Household expenses can add up, even after homeowners have paid off their mortgage. These expenses can be incredibly stressful for retired individuals who no longer receive a steady income and rely on a fixed income.
Due to the cost of maintaining their home and wanting more assistance as they age, many older persons decide to move from their homes to a retirement living community, making their day-to-day lives more financially viable. For a list of top-tier retirement homes in Canada, check out this article: https://seasonsretirement.com/best-places-to-retire-canada/.
However, before moving into a retirement home, older adults should plan to ensure they can stay on top of their new living expenses. If your loved ones don’t know where to start, you can make the process less financially stressful using the following tips!
Before deciding whether your loved ones can move into a retirement home, you must evaluate their current cost of living and compare it to the cost of living in a retirement community.
You’ll want to help your loved ones evaluate the following expenses:
In addition to your loved ones’ household expenses, you’ll want to consider other maintenance costs they currently pay for, such as snow removal, housekeeping, and regular household repairs.
Add to that the cost for emergency response monitoring (usually included in the price of a retirement home’s monthly rate) and care expenses, should your loved one need it. Sources indicate that the cost for long-term care homes in Ontario can range from around $1,800 to $2,700 per month (or $40 per day for short stays).
After adding up their monthly expenses, consider how they rank compared to the services and rental payments at various retirement homes.
Generally, most retirement homes include services like meal preparation, housekeeping, and apartment maintenance with their rental costs in one lump sum, which may total more or less than your loved one currently spends.
If the retirement home they’ve selected costs more than what they currently pay to live at home, your loved one will need to evaluate their current monthly income to determine whether they can afford the extra cost.
After comparing your loved one’s current expenses to that of a retirement home, you’ll want to get an estimate of their regular monthly income to decide whether the cost of a retirement home is financially viable.
Many retired individuals receive their income from multiple sources. If they have money coming in from various places, gather their monthly income statements and tally them up.
You’ll want to include the following:
If they plan on selling their home, you’ll also want to include the money they’ll receive from the sale in your estimate. Withdrawing real estate funds as monthly income is an easy way to track how much they have to put away from the sale.
Once you’ve examined the new monthly expenses your loved ones will incur from living in a retirement home, you’ll want to consider creating a new budget for other expenses and purchases they’ll be making month-to-month.
Consider how much money they have set aside for travelling, other recreational activities, and minor expenses like purchasing drinks from cafes or shopping with friends.
Before incurring the moving expenses that come from switching to retirement living, your loved ones must plan to stay on top of their payments by dealing with any remaining debts they may have.
Many retirement plans include a strategy for paying off debts before or shortly after a person retires. Therefore, you should be checking the plan to ensure all your loved one’s debts are addressed before they take the following steps to retirement living.
Before settling into retired life, it’s a good idea to check whether your loved ones qualify for certain Canadian tax credits, as they may be eligible to save a certain amount of money when they file their taxes at the end of each year.
If you’re unsure what to look for, consider enlisting the help of a tax broker or experienced family member who can examine your loved one’s tax returns and explain which benefits they may be entitled to.
Many individuals like to set aside a small financial safety net in case of emergency expenses. Losing money due to a bad investment, new medical expenses, and other similar issues are all situations where extra savings may come in handy.
In addition to unexpected payments, many retirees like to have family trusts set aside before or after they retire to assist their loved ones financially.
If your loved ones want to do something similar, you can help them evaluate how much they can set aside regularly and keep the funds in a secure bank account.
Reviewing and re-assessing finances can be daunting, especially for older adults who aren’t up-to-date with modern accounting methods.
If your loved ones are struggling with their financial planning strategy, consider discussing their retirement plan with a banker, financial consultant, or an immediate family member.
Accepting the assistance of others may help you get a better idea of precisely what your loved ones are entitled to regarding taxes and their pension plan. Those with experience handling finances can help you create a realistic budget for your loved ones.
As stated above, there are many factors to consider when creating a financial plan for your parent’s or grandparent’s retirement. Prudent financial planning is crucial for older persons looking to move into a retirement community, as they’ll need to consider how their new monthly expenses will weigh against their current costs and income.
If your loved ones are concerned about creating a realistic financial plan, consider enlisting the help of a professional or close family member to ensure your monthly expenses and budget meet their current needs. Once your loved one’s finances are in order, you can begin moving toward their new retirement community!
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