An overwhelming majority of older adults want to remain in their homes as they age. A survey by AARP found that 77% of adults 50 and older want to age in place. Other surveys have found that the percentage is even higher—nearly 90%.
It’s one thing to want to age in place. It’s another thing altogether to actually be able to make it work. That’s because there are several financial factors that can jeopardize adults’ ability to remain in their homes as long as possible. In fact, without adequate financial security and safeguards, living independently at home isn’t possible.
It’s important to understand the financial risks that can make it difficult to age in place and to take steps to reduce those risks.
Risk: Inability to afford home modifications
Only one in seven adults have given a lot of consideration to the modifications their home might need for them to stay there, according to the University of Michigan National Poll on Healthy Aging. Those modifications can include a main floor bathroom and bedroom, bathroom safety features, doors that are wide enough for wheelchairs and home entrances with ramps or no stairs.
“You need to be thinking long-term,” says Kimberly Whiter, CEO of Elder Care Solutions, which provides families with all viable financial options they have to pay for long-term care needs. “Aging in place could be 20 years.” Over the course of that time, the likelihood of staying at home depends on the financial resources you have.
Start with low-cost modifications: Changing lighting, removing tripping hazards, adding grab bars, installing lever-style door handles, using smart technology and other low-cost modifications can go a long way toward helping you age in place. Whiter says that even increasing the height of chairs can help prevent injuries because a lot of hip breaks happen as adults fall into chairs that are too low.
Downsize sooner rather than later: Downsizing to a smaller, one-story home, a condominium or apartment has two benefits. It can eliminate the need to make costly modifications to a larger home. It also can help reduce housing costs, which can free up money in your budget to cover other aging-in-place costs.
Consider a reverse mortgage: If you’re at least 62 years old and own your home outright or have a low mortgage balance, you could borrow from the equity in your home with a reverse mortgage to pay for modifications your home needs to age in place. However, make sure you weigh the pros and cons of a reverse mortgage before taking this step.
Risk: Inability to afford household or caregiving help
Successfully aging in place requires more than just a home that is accessible. It also requires support with personal care, household chores and grocery shopping, according to the University of Michigan report.
Those who don’t have friends and family they can rely on for this support will need to pay for help they might need. “Aging in place, unfortunately, costs a lot of money,” Whiter says. “You’re going to have to plan for the costs associated as care needs grow.” However, the University of Michigan survey found that more than two in five older adults aren’t confident they could afford to pay for household or caregiving help.
Investigate options before you need support: Whiter recommends investigating strategies you can use to pay for care before you actually need help because Medicare won’t pay for household and caregiving help. As mentioned above, a reverse mortgage is an option. You might be able to buy long-term care insurance, which covers the cost of services that help with activities of daily living such as bathing, dressing and eating. You also might be able to use the cash value in a permanent life insurance policy to pay for care or sell the policy through a life settlement. A service such as Elder Care Solutions can help you identify viable options.
Take advantage of government benefit programs: If you or your spouse served in the military, you might qualify for VA benefits that will help cover the cost of care at home. Medicaid also will pay for long-term care services at home. However, you must have very limited income and assets to be eligible for Medicaid. The local area agency on aging or an elder law attorney can help you navigate the Medicaid application process.
[ Find Out: How to Pay for Long-Term Care ]
Risk: Trouble managing finances
The University of Michigan report points out that older adults need support with managing finances to successfully age in place. Although adults with Alzheimer’s disease and related dementias are more likely to need support, all adults will need help staying on top of their finances as they age.
The ability to manage your finances and make financial decisions is impacted by natural cognitive decline that comes with aging, says Dr. Nathan Spreng, a professor of neurology and neurosurgery at McGill University. Tracking spending, balancing a checkbook, managing cash and staying on top of multiple accounts can become more challenging. Without support, you can make mistakes and let things slip by, which can lead to big financial problems that can jeopardize your ability to remain in your home.
Take advantage of technology: Set up automatic bill payments to reduce the risk of making late or duplicate payments. Sign up for direct deposit for all your sources of income to avoid delays in getting funds into your bank account and reduce the risk of having insufficient funds. Use a service such as Carefull that will monitor your bank and credit card accounts 24/7 for common money mistakes, as well as signs of fraud and identity theft. Carefull will alert you by email if it spots something unusual and provide you with tips on next steps to take.
Get a second set of eyes on your finances: Identify family members you trust who can act as a second set of eyes on your finances. Consider giving them view-only access to your accounts—which you can do with the Carefull service—so they can get a sense of what your normal financial behavior is and can intervene if problems arise.
Get professional help: You can hire a daily money manager to help you stay on top of your finances if you can’t yourself and don’t have family who can help. You can find one near you through the American Association of Daily Money Managers. It also might help to hire a financial advisor, who can help you create a plan to ensure you have the financial resources to age in place.
[ See: How to Figure Out How Long Your Money Will Last in Retirement ]
Risk: Fraud and exploitation
Not being able to manage daily finances will hurt your ability to age in place. However, a bigger threat to remaining in your home is the potential for financial exploitation. Spreng says that as you age, it becomes harder to recognize risky financial situations and to detect when others are trying to take advantage of you.
Without protections in place, you will be at risk of exploitation, especially if you live alone. Losing your money to a scammer or a thief will jeopardize your ability to afford care and support in your home. It also could prompt concerned family members to find a safer, more secure environment for you.
Put legal protections in place: Meet with an attorney to draft a financial power of attorney document to name someone you trust to make financial decisions for you if you can’t. Take this step while you’re healthy and mentally competent so you can decide who will be in charge of your finances if something happens to you. If you wait and start to experience cognitive decline, you might be talked into giving this power to someone you wouldn’t normally trust.
Secure financial documents: If you have household help, make sure financial documents such as tax returns, stock certificates, insurance policies or Social Security cards aren’t easily accessible because information in those documents could be used to steal your identity. You can store digital copies of the documents in a digital vault such as the one offered by the Carefull service and store originals in a safe deposit box or in a safe in your home.
Vet household employees carefully: If you hire household help or caregivers through an agency, make sure the agency is licensed and insured and ask if it does criminal background checks and drug screenings on its employees. If you hire a caregiver on your own, ask friends and family for recommendations then get references, do extensive interviews and ask local law enforcement how to do background checks for caregiving candidates.
Use technology: Install cameras in your home so family members can keep a watchful eye on you and your household employees. Also, use an account monitoring service such as Carefull that can spot credit and identity fraud and can alert you to unusual activity in your bank, credit card and investment accounts. If you name trusted contacts on your Carefull account, they, too, can receive alerts if it spots unusual activity and can step in to help you.
If you want to age in place, you need to ensure that you will have the financial resources to cover the costs of remaining in your home. You also need to create systems and find support to stay on top of money matters and protect the financial resources you have.
[ Keep Reading: How to Protect Your Finances as You Age ]