As you age, you might envision yourself staying in the place you call home, maintaining familiar routines and a sense of independence. You aren’t alone — according to a recent survey, 93% of people aged 55 and older intend to age in place.
Thoughtful, thorough financial planning is key to successfully aging in place, and the earlier you start, the more prepared you’ll be. The following steps will help you plan to live where and how you want as you grow older.
1. Assess Your Current Financial Situation
Before you make any decisions or detailed plans, gain a clear view of where you stand financially.
Step Back to See the Whole Picture
If you understand your available resources, your current needs, and any adjustments that may be necessary in the future, your plan will be more likely to succeed. Start by taking inventory in several key areas:
- Income: Consider all your regular income sources, including a salary, passive income, pension and retirement dividends, and even side gigs that contribute to your financial stability.
- Assets: Take stock of your assets, including property, investments, savings, and any other valuable possessions, and consider how accessible these assets are if you need to use them to cover a planned or unplanned expense.
- Expenses: List your weekly, monthly, and yearly expenses, starting with the essentials and ending with discretionary items. Essential expenses include mortgage or rent, house upkeep, utilities, groceries, and health care.
- Debts: Review outstanding debts, including credit card balances, personal loans, car loans, and mortgages. Pay extra attention to high-interest debts, which can pose a bigger risk to your overall financial stability.
After you’ve compiled all of this information, crunch the numbers. Subtract your expenses and debts from your income and assets to determine your net worth. This snapshot of your financial health is a starting point for the next step in your plan to age in place.
Consult with a Professional
Although you can handle this initial assessment on your own, it’s a good idea to consult with a professional financial planner. They can offer advice, help you make informed decisions, and provide strategies for managing your financial health. Aging in place involves careful long-term planning, and a professional’s perspective can ensure you cover all your bases, from tax planning to investment strategies.
2. Identify Future Financial Needs
Now that you understand where you stand today, look to the road ahead and decide which direction you would like to go.
Factor in Potential Cost Increases
Certain home-related costs are likely to rise over time due to a variety of factors, including inflation, property taxes, and maintenance needs.
Your health care expenses may also increase over the years. Although insurance plans cover a portion of these, your out-of-pocket costs might rise. Plan for the financial aspects of chronic health conditions, preventive care, medications, and more.
Plan for Future Home Modifications
Consider if and when you might implement home modifications to make your living space more accessible and safer to navigate. Examples include installing grab bars in the bathroom, widening doorways for wheelchair access, and making changes to decrease the risk of falls.
Evaluate Long-Term Care
As you age in place and your needs change, you may need assistance with a variety of tasks, from home maintenance to activities of daily living (ADLs), such as bathing and dressing. In-home health care is one option, but it can be costly depending on the level of assistance you require. Long-term care insurance can mitigate some costs, depending on the type of coverage you choose.
Another approach to future care costs is a membership program designed to support aging in place. Programs like WellAhead — A WesleyLife Well-Being Experience provide peace of mind by offering a range of services to help you age in place comfortably, safely, healthfully, and independently.
Consider Your Retirement Dreams
Along with considering the day-to-day living costs, decide what your ideal retirement involves. Will you travel, explore new passion projects, or contribute to charitable causes? Fulfilling these desires will impact your overall budget.
3. Maintain a Healthy Lifestyle
A healthy lifestyle improves and maintains your quality of life so you can fully enjoy all the benefits of aging in place.
Keep Up with Medical Care
A proactive approach to medical care can create a long-lasting impact, both emotionally and financially. Keep up with regular doctor appointments and preventive treatment — including blood pressure checks, vaccines, cholesterol testing, cancer screenings, and more — to enhance the opportunities for early detection and management of health issues. Manage your chronic conditions by following your doctor’s advice, taking the appropriate medications, and implementing recommended lifestyle adjustments. These steps will help control your health care costs now and in the future.
Find Well-Being Support
Wellness professionals possess the expertise and resources to help you stay healthy and active. Maintaining your well-being will preserve your independence for as long as possible and potentially lower your health care costs in the long run.
The following people can provide guidance that is tailored to your personal needs:
- Nutritionist: Eating the ideal balance of vitamins and nutrients is essential as you age. A nutritionist will help you build a smart plan to fuel your body at different stages in your journey.
- Personal trainer: A safe, effective exercise routine is key to maintaining mobility, flexibility, and strength as you age. A personal trainer can design a routine to help you reach your physical goals and ensure you’re using the proper form to prevent injuries.
4. Create a Financial Plan for Aging in Place
Now is the time to start the gears moving, taking all the data you pulled together — your net worth, budget, and needs — and aligning them into an actionable plan.
Set Goals
Creating a solid financial plan for aging in place begins with setting clear goals. When formulating short-term goals, focus on practical steps that will help you live more comfortably and maintain your independence. Take steps to ensure your overall well-being, including staying active and social. Even if you don’t need full-time in-home care right now, you may want to set aside money for occasional help such as a housekeeper. Your long-term goals should align with the financial needs you identified in the previous step, including medical needs, cost increases, and retirement interests.
Consider Tax Implications
Taxes can significantly impact your financial picture, especially as you draw from savings and investments. Consider the tax implications of the following:
- Tax deductions for home improvements: One of the most beneficial aspects of aging in place is the tax deduction you can take on home improvements related to safety and accessibility. For example, the costs of widening doorways and installing accessibility ramps may be deductible if they’re medically necessary.
- Taxes on sources of income: Investment income, retirement account withdrawals, and Social Security benefits are all subject to federal and state tax regulations. Strategic planning can minimize the tax implications for your retirement income as you plan to age in place.
Be sure to regularly consult a tax professional to ensure you’re up to date on the latest local and national tax policies and how they affect your financial picture.
5. Regularly Review and Adjust Your Plan
In the same way you maintain physical health with proactive care and regular doctors’ appointments, you should maintain financial health by staying on top of important information and regularly meeting with your financial advisor. Monitoring and fine-tuning your financial plan can help you prepare and flex with surprises along the way.
Monitor Changes in Government Programs
Government programs such as Social Security, Medicare, Supplemental Security Income (SSI), and energy assistance programs could play a role in your future financial plans. Stay informed of changes in government programs that can affect your financial picture, such as when Social Security Cost of Living Adjustments (COLA) vary to account for inflation.
Follow Financial Trends
Stay updated on financial trends pertinent to your financial picture, such as changes in inflation, tax policies, and investment markets. Regularly reviewing and adjusting your financial plan ensures that you are always aligned with your needs, your goals, and the realities of the market.
Enjoy the Benefits of Aging in Place
By building a proactive financial plan, you can realize your goal of successfully aging in place. The strategies outlined above will help you navigate the journey ahead while staying in the comfort of your home and enjoying your ideal lifestyle.
Want more tips for aging in place? Check out the “Aging in Place Checklist from WellAhead.”
