Unassisted Living on the Cheap

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At
some point, you will probably be forced by circumstances, mediated
by your kids, to move out of your home. You will then become visibly
dependent on others. Of course, we are all dependent on each other,
which is why we are rich. The modern division of labor has made
us rich. But there is something about being visibly dependent that
we resist. Such dependence is too much like becoming children again.
It’s unbecoming . . . except for children.

I
don’t think I would care. Give me a computer, a book, a yellow highlighter,
and the Internet, and I won’t care who cooks my meals. Yet maybe
I would care. It would depend on my mobility outside the facility.
A friend of mine who has early Alzheimer’s has been put into a facility
that locks him in. He calls it a prison. It really is. But, as he
declines, this is necessary. That merciless disease will make him
an infant again. Miracle drugs will make tens of millions of Americans
the healthiest Alzheimer’s patients in history.

THE
BIG MOVE

Last
year, my parents, in their late 80s, moved into a retirement facility.
It’s an unassisted care facility. They have their own apartment.

The
facility has a risk-reducing clause: If at any time either of them
requires assisted care, the facility has another wing. So, if you
are a resident of the unassisted care wing, you have priority in
the assisted care wing. This makes good marketing sense.

My
parents like the place. My father is happy with the food. My mother
is happy to be in the city. Until a year ago, they drove several
times a week for 45 minutes each way from their 10-acre place in
the country into town. The gasoline expenses today would be 30%
higher than they were a year ago. The risk on the road is less.
The highway is a killer. Logging trucks are always hitting cars — a
one-sided exercise in the laws of inertia. My parents are also closer
to the emergency hospital, which my father has had to be taken to
several times because of falls over the last few months. (My mother
suspects that a prescription drug weakened his legs. She quit giving
it to him, and he quit falling.)

The
key to their present comfortable circumstances is their health.
They don’t get sick very often. Neither of them is overweight. My
mother is a disciple of the legendary Francis Pottenger, M.D. She
took me to his clinic in 1948, where he helped restore my health
in 18 months through diet and exercise. She has tried to structure
their meals around Pottenger’s high protein, low sugar, no processed
grains diet. Over the years, this seems to have paid off. They both
have outlived both of their parents, all of whom died in their early
80s. The diet has worked for me. I am in good health. I can still
wear my 1975/82 three-piece suits — at least most of the time. (It
is not vanity that keeps me on my low-calorie, no grains diet; it
is parsimony. I last bought four cheap, L.A. garment-district suits
in 1994, and I do not plan to buy any more. For the record, I have
bought all but three of my suits since 1965 from Al Weiss Men’s
Clothing.)

For
those of us who don’t think Medicare will still be with us in our
old age, diet and lifestyle decisions today are ethically mandatory.
I don’t expect Medicare to go belly-up in one fell swoop. It will
go out the way its highest-cost patients do: on life support, drooling.
So, the care we can expect will be ever less efficient. My goal
is to stay out of the health care delivery system, as I have generally
stayed out of it, for the remainder of my life. I want to go belly-up
in one fell swoop. So do you.

My
parents say that their physicians keep looking at their watches.
There is a 15-minute limit. They spoke about this with a friend
of theirs in California. "Our limit is 12 minutes," she
said.

If
you are under Medicare, think of the system as a physician who is
ten years older than you are. Imagine what your level of care will
be like when you’re 75. You want a professional with a stethoscope.
You’ll get one on a catheter.

RATIONING
LIFE

Fact
of life: scarce resources are allocated either by money or by time.
If you are not in a position to pay the monetary price of some item,
you will pay with time. The health care delivery system speeds up
the conveyor belt for people who don’t have a feeding tube into
their bank accounts.

The
emotional commitment of care-givers is higher in an incubator room
for newborns than it is in an Alzheimer’s ward. People invest emotionally
in the results of their work. If the results are guaranteed to be
thwarted by a disease like Alzheimer’s, the care-giver is unlikely
to make an emotional commitment to the victims. The victims cannot
offer thanks, and their relatives would probably prefer to see a
victim die, especially if they are paying for care. The family’s
earthly inheritance is being depleted by the victim.

So,
the closer you get to the day of reckoning, the less committed the
health care delivery system is likely to be with respect to your
future. This is not the case if you are paying full ticket for the
care delivered. When you walk in the door as a full-price patient,
nobody groans. You bring with you the preferred sweetener: money.
But if you are covered by Medicare, and if the care-giver takes
Medicare patients, you are a liability. By law, he must charge Medicare.

I
have mentioned this strategy before, but it’s worth repeating. Try
to locate a physician in a small town. Preferably, he will be young.
He has lots of debts to pay. He is accepting new patients. If his
waiting room is empty, you will not be on a conveyor belt. In other
words, in the trade-off between time and money, you’re not costing
him much in money. His time is less valuable. In a city where his
waiting room is filled with Medicare patients, you will be on the
conveyor belt. Time is money. Time spent is money lost. He will
keep looking at his watch.

