Continuing Care Retirement Communities

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Continuing Care Retirement Communities or CCRCs are becoming more and more common. CCRCs are retirement communities that offer different levels of service and health care at the same location or campus. Most CCRCs have apartments, cottages, or small houses, which allow healthier residents to experience a neighborhood feel while still enjoying access to the amenities (restaurants, gyms, libraries, clubs, etc.) of the larger campus. CCRCs also usually have smaller apartments or rooms for residents who need more assistance in addition to skilled nursing facilities and rehabilitation centers. The idea is to not have to move to multiple residences towards the end of one’s life, and to not have to be separated from a healthier or sicker spouse.

The growing popularity of CCRCs is due to a number of reasons. For one, residents want to keep their independence as long as possible and CCRCs allow them the flexibility to do so. CCRCs also allow many sick residents to stay with, or at least in the same facility as, their healthier spouse. Additionally, many residents either do not want to be a burden on their spouse or family, or simply do not have spouses or families that are able to handle the burden of care necessary to support them. With people living longer and longer, I would expect this trend to continue. I’ve already seen it as I have helped a growing number of clients transition themselves or their parents to CCRCs. It’s a big decision; emotionally and financially, and one that should not be taken lightly. In that spirit, I’d like to offer a few financial tips I’ve learned along the way.

1. Know what you can do. As you might imagine, there are varying qualities of CCRCs with varying costs. It’s important to look at what your new living expenses would be and whether that is a feasible “burn rate” given your amount of assets and life expectancy. Many people have to sell their primary residence to make a move to a CCRC possible.
2. Figure out your real estate options. If you need to sell your primary residence when moving into a CCRC, talk with the CCRC before making any decisions. In some cases they have people or relationships that can help you clean out and even sell a home at discounted rates. I’m talking estate sale experts, realtors, and mortgage brokers. Some CCRCs offer financing on a short term loan between the time you sell your primary residence and move in, but sometimes “outside” financing on a loan to bridge you between the sale of your old home and the purchase of your new CCRC home may be necessary.
3. Consider refundable versus nonrefundable options. Some CCRCs charge you more up front, but promise to give your heirs a portion of your down payment back after you pass away or if you pass away within a certain period of time. Depending on the specific offer, your financial capabilities, and your life expectancy, there can be a strategic decision to be made here.
4. Consult with a CPA. At certain CCRCs, a portion of your initial down payment can qualify as a medical deduction for income tax purposes. Ask any CCRC you are considering if this is the case, and then if so, talk with your CPA. A really large medical deduction might cause you to have a really low or negative income tax year in the year you move into a CCRC, so it may make sense to pull some income forward or recognize some extra income in such a year if possible. Perhaps the CCRC will let you pay the down payment over two tax years so you can spread out the deduction? A medical deduction for moving into a really nice CCRC can near six figures, so the tax planning on this isn’t something to just do yourself or with your generic tax software!
5. Get on a waiting list sooner rather than later. There are more people interested in CCRCs than there are spots available. If you know there is a particular facility you are interested in or you have friends going into, inquire if there is a waiting list. Usually you can get on a waiting list for several hundred to a few thousand dollars that may even be refundable if you change your mind. You may not be able to get into the CCRC you want to when you need it if you don’t go ahead and get on the list beforehand!

As always, if I can be of assistance to you or someone in your family considering a move into a CCRC, please let me know. You know where to find me.

-Tom

What a Year!

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This time last year, my wife and I were trying to decide whether to move or not. This time last year, I was just beginning to actually think about being a dad. This time last year, I was a senior financial planner still learning the ropes.

Now, my wife and I’ve sold our first home and bought our second home. Now, I’m not quite “Superdad,” but I can change diapers faster than a locomotive and I’m able to soothe my teething son in a single bound (well most of the time…). Now, I’m a wealth advisor, and finally doing what I’ve always wanted to do, yet I still learn something new almost every day!

2015 has been a year of change, and for the most part, a year of blessings. There have been a lot of peaks, but there have also been some valleys. Overall, I consider myself pretty lucky. What a year!

