4 factors to consider when exploring retirement living affordability

You’ve done your research and determined that a move to a retirement residence would be a beneficial lifestyle change for yourself or a loved one—but can you afford it? Determining affordability is the natural next step in your process of exploration, and for many people, it’s the right time to seek advice to understand how the numbers add up.

Recently, Ted Rechtshaffen, President and CEO of TriDelta Financial Partners, tackled the question of retirement living affordability in his Financial Post article, “Here’s what it costs to live in a retirement home—and the bottom line is less than you might think.” He writes that more often he is being approached by senior clients and their families about retirement living, with many of them mistakenly assuming the lifestyle option is not within their financial reach. 

Here are four factors Rechtshaffen explains can make the monthly rental expense of a retirement residence easier to handle.

At-home costs you’ll no longer have to manage. Rechtshaffen lists a number of household expenses you’ll no longer have to worry about once you’ve moved into a retirement community, including utilities, rent or condo fees, property tax, general maintenance costs (i.e. windows, roof, driveway shoveling, landscaping, etc.) and even food costs. In his words, “It would be fair to say that most people will eliminate anywhere from $18,000 to $60,000 a year by not living at home.”

Declining miscellaneous expenses. Depending on the age at which you’re considering retirement living, Rechtshaffen asserts that expenditures you may have enjoyed in your early retirement years like travelling, frequent dining out, shopping sprees and other entertainment are likely in decline, and thus you have savings which can be devoted elsewhere. “[Expenses] which could have been $25,000 or more when you were 70—might now be $2,500 or even $0 when you are 88,” he says.

Federal and provincial tax credits. Rechtshaffen discusses a number of different tax credits which can help offset your monthly rental expense in a retirement community, including the Medical Expenses and Disability Tax Credit. If you are receiving health care support in a residence setting, he explains a portion of those expenses may be able to be deducted from your income. “Many seniors could get back maybe 25 per cent to 30 per cent of their health-related expenses if they are sizable,” he says. Federal tax credits and support programs are worth looking into, and different credits may be available according to your province of residence. 

Multiple sources of income. When determining affordability, Rechtshaffen says an important step is to add up all your sources of income, including Canada Pension Plan and Old Age Security payments, any RRSP/RIFs, TFSAs and personal pension plans earned by yourself or a spouse. Some people also forget to take into account the sale proceeds of any personal or recreational property they may own. Rechtshaffen adds, “It is important to remember that these funds have been built over a lifetime so they could be used to cover retirement expenses. Now is the time.” 

This sentiment is echoed by gerontological social worker Dr. Amy D’Aprix, who encourages people to give themselves permission to spend their money on their own health and wellness in their later years—something she finds many seniors have trouble doing, as it can be difficult to “switch from saving to spending.”

As Rechtshaffen concludes, the lifestyle in a retirement residence may be more attainable than you think, and—in certain circumstances—when compared to other support options like homecare, may actually be the more affordable choice. 

Trying to add up your current monthly expenses and sources of income to determine if you can afford retirement living? Chartwell’s Budget Assistant can help. 

*The following source provided reference for this blog:

Rechtshaffen, Ted. “Here’s what is costs to live in a retirement home—and the bottom line is less than you might think.” (2019), online: https://business.financialpost.com/personal-finance/retirement/heres-what-it-costs-to-live-in-a-retirement-home-and-the-bottom-line-is-less-than-you-might-think