IF
YOU CAN MANAGE FOR YOURSELF

If
you live in a home large enough for children, and if the home is
in a neighborhood suitable for new families, you should move. The
house can be rented. The rental money may be more than the cost
of the following strategy.

A
used mobile home is clean living space. Like a used car, the depreciation
factor has hurt the original buyer. You are buying a bargain.

If
you live in a city that has zoned out additional mobile home parks,
then the rent may be high, but it won’t be as high as the land rental
component of your home. If there is a mobile home park in the county,
just across the city’s line, it will be cheaper. Zoning will not
have restricted the development of parks there.

You
should even consider developing a small, middle-class park while
you are still mentally and physically able. For an entrepreneur,
a middle-class park is a great way to make money and live rent-free
(or close to it) in semi-retirement. Frankly, for a person with
any sales and management skills, the rental income from a mobile
home park is much higher than rental income from a single-family
home that costs the same.

I
think of people living in a median priced home in California: $485,000.
That would buy or build a nice mobile home facility in most places
in the U.S. It would generate a lot of rental income.

There are three ways to sell. If you have not yet taken your one-time
tax-exempt home sale, take it now. Then buy rentable housing in
your new area, which presumably offers cheaper housing. Either pay
cash or buy very smart. If you have taken the exemption, move out
of your home. Rent it for a year. This establishes it as a rental
property at the market price when you moved out. Now you can sell
it, tax-deferred, and use the money to buy replacement rental properties
in your new area. Third, exchange it. See 1031
of the IRS Code
for details. Talk with your accountant. If he
is unfamiliar with 1031, find a new accountant.

Let’s
say you just want cheap living space. You can buy a used single-wide
mobile home for $10 a square foot, either at a mobile home sales
facility or at an auction for repossessed units. You will have 1,200
square feet of living space: three bedrooms, living room, kitchen,
2 baths. This is more space than you get in all but the nicest retirement
facilities.

A
double-wide home at 1,500+ square feet is not much more if you buy
at an auction for repossessed units. Your competitors will be mostly
mobile home retailers, who will not pay more than 50 cents on the
retail dollar.

Your
main problem will be finding a park that is still accepting homes.
The owners of mobile home parks make big money — 30% per annum — on
buying the homes of owners who lose their jobs and are forced to
move, or homes of recently deceased owners whose families don’t
want to fool around with the deceased’s mobile home. They pay bottom
dollar and then rent out the units. This is one of the most profitable
small businesses in America. Hardly anyone spots this opportunity,
especially in small towns. Then there is a zoning change, and rents
jump 20%. The existing park owners love zoning.

Another
strategy to buy a nice home cheap is to send regular letters to
residents of mobile home parks and offer to buy their homes. Offer
a $500 finder’s fee if someone tips you off to a unit that becomes
available, and you buy it. If an old person must be moved into an
assisted care facility, this is an ideal situation for you as a
buyer.

If
you figure $300 a month park rent plus an investment of under $30,000
for a nice used mobile home, you can buy clean living space cheaper
than your home will rent for. Plus, on a mobile home over eight
years old, most of the depreciation has gone out of it. You or your
heirs will be able to sell it for close to what you pay. You retain
ownership of your neighborhood home (rented), plus you don’t lose
too much on rent.

If
you move into a retirement center, you will pay four times as much
for the space. Someone cooks for you. That is very expensive food.
If you can still cook and care for yourself, a mobile home makes
more sense.

There
is a social stigma associated with mobile home parks. There is no
stigma associated with retirement facilities. Yet nobody looks forward
to living in a retirement facility. Moving in is usually as last
resort. That’s why they charge you as if it were a resort.

CRUISING
THROUGH RETIREMENT

Am
I exaggerating? Not really. Call around for tour ships. See what
a two-week cruise costs with a discount package. You will find that
it’s not much more expensive than living in a non-assisted care
facility. The food is better, the service is terrific, there are
things to do, new people to meet, and you can enjoy true leisure.

There
are downsides. Your cabin is small. You don’t establish long-term
friendships. You must go to a new ship every two weeks. But maybe
not. Sequential tourists are now becoming common on cruise ships.
These people provide steady income in the off-season. They are easy
money for the cruise ship companies. You can negotiate deals.

You
can rent cheap cabins or fancy ones. There is no stigma to a small
one. Who else knows? And people landside think you’re in fat city,
which in fact you are. They don’t call it "The Love Bloat"
for nothing. All you can eat: steak, chops, all sorts of choices.
Just stay away from the slot machines.

I
had heard about this strategy 20 years ago, but it did not register
mentally. It was a Wall Street Journal center column story
about some dissipated wealthy man who had lived for decades on cruise
ships. He would gain too much weight and then have to go to a fat
farm to take it off. Then he would go back to the ships.

In
a recent issue of the daily Early to Rise e-letter, I read
about an article by journalist Korky Vann (not a cruise ship name,
surely), who reported the following:

Hate
the idea of living out your life in an assisted-living facility?
How about spending your golden years sailing the high seas and
visiting exotic ports of call instead? If the idea sounds farfetched,
check again.

