Should Seniors Live Alone or With Family?

Weak economy, and now longevity and savings challenges, accelerating growth of multigenerational households.

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The following article comes from the U.S. News ebook, How to Live to 100, which is now available for purchase.

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."