During the course of this mania, I learned several financial and life lessons first hand:

• The emotions, stress, and time consumption associated with a real estate transaction is insane. It’s a second job! However much you budget for a move, you’re going to be low. There’s a financial advisor joke out there that goes something to the effect of “What do you call downsizing? Half the house for just about as much money!” I used to laugh, but now I don’t. We weren’t downsizing. We were upsizing to our first house big enough for a family with a yard, and moving ended up costing us significantly more than we expected. All I can say is buy less than you think you can handle and maybe have more than one inspector or buy a home warranty!
• Baby furniture, car seats, strollers, clothes, formula, diapers, toys, and doctor visits can really add up! Remember that old game show Supermarket Sweep? Those people grabbing the expensive turkeys were crazy! Give me a cart on the baby formula and diaper aisle next to the greeting cards and I bet I’d be pretty hard to beat! Adding another mouth to feed does not financially benefit many households (despite the tax deduction), but being a parent is more miraculously wonderful and fulfilling than I ever imagined! In happier financial news, the “going out” expenses and vacation expenses do seem to naturally tick down, partially compensating for the costs associated with the mountains of diapers!
• Earlier in 2015 I was promoted from a senior financial planner to a wealth advisor. That meant that the firm I work for was ready to take off my training wheels and entrust me with working with clients on my own. That is a trust from my employer, and the clients I serve, that I do not take lightly. I continue to encounter new situations, I continue adding experiences, and I continue to learn new techniques and strategies to help people grow and preserve their nest eggs, save a little on taxes, give a little more to their favorite charities, and achieve personal goals. This year I got to be the anchored beacon to clients experiencing their first market correction in almost six years, I got to help a number of people who were in emotional and financial pain from suddenly being laid off, and I got to help a number of widows and children walk through the grieving process and the financial distribution and redeployment process of bequeathed and inherited assets. Money should not be anyone’s life, but money is part of everyone’s life. My job is not always easy and it’s not always fun, but being able to help people when they need it most is what motivates me to do what I do.

 

In 2016, my wife and I are going to go on the offensive against our mortgage and pay a little more than we have to so we can be debt-free a little sooner. In 2016, my wife and I are going to contribute a little more to our 401(k)s and continue to make our annual Roth IRA contributions so we can build up a reasonable retirement nest egg as soon as we can. In 2016, we’re going to save week after week and finish furnishing our new home. Those are our financial goals. What are your financial resolutions?

 

If you’re one of my loyal readers, you probably noticed that I didn’t post quite as much as I have in previous years. If you wondered why, now you know (move, baby, job responsibilities, etc.). Still, 28 posts in 2015 isn’t too bad, and I promise you, I have just as much energy and excitement about 2MuchCents as I ever have. Life happens, but I’m going to try to average at least two posts every month. And as always, if you have a question or an issue that you think I could help you with, please reach out to me. I’ll make time for you!

 

2016 posts will include why you should unplug from work, some things you need to consider if you or a loved one are considering a move to a retirement center, how to live in harmony if you and your spouse have very different incomes, some suggestions on what you need to teach children about money, a look at some financial mistakes we all make, and how to make sure you don’t face any tax penalties by hitting a “safe harbor.” I hope you’ll check them out!

 

Merry Christmas to all, and to all, a good 2016!

 

-Tom

The Top Ten Things I Learned from Selling a House

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Selling a house as you are buying a house often go in tandem, and I’m happy to report I’m once again the happy owner of only one home! A few weeks ago I shared with you the Top Ten Things I learned from Buying a House, and a number of you were quite interested. With that in mind and not wanting to shortchange any soon-to-be sellers out there, I now offer some tips based on my recent experience of selling a house.