A
geriatrician at Northwestern University says full-time cruise-ship
living is a feasible and cost-effective alternative to assisted-living
facilities, and she’s got the research to back up her claims.

Dr.
Lee Lindquist, an instructor at Northwestern’s Feinberg School
of Medicine, compared the costs (over a 20-year life expectancy)
of moving to an assisted-living facility, a nursing home and a
cruise ship, including the expense of treating acute illnesses,
Medicare reimbursement and other factors.

She
found that the net cost of cruise-ship living was only about $2,000
more than the alternatives ($230,000 versus $228,000) and offered
a higher quality of service.

"Cruise
ships offer such a range of amenities — such as three meals
a day, often with escorts to meals if needed, room service, entertainment,
accessible halls and cabins, housekeeping and laundry services
and physicians on board — that they could actually be considered
a floating assisted-living facility," says Lindquist, who
published the results of her study in the November 2004 issues
of the Journal of the American Geriatric Society.

Lindquist
was inspired to undertake the research after taking a cruise with
her parents. She noticed a large number of senior travelers with
walkers, canes and wheelchairs who were enjoying the activities,
amenities and social stimulation of cruise life.

After
returning home, she started asking her patients about assisted-living
facilities vs. cruise-ship living. When many expressed concern
about the cost, Lindquist decided to take a closer look. The surprising
cost comparisons inspired many of her senior subjects to seriously
consider cruise-ship living. Retiring baby boomers were particularly
enthusiastic about the concept.

The
plan would work best, says Lindquist, for seniors who need a minimal
amount of care.

She
envisions a cruise community of seniors integrated with regular
passengers, rather than a "floating nursing home" carrying
only older adults.

"Seniors
who enjoy travel, have good or excellent cognitive function but
require some assistance with activities of daily living are the
ideal candidates for cruise-ship care. Just as with assisted living,
if residents became acutely ill or got to the point that they
needed a higher level of care, they would have to leave,"
says Lindquist.

"Until
then, they could select a cabin to inhabit as home during prolonged
cruising, while other passengers would arrive and disembark as
usual. The change in other passengers would provide seniors more
stimulation and interactions with new people."

That
socialization, says Lindquist, is key to the concept.

"Depression
in nursing-home residents is estimated to affect as much as 25
percent of residents," says Lindquist. "Would you rather
spend your days sitting in a lobby watching the same people go
by or be on permanent vacation?"

While
Lindquist’s idea hasn’t had widespread application, some seniors
are already practicing a variation of cruise-ship retirement.

Industry
experts say a number of older adults, nicknamed "serial cruisers,"
schedule as many as 20 to 30 cruises a year.

And
a Florida woman, 86-year old Bea Muller, has been a permanent
resident on the QE2 for close to five years.

Muller’s
husband died while the couple was on a world cruise in 2000. Rather
than move to a retirement home, Bea sold her home and possessions
and booked herself onto the ship for a year.

She’s
been renewing her yearly reservation since, and reportedly spends
her days happily dining, dancing and socializing with new acquaintances.
Her novel decision has earned coverage on CBS’s "60 Minutes"
and in numerous newspapers.

Lindquist
says seniors interested in cruise living should start out with
a short cruise and gradually extend their time onboard to see
if the lifestyle works for them. Feedback from those who’ve tried
it, she says, has been overwhelmingly positive.

"On
a cruise ship, you’re treated like a customer, pampered and indulged,"
says Lindquist. "In an assisted-living situation, you’re
a patient. Anyone who’s observed both situations can tell you,
there’s a big difference between the two."

I
am not recommending this lifestyle for a lifetime. It might be nice
for six months or a year, to get the travel bug out of your system.

Frankly,
I would go nuts on a cruise ship. I know this for a fact. I used
to be a speaker on cruises run by Howard Ruff in the late 1970s.
I wore my Al Weiss three-piece suits on board ship. No one else
did for some reason — the Caribbean in July, possibly. It was not
my lifestyle.

I
am only trying to illustrate a point: the high cost of unassisted
care retirement centers. If you do not need assisted care, there
are alternatives to an expensive facility.

CONCLUSION

There
are those over-55 communities, cogently described 37 years ago by
my friend Al Bell: "The elephant burial grounds for the white
middle class." One major disadvantage: The homes are aging,
just like their owners. Future retirees will want to live in whatever
homes are considered contemporary. Yours won’t be.

If
you like to hit a white ball into a hole, and you can do this below
par, fine. That, too, is not my lifestyle. But move to an area like
Bella Vista, Arkansas, where the house appreciation will cheer up
your heirs.

If
you wait until true old age, then a retirement facility is OK. Leave
the details to others. Enjoy being a pure consumer.

Here,
I have in mind people approaching retirement who have two decades
or more of active, independent living ahead of them, and who want
to conserve their capital or even add to it. A residence strategy
that involves renting your mortgage-free home and finding less expensive
living space to rent is wise. Your heirs will appreciate your foresight.

April
9, 2005

Gary
North [send him mail] is the
author of Mises
on Money
. Visit http://www.freebooks.com.

Gary
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