirement.net
There's no doubt about it--going through a divorce can be an emotionally trying time. Ironing out a divorce settlement, attending various court hearings, and dealing with competing attorneys can all weigh heavily on the parties involved.
In addition to the emotional impact a divorce can have, it's important to be aware of how your financial position will be impacted. Now, more than ever, you need to make sure that your finances are on the right track. You will then be able to put the past behind you and set in place the building blocks that can be the foundation for your new financial future.
Assess your current financial situation. Following a divorce, you'll need to get a handle on your finances and assess your current financial situation, taking into account the likely loss of your former spouse's income. In addition, you may now be responsible for paying for expenses that you were once able to share with your former spouse, such as housing, utilities, and car loans. Ultimately, you may come to the realization that you're no longer able to live the lifestyle you were accustomed to before your divorce.
Establish a budget. A good place to start is to establish a budget that reflects your current monthly income and expenses. In addition to your regular salary and wages, be sure to include other types of income, such as dividends and interest. If you will be receiving alimony and/or child support, you'll want to include those payments as well.
As for expenses, you'll want to focus on dividing them into two categories: fixed and discretionary. Fixed expenses include things like housing, food, and transportation. Discretionary expenses include things like entertainment, vacations, etc. Keep in mind that you may need to cut back on some of your discretionary expenses until you adjust to living on less income. However, it's important not to deprive yourself entirely of any enjoyment. You'll want to build the occasional reward (for example, yoga class, dinner with friends) into your budget.
Reevaluate/reprioritize your financial goalsYour next step should be to reevaluate your financial goals. While you were married, you may have set certain financial goals with your spouse. Now that you are on your own, these goals may have changed. Start out by making a list of the things that you now would like to achieve. Do you need to put more money towards retirement? Are you interested in going back to school? Would you like to save for a new home?
You'll want to be sure to re-prioritize your financial goals as well. You and your spouse may have planned on buying a vacation home at the beach. After your divorce, however, you may find that other goals may become more important (for example, making sure your cash reserve is adequately funded).
Take control of your debt. While you're adjusting to your new budget, be sure that you take control of your debt and credit. You should try to avoid the temptation to rely on credit cards to provide extras. And if you do have debt, try to put a plan in place to pay it off as quickly as possible. The following are some tips to help you pay off your debt:
Review your credit report and check it for any inaccuracies. Are there joint accounts that have been closed or refinanced? Are there any names on the report that need to be changed? You're entitled to a free copy of your credit report once a year from each of the three major credit reporting agencies. You can go to www.annualcreditreport.com for more information.
To establish a good track record with creditors, be sure to make your monthly bill payments on time and try to avoid having too many credit inquiries on your report. Such inquiries are made every time you apply for new credit cards.
Review your insurance needs. Typically, insurance coverage for one or both spouses is negotiated as part of a divorce settlement. However, you may have additional insurance needs that go beyond that which you were able to obtain through your divorce settlement.
When it comes to health insurance, make having adequate coverage a priority. Unless your divorce settlement requires your spouse to provide you with health coverage, one option is to obtain temporary health insurance coverage (up to 36 months) through the Consolidated Omnibus Budget Reconciliation Act (COBRA). You can also look into purchasing individual coverage or, if you're employed, coverage through your employer.
Now that you're on your own, you'll also want to make sure that your disability and life insurance coverage matches your current needs. This is especially true if you are reentering the workforce or if you're the custodial parent of your children.
Finally, make sure that your property insurance coverage is updated. Any applicable property insurance policies may need to be modified or rewritten in order to reflect property ownership changes that may have resulted from your divorce.
Change your beneficiary designations. After a divorce, you'll want to change the beneficiary designations on any life insurance policies, retirement accounts, and bank or credit union accounts you may have in place. Keep in mind that a divorce settlement may require you to keep a former spouse as a beneficiary on a policy, in which case you cannot change the beneficiary designation.
This is also a good time to make a will or update your existing one to reflect your new status. Make sure that your former spouse isn't still named as a personal representative, successor trustee, beneficiary, or holder of a power of attorney in any of your estate planning documents.
Consider tax implications. You'll also need to consider the tax implications of your divorce. Your sources of income, filing status, and the credits and/or deductions for which you qualify may all be affected.
In addition to your regular salary and wages, you may have new sources of income after your divorce, such as alimony and/or child support. If you are receiving alimony, it will be considered taxable income to you. Child support, on the other hand, will not be considered taxable income.
Your tax filing status will also change. Filing status is determined as of the last day of the tax year (December 31). This means that even if you were divorced on December 31, you would, for tax purposes, be considered divorced for that entire year.
Finally, if you have children, and depending on whether you are the custodial parent, you may be eligible to claim certain credits and deductions. These could include dependency exemptions, the child tax credit, and the credit for child and dependent care expenses, along with student loan interest and tuition deductions.
Consult a financial professional. Although it can certainly be done on your own, you may want to consider consulting a financial professional to assist you in adjusting to your new financial life. In addition to helping you assess your needs, a financial professional can work with you to develop a plan designed to help you address your financial goals, make recommendations about specific products and services, and monitor and adjust your plan as needed.
Roy Larsen, CFP®, AAMS® is a CERTIFIED FINANCIAL PLANNER™ practitioner, financial advisor and wealth manager. Roy is President and CCO of Larsen Wealth Management, LLC, a Fee-Only Registered Investment Advisory Wealth Management firm in Cumming, Georgia. Roy is an expert in successful retirement living and specializes in holistically managing the multiple planning and investing issues surrounding the receipt of a large lump sum. Roy Larsen, CFP®, AAMS® is available in all 50 States. He can be reached for comment at 678-456-8138,email@example.com or www.investinretirement.net
Roy Larsen is a Certified Financial Planner™ practitioner and Fee Only Wealth Manager who resides outside of Atlanta, Georgia.
Roy's Financial Blog contains articles on multiple financial life events as well as his favorite questions from he receives from around the country as a an expert panel member for Investopedia's Advisor Insights.