1. First impressions count. I can tell you as a recent buyer that first impressions count. One of the agents that took my wife and me through several homes told us that within 30 seconds to a minute we would either have that “aha” moment or we would not. I think she is right and, as a seller, you need to know this. The house you are trying to sell obviously needs to look nice on the inside, but the buyer’s “aha clock” starts from the curb or the driveway! Make sure paths and stairs are swept, mats are clean, the yard is well manicured, and maybe even hang one of those pretty seasonal wreaths on the door to help things get off to a good start.
2. Set a reasonable price. Go ahead and reach for the stars, but don’t be foolish. Do a little research on comparable houses and give yourself a little wiggle room to go down and still get what you want. Keep in mind that an appraiser is going to have to feel comfortable with the property being worth what the buyer is borrowing before the bank is willing to play ball; so if you are looking for a sucker, you’re going to need two: the buyer and their appraiser (unless, of course, the buyer is paying cash)!
3. Remove evidence of your pets. I’m fonder of certain animals than others, and some of your potential buyers aren’t going to be fond of any pets at all, so keep this in mind. Fido may be cute to you, but if he scares away a perfectly good and willing buyer because there are chew toys all over the house, Fido and Fido’s possessions may need to be strategically relocated when someone is looking at your home.
4. Declutter. Speaking of strategically relocating things… hide your stuff! In all seriousness, no one wants to see all your stuff. Pretend you are hosting Thanksgiving. Pretend you will be eating dinner off the floor. Pretend a volcanic eruption is coming and every bit of your stuff that is out will be melted by the molten magma. Imagine whatever it takes to make you declutter! Have your possessions displayed neatly, and less of them displayed than you normally would.
5. Hire a real estate photographer to take photos. Photos matter. Our photographer made our house look like Southern Living, and I think that really helped us sell our home pretty quickly. Put simply, there is a good chance a photographer’s camera is better than yours, their experience manipulating light is better than yours, and their ability to Photoshop themselves out of mirrors is better than yours. Hire a photographer and pay them. It won’t take many days of you not selling your house for it to be worth their fee!
6. Do minor repairs before the inspection. If you know you have a scratch on the wall, try a Magic Eraser. If you haven’t changed your air filters in ages, change them. Please, please make sure you don’t have any lightbulbs that are out. I can’t tell you how many houses we looked at that were in need of copious amounts of lightbulbs. Minor things may not be “deal breakers,” but they can make your prospective buyers wonder how well you have really taken care of your house.
7. Differentiate your home from others. I’m talking fresh flowers on the table, a little soft music on in the background, maybe even a bowl of candy or some bottles of water available to your visitors. You want visitors to see how serious you are about selling your home and how precise and thoughtful you have been.
8. Sweeten the deal. It has amazed me how many people I know were drawn to houses that “left them things.” In our own case, our willingness to leave our refrigerator as opposed to taking it with us was what actually sealed the deal. Whether it is leaving behind appliances and deck furniture, or going ahead and paying HOA fees for the rest of the year, consider little things you are willing to do for a buyer to make it easier for them to move in. Buying a house and moving is an expensive time, and all I’m trying to say is that not having to go pick out and pay for a washer or a dryer may be worth a lot more to your buyer than you might think.
9. Be responsive. When buyers or their agents inquire, be responsive. Can they visit? Yes. Will you send the Seller’s Disclosure? Done. Will you send the Neighborhood Covenant? Yes (as soon as you find it). Buyers are anxious and you need to strike when the iron is hot. I know a lot of people that do things at the last minute, and it works for them; but in a situation where you’re trying to woo someone into giving you a whole lot of money, please don’t be a “buzzer beater.” They will appreciate it. So much so, they might even buy your house!
10. Write a letter. This is my seller’s secret sauce: write a letter. I know it sounds crazy, it sounds cheesy, and lots of people will tell you that you need to depersonalize your house in every way possible, but I disagree. Okay, take some of those obnoxious family pictures off the refrigerator, but my wife and I were undoubtedly drawn to houses that felt like homes. We wrote a letter that we left on the counter to our prospective buyers, and I can tell you they went quickly, so I think other people like them, too. Introduce yourself, say why you’re moving, why you love your house, and thank them for coming. It’s human, it’s real, it’s a keepsake. If someone is visiting 17 houses on a Saturday, it might just cause them to remember yours. Maybe it could rub someone the wrong way, but, personally, I think it can do a lot more good than bad.

If you’re getting ready to sell your home, I wish you the best. It’s easy to think, “Why fix that?” and “Why put money into something I’m not going to enjoy?” but I urge you to think more along the lines of making your house look and feel like the kind of home you’d want to live in.

 

-Tom