In Rough Times, Senior Living Providers Still Have Much to Offer

by Mario Mckenzie

The drop in housing values and portfolio values are impacting the willingness of retirees to embark on their retirement journeys. Consequently, these same factors will also affect the financial well being of many senior living providers with offerings that lean toward “lifestyle” or “discretionary moves,” namely, the independent living setting. Although the access to assisted living and nursing care will still depend on whether retirees can afford them, the decision to utilize the extra programs and services campuses offer have always correlated to medical needs rather than lifestyle choices.

Loss of net worth

Based on the third quarter of 2008, S&P/Case Shiller U.S. National Home Price Indices determined that housing values, adjusted for inflation, were at the same level they were in 2002. Many homeowners had increased spending based on the increase in home values (and home equity) prior to the housing crash. Although, the data is not segmented and discernable at the 75+ age level, when most discretionary retirement decisions to move into senior living facilities are made, one can assume that the net worth for individuals who tapped into their home equity is now compromised. This housing effect on net worth is compounded by the recent declines in the stock market.

The perceived loss of financial security

Those close to retirement have had to abruptly come to terms with a psychological effect of the economic turmoil: the loss of financial security. Many may not move forward with their retirement plans because they would like to return to the same comfortable financial position they held prior to the burst of the housing bubble and general market decline. It is critical that providers and consumers determine whether the retirement decision is economically affordable versus psychologically comfortable. For those who can afford it, there are still many advantages to implementing their retirement plans.

Promoting retirement living

On Web sites, promotional materials, or in advertising, providers should remind those nearing retirement about the tangible benefits of sticking to their retirement plans.

• Cash outlays over time are predictable—retirement communities that offer “life care” contracts, in particular, provide assisted living and nursing at the same cost as independent living
• Quality of life—social and wellness programs are geared towards enriching the lives of those in retirement
• Affordability—well-run care communities may actually provide services at a lower cost than if an individual consumed these services directly at home

A senior living provider can’t do anything about a retiree’s real loss of net worth. But publicly promoting the value and benefits that are available can go a long way toward reassuring the anxious, who can still afford it, that retirement remains within reach.