Yes, I know there are a myriad of different options for other folks but this what I’ve got. Also know the current inflation situation keeps quite a bit questionable on rising costs.

Living accommodations and amenities are pretty much identical.

Option 1
$5,000 buy in (non refundable) $2900 a month

Option 2
$220,000 buy in (fully refunded when one moves on) $2000 a month

Both monthly payments include everything related to your residence. No maintenance fees, no having to replace a furnace, roof, plumbing, etc. You are only responsible for interior furnishings which you have plenty of and will last you quite awhile. Both places price increases over the last 10 years are pretty much identical and surprisingly far less than I would have expected. Though I know this is a huge variable in our current world. Though outside of something just absolutely catastrophic there is enough in your current fixed income amount to absorb it.
Both places start as independent living facilities, with assisted, and nursing care facilities. You have very good long term care insurance/coverage.

You are on a fixed income that covers the monthly payment with enough to live on, enjoy life, and save some comfortably. The $220,000 is not all but a good majority of your liquid assets. Barring some crazy catastrophe there is no foreseen need to ever touch the liquid assets.

If you choose option 1 (which to me is the no brainer but could be wrong) where do you invest your $220,000?

Unless there's some weird fine print, option 1 seems the no brainer option.

My grandmother was in an option 2-like place, and is still waiting on the payout (they had an exit clause where you could get your buy-in back if you moved out).

I don't see where option #2 is viable at all .

+1 for option 1. I think you could buy 2 year t notes and come out ahead over option 2

Option 3: Take up lion hunting and jet pack racing.

It’s a tough question with a myriad of uncertainty. Things like current health and expected longevity would play a part in the decision. I assume part of the monthly income is not currently coming from the 220k liquid assets.

I’m inclined to pick option 2 for the peace of mind. Today’s world has many uncertainties and having more monthly cash flow and ultimately being able to leave a legacy (220k) would probably be important. Where we are in the current economic cycle today and the number of years it may take get through it don’t have me excited anywhere in the markets that would be appropriate for someone making this type of decision. If a recovery/turn around were to happen sooner I miss opportunity cost. Age dependent I’d choose the security of two over the lost opportunity cost of option one.

BTW, I don’t think either situation is terrible given sufficient monthly income to cover living expenses.

220,000 - 5000 = $215,000
215,000 / 900 = 238.9 Months ROI or 19.9 Years!

One has to consider how long you'd plan on being retired/alive, and living there...

quote:

Originally posted by nhracecraft:
220,000 - 5000 = $215,000
215,000 / 900 = 238.9 Months ROI or 19.9 Years!

One has to consider how long you'd plan on being retired/alive and living there...

and, that 19 year ROI is a zero interest return, no accommodation for any potential earnings in any kind of investment of the $220,000 over 20 years..

Option 1. You can take the one time $5K hit, if you can handle the initial out lay of the $220K. The additional $217K you can invest and essentially reduce the current monthly cost or invest it as well and never notice any minor hikes in rate from the proceeds. Certainly the option 2 folks will be able to invest multiple $220K buy-ins and invest it handsomely, why shouldn’t you benefit from it instead of them?

With the information you’ve provided I can’t see any advantage to option 2.

quote:

Originally posted by arfmel:
With the information you’ve provided I can’t see any advantage to option 2.

Concur.

But wonder if you own your home and all things considered would prefer staying there. I added stairlifts to my home to permit me to stay put where I like the advantages it provides, great neighbors, and a close by son to help as necessary.

Whatever you decide, also carefully check out the financials of the entity that owns the place.

Assuming identical facilities and identical price changes with both, this becomes purely a financial decision. For simplicity assume there is sufficient guarantee of getting the $220K back (i.e. remove bankruptcy/swindling concerns) but there is always some doubt about future events like this.

To begin with, look at the differences: $215K more up front, but in return spending $900/mo less going forward, then getting the $220K back in the end.

The longer the individual lives, the longer the delay in getting the $220K back but the more months of savings.
So you'd start by estimating how long the situation will last, e.g. estimated remaining life expectancy and doing the math.

Neglecting interest and taxes, what you're doing option 1 compared to option 2 is putting out $215K more up front, but then saving $900x12months=$10.8K per year, and then getting it all back at the end. Imagine that it all happened in one year. That's about a 5% return ($10.8K/$215K).

So it's not financially ridiculous to consider, based on that. Depends on what else they'd be doing with the money and what their returns on that other activity would be.

