Retirees: Does it Make Economic Sense to Move Into a 55+ Community?

America is aging, and the number of retirees continues to surge as the baby boomer population grows older. As of 2023, there were an estimated 49.4 million retired workers receiving Social Security Benefits, according to the Social Security Administration. And that's only set to rise; by 2050, it's estimated by the National Institutes of Health that America's 65-and-over population could reach 88 million.

That means quite a few retirees will be looking for economically viable housing options in the years and decades to come. There are many choices to consider, from staying planted at home all the way up the scale to assisted living facilities. 

But for those seeking a solution somewhere in between, residential communities targeted toward retirees 55 and over might be an excellent option to consider. While these residences typically offer various benefits and amenities, the question we'll attempt to answer here is whether it makes good financial sense.

What is a 55+ Community?

First off, for those who may not be aware, let's talk about what exactly a 55+ community really is. Unlike nursing homes or assisted living facilities, 55+ retirement communities are exactly what they sound like. These are communities designed for those looking to retire amongst others their own age, without necessarily needing any healthcare or other medical support. What's more, these communities are usually designed to keep those 55 and older active and engaged.

Since these communities are focused on residents who are 55 and older, there are specific rules about minimum ages for residents, homeowners, renters, and even visitors. As per the amendment to the Fair Housing Act which allows age-restricted living, these communities will usually at most follow an 80/20 rule - meaning 80% of residents must be over 55, with no more than 20% under 55. And while visitors are allowed, no one under 18 is allowed to live there full time.

Residences in these communities are usually smaller units, allowing for those above 55 to downsize from their current living arrangements if needed. Units might consist of condominiums, townhomes, or even manufactured homes. Residents are able to own their homes outright, but can also enter under lease or rental agreements. 

And while there are many of these communities scattered across the U.S., most tend to be in high-demand locations. This would include those in the sunnier states, with Florida taking the top spot, though other states such as Arizona, California, and South Carolina also have a high concentration.

Why are 55+ Communities Popular?

There are plenty of fairly obvious reasons to consider relocating to a 55+ retirement community in the first place. These benefits are usually displayed front and center on company websites, and may include everything from on-site activities and events, to classes and housekeeping services, to pools and even golf courses!

Depending on what you want out of your retirement and what you can afford, these communities can range from a simple way to meet other active retirees, to luxurious living experiences. One of the main attractions is the community involvement, providing retirees with a great way to remain active and engaged as they transition out of the workforce. Organized activities and common community spaces can encourage residents to get to know each other and build relationships. This can be an important aspect to community living, especially for individuals who might live alone or have limited family members nearby.

Many 55+ communities also provide the relative safety of a gated neighborhood. Security on site means there is little worry about break-ins and crime. Furthermore, many of these communities are located in quiet areas. And with the added benefit of few - if any - residents above 55 years old, these communities typically provide a nice, peaceful backdrop for however you choose to spend your retirement.

So, does it add up financially?

How Much Do 55+ Communities Cost?

A 55+ retirement residence can certainly be an appealing option, but depending on the location and amenities available, it can potentially be a costly one. 

If you're hoping to live in the sunshine year round near a large city in a luxurious residence, for example, homeownership in one of these communities could total upwards of $4,000 per month. However, if you're looking for a rural location with fewer amenities, housing costs might be as low as $1,500 per month. And while you'll still need to factor in budget items such as food and utilities, expenses such as road maintenance, landscaping - and, of course, many activities - are often included in the community's fees.

Those monthly home owners’ association (HOA) fees can vary quite significantly by location depending on the events, services, and any other extras provided by the residence. What's more, HOA costs can rise year after year to adjust not only for inflation, but demands made by residents for improvements and amenities. Therefore, the HOA fees you sign up for may not remain at that price indefinitely.

Depending upon location, fees, and perks, annual costs for 55+ communities can vary from $12,000 to $42,000 - quite a broad range, though $3,000-3,500 is a decent monthly estimate for high-end communities. For perspective, the latest Census Bureau data (as of 2021) pegged the median cost of U.S. homeownership at $1,672 per month.

It's worth pointing out that these 55+ communities generally have a limited buyer pool due to the age restrictions mentioned above. This can impact pricing in a positive way, since limiting qualified buyers to those 55 and over typically dampens demand, which brings the price down. It's not a guarantee of cheap 55+ housing, though; competition can still be fierce for homes in the most in-demand exclusive communities.

Notably, these monthly housing costs don't include items that seniors may need later in life, such as assisted living aid or on-site medical care. However, there is usually transportation available to a nearby healthcare facility, and the option to bring in your own in-home healthcare assistance. 

In any case, 55+ communities tend to be 30-50% cheaper than assisted living, since on-site medical care isn't part of the package deal. However, unlike assisted living, Medicare and Medicaid will not help foot the bill for housing expenses in a 55+ community.

An Individual Choice

When it comes to making the decision to live in a retirement community, the choice is an individual one. If you're a retiree with a limited budget, who doesn't spend much money on transportation, activities, or an active lifestyle, then staying at home may be a suitable option - especially if you're already locked into a favorable mortgage payment. 

However, for those wanting a more active lifestyle, needing to downsize, and wanting to meet more people their own age, then a 55+ retirement residence is certainly an appealing - and potentially more affordable - option.

To really decide which choice is right for you, think about what is most important in your life as you age. Are you looking to meet more people and stay active and engaged? How much can you afford to spend on a monthly basis for necessities you can receive at home, versus the “nice to haves” available at a 55+ community? 

And of course, consider your lifestyle. If you prefer independence, community-focused housing may not be the best fit. In contrast, if you're looking for an active, structured daily schedule as part of an involved community, then perhaps a 55+ neighborhood is exactly what you want.

The only way to make this decision is to sit down and look over your own situation, with your own numbers. And of course, a financial advisor can help you with this. By weighing the pros, cons, and your own budget, retirees will be able to make the decision that's perfect for them.