Financial Well-Being in IL & AL Communities

This paper is the second in a series of four based on the 2011 Residents Financial Survey (RFS) conducted by the Center for Retirement Research at Boston College. (See an overview of the first paper by clicking here.) It focuses on the financial well-being of residents in IL and AL communities by looking at income and source of income, lifetime earnings, and net worth. The authors compare income level and net worth at the individual level and examine patterns of gift-giving, length of stay at the community, and rate of asset depletion.

The survey indicates that residents of IL and AL communities tend to be mid- to high-income, especially when compared with their age groups, and that their income covers most, if not all, their monthly fees. In both IL and AL, a plurality of residents reported their monthly incomes at greater than $3,500, with, for example, 34 percent of the residents in Combined IL and Combined AL facilities having income at least that high. This income level puts them in the top 15% of earners in their age group in their metropolitan area. The income comes from a variety of sources: Social Security is nearly universal, with about 97 percent of respondents indicating it as a source; about 65 percent of respondents indicate pension or annuity income as a source; bank accounts and stocks and bonds were the other most commonly cited generators of income.

Net worth responses show useful nuances. The median net worth lies in the $100,000 to $300,000 range for Freestanding IL, Freestanding AL and Combined AL. Residents in Combined AL properties have a median net worth in the $300,000-$500,000. The median for senior living residents therefore exceeds that of the US as a whole, perhaps not surprisingly. At the same time, however, senior living residents include a large share of people with low net worth. For example, 33 percent of the residents in Freestanding IL have a self-reported net worth of less than $50,000. By contrast, 20 percent of the 65+ population as a whole has a net worth less than $50,000.

The cross tabulation of income and net worth shows that residents with high net worth (in excess of $750,000) also have high incomes. The reverse is not necessarily true – more respondents with net worth less than $50,000 have monthly income of $3,500 or more (the highest category) than any of the three lowest categories (less than $850, $850 to $1,200, and $1,200 to $2,000). The authors suggest that conversion of assets into annuities explains part of this apparent disconnect.

The results indicate that people with a broad range of net worth have figured out how to pay for a stay at a senior housing facility. Operators will therefore be wise not to count out prospective residents, even if they appear to have limited accumulated wealth.

Source:

“Financial Well-Being of Residents in Seniors Housing and Care Communites: Evidence from the Residents Financial Survey,” Norma B Coe and April Yanyuan Wu, Center for Retirement Research at Boston College, April 2012

 

Click here to download this and the other papers within the series (listed below):

“Residents in Seniors Housing and Care Communities: Overview of the Residents Financial Survey,” Norma B. Coe and April Yanyuan Wu, Center for Retirement Research at Boston College, April 2012

“Costs and Concerns Among Residents in Seniors Housing and Care Communities: Evidence from the Residents Financial Survey,” Norma B Coe and April Yanyuan Wu, Center for Retirement Research at Boston College, April 2012.

“Geographic Mobility Among Residents in Seniors Housing and Care Communities: Evidence from the Residents Financial Survey,” Norma B Coe and April Yanyuan Wu, Center for Retirement Research at Boston College, April 2012.

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