Now, in the real world...tying up the majority of one's liquid assets in any one thing is risky as all get out. Plus these days you need to factor in inflation over the length of the occupancy (i.e. the $220K refunded at the end won't be in 2022 dollars).

Then take into account the non-zero risks of bankruptcy and swindling in the real world, and perhaps option 1, while mathematically worth thinking about in terms of return, doesn't look so sweet.

If they're sure they can cover the $2900 then that's the way I'd advise.

If invested and returning around 5%, your 215k will make you the difference in the monthly cost every year. Anything above 5% is gravy. Plus, you have access to it if needed.

quote:

Originally posted by 220-9er:
Whatever you decide, also carefully check out the financials of the entity that owns the place.

This. And, really unless the $220k is escrowed (safely), there is little guarantee of ever getting that money back.

As to what to do with the $220k, the correct answer is give it away to your children or grandchildren or other worthy recipients. If the heirs are reliable, make an agreement that if the person ends up needing financial assistance then the heirs will provide it.

If the person going into elder care starts needing some form of government assistance, having assets means they get spent down. But if that person has given away their assets, they are destitute on paper and their nest egg has been safely passed on.

There are, of course, legal hoops to jump to make this work, but it isn't complex.

If the person wishes to invest their $220k right now, I am without recommendation other than cash and whatever iBonds or TIPS they can purchase. I believe the market is going to go down significantly for the next year, and would not buy into anything volatile such as stocks or regular bonds. Not real estate either.

Have them put all of their assets into a Trust, utilizing a local attorney who specializes in these things. It will cost $2k-$5k to get that done, and it makes things a lot easier now if a reliable person is named Trustee, and it makes things a lot easier when the person eventually passes away.

Buying mutual funds right now while things are low doesn't sound like a bad idea to me...

This hypothetical person has 215k so they don't need immediate returns on their investment.

quote:

Originally posted by bald1:

quote:

Originally posted by arfmel:
With the information you’ve provided I can’t see any advantage to option 2.

Concur.

But wonder if you own your home and all things considered would prefer staying there. I added stairlifts to my home to permit me to stay put where I like the advantages it provides, great neighbors, and a close by son to help as necessary.

They are on acreage with with multiple buildings upkeep is getting expensive and they have no desire to be there and want to be living somewhere they don’t have to worry about how things will get fixed or taken care of.

quote:

Originally posted by 220-9er:
Whatever you decide, also carefully check out the financials of the entity that owns the place.

Already been done. Both have been around for quite some time and have good financials. But I still don’t like someone having control of that much of one’s assets.

quote:

Originally posted by Fly-Sig:

quote:

Originally posted by 220-9er:
Whatever you decide, also carefully check out the financials of the entity that owns the place.

As to what to do with the $220k, the correct answer is give it away to your children or grandchildren or other worthy recipients. If the heirs are reliable, make an agreement that if the person ends up needing financial assistance then the heirs will provide it.

I am the heir and would much rather them use the money for them and not worrying about leaving anything.

I do not favor these retirement communities. I could give a shit about meals, walking trails, bingo, karaoke and sitting in a chair lifting legs for exercise. Nope, and I don't want neighbors getting in my face. I'm not anti social, but I don't want it forced on me. Just a plain old condo would suite me fine.

I know people that have gone that direction and they all rave about it. "Oh, we get our meals... yada yada. If you talk to those that have been there a few years, you get a different story most times.

quote:

Originally posted by NavyGuy:
I do not favor these retirement communities. I could give a shit about meals, walking trails, bingo, karaoke and sitting in a chair lifting legs for exercise. Nope, and I don't want neighbors getting in my face. I'm not anti social, but I don't want it forced on me. Just a plain old condo would suite me fine.

I know people that have gone that direction and they all rave about it. "Oh, we get our meals... yada yada. If you talk to those that have been there a few years, you get a different story most times.

This is not that sort of place until you are in assisted living.
They are independent patio homes but you have access to the amenities when you choose to use them.

quote:

This is not that sort of place until you are in assisted living.
They are independent patio homes but you have access to the amenities when you choose to use them.

Okay. I have free gym at LA Fitness, Plenty of walking trails, all of the medical help I need. Two minute drive to pharmacies, grocery stores, home centers and tons of carry out food places. I can't imagine what else they could offer me that I'd jump on. If you're sold on it and finances work out go for it. Around my neighborhood there are many such facilities. Just not for me at this point.

2. I'd let them hold $220,000 of my kids inheritance while I save $10,800 every year.