The Hidden Costs of Aging in Place: What Baby Boomers Need to Know

As featured in Straight Arrow News

The housing market has a baby boomer problem. With 61% of boomers saying they never plan to sell their homes, millions of properties are staying off the market, creating a bottleneck for younger buyers. But as I recently told Straight Arrow News, there’s a critical financial planning aspect that many families aren’t considering.

“Most people prefer to age in place, which is fine if you’re planning for it and you can pay for it,” I explained to the publication. “I’ve had plenty of clients who thought, ‘I can take care of Dad’ at home, and it works until it doesn’t.”

The Real Cost of Staying Put

The desire to age in place is understandable and often the right choice. However, too many families make this decision based on emotion rather than comprehensive financial planning. The math isn’t always as simple as “keeping the house is cheaper.”

Consider these often-overlooked costs:

Home Modifications: Most homes need significant updates for safe aging in place. Bathroom renovations, stair lifts, ramps, and wider doorways can easily cost $15,000-$50,000 or more.

Increased Care Costs: While institutional care is expensive, professional in-home care can be equally costly. Full-time care at home often runs $4,000-$6,000 per month in many markets.

Opportunity Cost: The equity tied up in a large family home could be generating income elsewhere. A $500,000 home represents potential investment income that many retirees desperately need.

Family Financial Strain: Adult children often shoulder unexpected costs when parents age in place, from lost wages due to caregiving responsibilities to emergency home repairs.

The Capital Gains Red Herring

Many families point to capital gains taxes as the reason for not selling, but this often masks deeper issues. Yes, the tax implications are real, but they shouldn’t drive the entire decision. For many families, the tax cost is manageable compared to the long-term financial benefits of right-sizing.

More importantly, capital gains concerns can prevent families from having crucial conversations about care preferences, family dynamics, and realistic long-term costs.

A Better Approach to the Decision

Rather than defaulting to “we’ll figure it out,” families need structured planning that considers:

1. Total Cost Analysis: Calculate the true cost of aging in place versus alternatives over 10-15 years, including home modifications, care costs, and opportunity costs.

2. Care Preferences and Realistic Assessment: Honestly evaluate the level of care that may be needed and whether the home can accommodate it safely.

3. Family Capacity: Assess the real ability and willingness of family members to provide care, including the financial impact on their own retirement security.

4. Flexibility Planning: Build in decision points and triggers for when the plan might need to change.

The Bottom Line

Aging in place can be a wonderful option, but only when it’s properly planned and funded. The families who succeed are those who make the decision based on comprehensive financial analysis rather than hope and emotion.

If you’re part of the 84% of Americans planning to age in place, make sure you’re planning for it financially. The time to have these conversations and run the numbers is now, while there are still options and choices available.

Eric Ludwig, CFP®, is Director of the Center for Retirement Income at The American College of Financial Services and CEO of Stockbridge Private Wealth Management. If you’d like to discuss aging in place planning or retirement income strategies, contact our team for a consultation.

One of the biggest fears I hear from clients is running out of money in retirement. It’s why many people over-save, work longer than necessary, and delay enjoying life while they’re still healthy enough to do so. But here’s something surprising from the research: you probably won’t maintain constant inflation-adjusted spending throughout retirement. In fact, most retirees don’t.

A 2014 study discovered a “retirement spending smile.” Instead of spending staying flat or increasing with inflation, real spending follows a curved pattern that resembles a smile. Here’s what often happens: In early retirement (the “go-go” years), spending is highest as retirees travel, eat out frequently, and pursue new hobbies. Then spending decreases, often by 1-2% per year, during the middle retirement years (the “slow-go” years) as activity naturally declines. Finally, spending levels off or ticks up slightly in late retirement (the “no-go” years) when healthcare costs rise, but even this uptick doesn’t fully offset the earlier decreases.

JP Morgan confirmed this pattern using their own client data of households with $1-2 million in assets. They found real spending decreased about 1% annually through the first 20 years of retirement.

The implications are significant. If you’re planning for constant inflation-adjusted spending, you might be targeting 15-20% more savings than you actually need. That could mean working years longer than necessary or leaving significant wealth unspent at death.

This doesn’t mean you should under-save. Rather, it means being realistic about spending patterns can help you make better decisions about when to retire and how much you can safely spend in those critical early retirement years when you’re healthiest.

The real risk isn’t running out of money; it’s missing out on life experiences during the years when you can most enjoy them. The research suggests you have more flexibility than traditional retirement models would indicate.

Want to understand what your personalized retirement spending pattern might look like? Schedule a complimentary review to see if you’re on track—or if you might be over-saving.