Making the decision whether to stay or go in retirement can be a tough one. As CFP Board Consumer Advocate Eleanor Blayney, CFP® discussed in a recent blog post on this website, “aging in place” – or remaining in one’s home during retirement – is one option that requires a careful evaluation of the financial costs involved.
An altogether different option – with different financial considerations than just aging in place – are Continuing Care Retirement Communities (CCRCs). In some senses, they serve as a combination residence and Long Term Care (LTC) policy in one.
I’ve heard someone claim, “LTC insurance is the best gift I can give to my children because they know I will not run out of money and will be taken care of where I am living.” If you never purchased or qualified for LTC insurance, CCRC may be an option to consider.
Let’s define what a CCRC is and the benefits.
It is a retirement care community that offers different levels of care. You can go in active and healthy and move within it as you age, and as different medical conditions arise. In one “campus” you can have:
- Independent Living for those who don’t need any help with anything
- Assisted Living for those who need help with activities of daily life (ADLs)
- Memory Care for patients with Alzheimer’s disease, dementia, and other types of memory problems
- Skilled Nursing and Rehabilitation, both short- and long-term
CCRC can be great for couples. If the health of one partner fails, he or she can move to another part of the community – potentially walking distance away. It can be a big comfort for the couple to know that all the health care infrastructure is onsite, and that they will not be separated.
Upon entering, healthy adults can reside independently in single-family homes, apartments, or condominiums. The CCRC will charge a hefty entrance fee, which usually means the couple will need to sell their primary home. Oftentimes, there is an option for refundability of the entrance fee in full or in part within a given time period. Typical options are 90 percent refundable, 50 percent refundable, and zero percent refundable. The refundable portion generally declines over time. Most people choose the zero percent refundable option. The higher amount paid for refundability is not held in escrow and is an asset of the CCRC until the resident passes away, at which time the CCRC must repay any remaining refund to the decendent’s estate.
Entrance fees can range from $100,000 to $1 million, and cover the purchase of the residence, operation expenses of the facility, and the provision of lifetime care, should one or both members require it. CCRCs also have monthly charges which range from $1,500 to $5,000, but may increase as needs change. They also typically go up more than inflation.
CCRCs provide value for what they offer. While residents are independent, CCRCs arrange trips, social events, and hold lots of stimulating, community events. Monthly fees, meanwhile, may cover meals, housekeeping, maintenance and activities, along with some or all health care services.
One major pitfall to consider: if a CCRC is forced into bankruptcy, residents may be considered unsecured creditors and could lose any refundable entrance fees. Or the facility may be bought out of bankruptcy by a new owner, resulting in service changes and other upheaval for residents.
Those looking at CCRCs should ask for audited financial statements, and keep an eye out for red flags: expenses that are greater than operating income, or liabilities that exceed assets. A CFP® professional can help you evaluate the CCRCs you might be considering.
For more information, visit:
Financial Performance & Reporting in Continuing Care Retirement Communities (CARF International)
About Continuing Care Retirement Communities (AARP)
Risks and Rewards of Moving to a CCRC (Kiplinger)