It may be the single most important decision of our retirement, yet too often, we leave it until too late. What is this forgotten decision? We don't think about where we'll live.
"I think, in reality, no one starts thinking about it until after they retire," said Cheryl P. Sherrard, director of financial planning at Rinehartin Charlotte, N.C.
Yet there are five important steps we can take to ensure the right decision is made, when it should be made.
Often, a life-changing event, such as the passing of a spouse or an illness, forces the issue. But rushing a decision this big when you're distracted by emotion, physically unwell or otherwise unprepared could you'll pay too much for a living situation that doesn't suit you.
1. Consider your future lifestyle. As of 2010, 40.3 million Americans were 65 and older, making up 13% of the population. Myriad types of retirement communities cater to the giant wave of baby boomers expected to retire in coming decades. They include "age-targeted" communities that welcome people as young as 45 years old and "active adult" communities that make it easy for older people to participate in recreational activities without traveling far from home.
There's also what's known as naturally occurring retirement communities (NORCs) -- such as urban apartment buildings where residents have aged together. Management has sometimes added services to accommodate them, according to Jan Cullinane, author of "The New Retirement: The Ultimate Guide to the Rest of Your Life" and the upcoming "The Single Woman's Guide to Retirement."
Check out several options, from informal ones to more structured settings, to give you an idea of how they stack up.
While no one wants to think about the possibility of declining health, people who want to "age in place" and stay in the same community if they happen to need medical help in the future, may want to choose a "continuing care retirement community," Cullinane said. Theseoptions from completely independent living to assisted living. Opting for a community that uses "universal design" -- a set of principles in which buildings are designed for accessibility to all -- also can enable you to stay in the home you choose for the long haul, the author said.
2. Take a hard look at your budget. The median household income of Americans ages 65 and older was $31,408 as of 2010, according to the U.S. Census Bureau. Unless you've socked away substantial retirement savings and built up significant assets -- such as a home that you can sell -- you may need to shop carefully for your retirement residence. "Retirement community choices cannot be looked at in a vacuum, but rather need to be considered as part of the client's entire financial situation," Sherrard said.
It's important to consider your age, your overall financial goals (including whether you plan to leave an inheritance to beneficiaries), your medical status, whether you are single or in a relationship and whether you have long-term care insurance that will cover a facility assisted living, she said.
A home in a retirement community heavy on recreational amenities may cost more than a comparable one without so many extras. Independent living facilities with lots of amenities -- sometimes on with a cruise ship -- often charge from $4,500 to $8,500 a month, depending on location, and may require initial deposits in the six figures, according to wealth manager Brad Stark, co-founder for Mission Wealth Managements in Santa Barbara, Calif. And even more modest residences in a retirement community may come with additional recurring expenses once you move in.
"You may be paying homeowner association fees or fees to maintain the community," Cullinane said.
One way to keep costs down is to avoid communities with high-maintenance facilities you won't use. For example, if you've never swung a club and don't plan to take up the sport, you'll have no use for a golf course. Many newer communities have eliminated this feature, so it pays to look around. Picking a community where walking and public transportation are convenient options also can help you cut costs. "If you can ditch your car, you can save a lot of money," she said.
Also important: If you're considering moving out of state to a particular retirement community, "See how your income is going to be taxed," she said. You may hold onto a lot more of your money in a low-tax state.
3. Choose a financially stable community. Retirement communities aren't immune to theforces that affect other residential developments, so check them out as you would a condo purchase.
"Usually they're governed by a homeowners association," Cullinane said. "You can ask to see their records and talk to people who run their board. See if they are collecting dues from everyone."
Signing onto a retirement community before it is well established can be risky -- it may not catch on and face financial problems.
"I wouldn't advise going in as a pioneer," she said.
4. Look for the right vibe. Many communities"discovery tours" to let you eat lunch at a facility and try the golf course, for instance, and it's a good idea to take them up on it to see how comfortable you feel there, Cullinane said. Even subtle aspects of a community, like the dominant political views of its members, can make a big difference in your happiness there. Stark said that in advising his clients, he's discovered that some retirement communities can be clique-ish. For instance, one client ultimately left a community that was full of former professors because she didn't fit in. "If you didn't have a Ph.D., you weren't of their social and mental status, in their view, and they would shun you," he said.
Also consider your plans to work once you move into a retirement community -- an increasingly common choice, according to Cullinane. A 2012 survey by the nonprofit Transamerica Center for Retirement Studies found 56% of Americans planned to work past age 65 or did not plan to retire at all. Some retirement communities schedule recreational activities in the mornings and early evenings to accommodate this.
5. Do a test run. Stark suggested renting an apartment in the area surrounding a retirement community for six months -- including "bad weather" months -- to make sure you like where you're moving before you commit. He's seen clients suffer buyer's remorse after moving to places like Florida before becoming familiar with the year-round climate.
The Investing Answer: Take time to shop around for a retirement community, so you understand the options. Consider your budget carefully. Remember, you're not just buying a new home. You're joining a community.