Should Seniors Live Alone or With Family?

Rachel Koning Beals

Put Grandma in the garage? Yes. But a garage transformed into a well-appointed studio apartment with skylights and a patio for morning coffee.

Home remodeling for those who can afford it is one answer to a growing issue: How do you take care of family members in their late-retirement and twilight years? And then, a tougher question: When a home solution won't work, what assisted-living or nursing home options are available?

[See The Best Places to Retire in 2012.]

Growth of multigenerational households (mostly grandparents, parents, and minor children, but also other extended-family relationships) accelerated during the economic downturn. Some families shared quarters because the unemployment rate (a 30-year high) forced some out-of-work adult children to move back home. Sometimes it was the senior generation that needed a housing solution because they were no longer able to physically or financially go it alone.

The rate of this change is worth noting. In 2008, 6.2 million intergenerational households resided in the United States. That's 5.3 percent of all households. That number jumped to 7.1 million households, or 6.1 percent, by 2010. The two-year increase marked a faster rate of growth than the previous eight years combined, according to AARP's Public Policy Institute.

Even if the economy improves, it's a trend that looks to stick as families address graying baby boomers who may be facing an underfunded retirement, according to aging and financial professionals.

In the best and worst of times, the benefit of companionship and shared household duties, such as childcare, can't be dismissed. For some families, living together is not a solution to a problem but an exercise in bonding. There are also different cultural interpretations of the social value of multigenerational households. But for many families, finances are certainly a factor in their decision to merge under one roof.

Kevin Young, a certified financial planner with Young Wealth Management in Davis, Calif., sees an increasing number of "sandwich generation" clients in his tax practice. "They're taking care of aging parents and children at the same time, sometimes working multiple jobs to accomplish that," he says.

[See How to Avoid Being a Financial Burden on Your Children.]

Young says some boomers and their parents are still playing retirement savings catch-up as corporate America (and the public sector too, in some cases) shifts from defined benefits such as pensions to market-reliant 401(k)s and other individual retirement accounts (IRAs). Others just dropped the ball and didn't save enough.

Options. George Yedinak, editor and publisher of trade newsletter and blog Senior Housing News, sees an industry boom coming to meet the needs of multigenerational and senior housing. This includes concepts such as Greenhouse Project (modest stand-alone homes that include high levels of healthcare), senior villages, co-housing (unrelated seniors sharing space to reduce costs), in-law apartments, and other communal living solutions.

Yedinak notes that regulation of these housing models isn't currently as comprehensive as regulation nursing homes and other traditional care facilities. Regulation catch-up could bring a mixed impact--more scrutiny of care but also reduced incentive for industry growth.

As for home modifications, those are on the rise, too. "Those living in single-family homes will invest capital in their homes as more parents move in with their adult children. Using home office spaces, basements, attics and other existing solutions will make way for more formal renovations including the 'grannie apartment' as either an add-on or standalone," he blogs. "Unlike additions for bathrooms or kitchens, the resale value of 'grannie' renovation should be discounted greatly. Others may opt for pre-fab cottages or PODs as solutions that can be moved, stored, or re-sold when a senior needs to move to a more comprehensive care community."

The longevity conundrum. Healthcare presents a mixed picture for boomers; active lifestyles and treatment developments are helping stave off some disease, but longer living also raises the odds of multiple serious conditions in advanced years and the need for body maintenance, such as joint replacement.

Some households are able to accommodate parents with physical issues and the care industry is responding with more flexibility, often traveling to see patients. But eventually, no matter how welcoming younger generations are to opening their homes to the seniors, they may just not be able to handle the level of care needed.

The home versus care-facility debate welcomes a whole new round of cost concerns. According to Genworth Financial's 2011 Cost of Care Survey, while the cost to receive care in an assisted living facility or nursing home increased over the past year, the cost to receive care in the home, Americans' preferred long-term care setting, remained unchanged. Nationally, the median annual cost of long-term care in an assisted living facility is $39,135, an increase of 2.4 percent from 2010. The comparable cost for a private nursing home room rose 3.4 percent, to $77,745. At $18 per hour for homemaker services and $19 an hour for home-health aide services, the median hourly cost to receive care in the home remained flat over the past 12 months.

[See Should You Buy Long-Term Care Insurance?]

Aging consultancy Age Wave says some older Americans cling too much to the notion of independence in their own home and don't fully weigh the costs and benefits of retirement facilities.

Based on a study, the group offers a list of five myth-busters that may help families make these tough decisions:

-- My current home will be the best place to live in retirement. Many retirees believe remaining in their house gives them the most freedom and independence. But the reality is that by staying at home, they spend twice as much time doing housework and shopping as someone in a retirement center.

-- My current home is the best option to lead an active life and stay connected. Among those over 80, nearly half report suffering from loneliness--twice the rate of younger adults. Depression, alcohol abuse, and obesity can follow.

-- Home is less expensive. Among homeowners older than 65, 84 percent have paid off the mortgage. Still, a house is expensive. Taxes, utilities, upkeep, and insurance really add up.

-- It would be easy to get any care I might need at home. This may be true. But home-health care can further isolate anyone unable to get out. It is also expensive and can add to burdens on extended family.

-- Retirement centers are filled with people who are sick and dying. This may be the most off-putting myth. Today's centers are not where old people go to die. This is partly because most centers require new residents to be in good health and be able to live independently when entering the community.

Let's talk. Families are challenged to communicate their needs and desires for a housing solution. Cultural differences certainly determine the "acceptance" of multiple generations in a single household, but for the most part, the concept has moved in and out of trend in the United States. Needless to say, it's a touchy subject.

In a Metlife Mature Market Institute online survey of 2,123 Americans ages 21 to 65, conducted from June 29 to July 20, 2011, nearly half--46 percent across generations--believe children have a responsibility to provide financial support to their own parents or in-laws if they experience financial difficulty later in life. For many, this means allowing a parent to live with them if he or she is not healthy enough to live alone without caregiving (58 percent overall call this a strong or absolute responsibility), or allowing a parent to live with them if he or she is having financial trouble (50 percent). At the same time, however, many parents say they would not accept financial assistance from their children in old age.

The sad truth is that they may not have much choice. Better to discuss these issues now, when all the stakeholders can play a role in determining what "home" will look like in the future.