Most senior housing communities require that potential residents prove their financial ability. This is usually done through an approval process questionnaire which asks about income from pensions or retirement plans, home value, and savings. Communities will also ask about any debt you have and the amount of monthly payments on that debt.
The worksheet helps the community evaluate two things: your annual income and your assets.
Annual income includes social security, pensions, retirement plans, and dividends or bond payments. The worksheet given to you by the community should make it easy to tally all of your income into one number. You might have to subtract out mortgage or other debt payments.
In general, most communities require that your income be at least 1.5 times the monthly fee. For example, if the community’s monthly fee is $2,500, your annual out-of-pocket expense is $30,000. Therefore, you would need at least $45,000 in annual income in order to qualify to live in the community.
Assets include your house (minus remaining principle on your mortgage) and other investments like stocks, bonds, businesses, royalties, and rental property. The community will require that you note all debt owed on these assets.
Most communities require assets in excess of 1.5 times the entrance fee. For example, if the community charges $200,000 for the apartment of your choice, you would need at least $300,000 in assets (including the value of your home) in order to qualify to live in the community.
How do communities know this is enough money?
They don’t. Changes in the stock market, low investment returns, or unforeseen expenses can cause residents to experience dramatic declines in their net wealth. However, having a cushion of 1.5 times assets and income allows most residents to weather even the toughest of financial storms.
What if I don’t qualify?
It is not uncommon for potential residents to have more assets than income or vice versa. In the case of a resident meeting one criterion by a wide margin but not the other, most communities will make an exception. This is solely at the discretion of the executive director. At the very least, communities will require a cosigner like an adult child or relative who promises to pay the balance of fees should the resident run out of money.
As stated above, income and asset requirements vary between communities. Some communities might have more lax or more stringent requirements. Especially since the recession, look for higher income and asset requirements, and expect some communities to ask for proof via copies of financial statements.