Brad Breeding, CFP
Brad Breeding, CFP, president of MyLifeSite, which helps consumers research continuing-care retirement communities. Based in Raleigh, North Carolina, he is author of What’s the Deal with Retirement Communities? www.MyLifeSite.net
Bottom Line: How to choose a “continuing care” facility whose assistance ranges from a little to a lot
Most people prefer to stay in their homes as long as they can as they age—even after they can’t take care of all the things they used to. But that can be socially isolating and physically difficult. It’s also stressful for family members who, at some point, will have to help maintain the older person’s home, make sure that he/she eats properly and scramble for medical care and housing if the person develops new health problems or the person’s abilities erode.
One alternative that has grown in popularity—a continuing-care retirement community (CCRC) that lets seniors age in place as their abilities and needs change. There are more than 2,000 CCRCs in the US now, and their signature attribute is that they essentially are hybrids. Able singles and couples live independently but have the option of sharing communal services such as dining halls and daily social activities. Within the same campus, residents have access, should it become necessary, to assisted-living services such as daily dressing and bathing support, a skilled-nursing home and sometimes even special facilities for dementia and/or hospice care.
In a well-run CCRC, no one has to live less independently—or more independently—than makes sense. Residents can maintain a continuum of comfort and connections no matter what happens.
If there’s a downside, it’s that these communities require a big financial commitment, typically six-figure fees up front. (See “What CCRCs Cost” below) Those who choose to deploy their money this way, though, look at it as a worthwhile expense. Here’s how to figure out whether a CCRC would be a good choice for you (or a loved one) and how to evaluate and compare them…
There are CCRCs in every state. (For a list, go to CCRCS.com.) To apply, you typically need to be at least 62 years old and able to live independently. A community may be a mix of physically adjacent buildings, such as garden apartments or townhomes spread across a campus setting. In more urban areas, there might be a single high-rise building. Upscale amenities are the drawing card for many CCRC residents. These can include on-campus walking trails, gyms, activity centers, golf courses, excursions to museums, theaters and stores, and fairly posh dining halls. How to evaluate a CCRC…
Make sure that the place meets your practical needs. Country club–like amenities are nice, but you need to be comfortable with the age range and mix of residents, how attentive the staff is and whether the meal schedule and food selection work for you if you choose communal dining. Most CCRCs have guest suites. Plan to visit and live there for several days. Examine the list of weekly activities. Is there enough to engage you and help expand your social circle? If you are considering giving up your car, what kind of transportation is available?
Evaluate the quality of care. Check with your state’s long-term-care ombudsman, who advocates for residents of adult-care facilities, to see whether there are any complaints on file (TheConsumerVoice.org/get_help) and, if so, how serious they are. Also, use the “Nursing Home Comparison” tool at Medicare.gov, which rates nursing-care facilities and compares important statistics such as the total number of licensed-nurse staff hours devoted to each resident per day.
Residents typically are charged a onetime “buy-in,” or entry fee, which can range from less than $100,000 to more than $1 million, and a monthly recurring fee generally ranging from $2,000 to $5,000 for singles ($3,000 to $6,000 for couples) that covers the communal amenities including meals, your rental housing unit and utilities. Only a tiny percentage of CCRCs allows residents to purchase their homes or become co-op owners. Expect monthly fees to increase at a rate of 3% to 4% annually.
The exact amount of your entry fee and monthly fees are determined by the type of contract you sign with the CCRC. Most common: A fee-for-service contract is a pay-as-you-go option that offers low entry and monthly fees for independent living—but if you need assisted-living services or the nursing home in the future, you pay the CCRC’s going rate at that time, which is tacked on to your regular monthly charges. According to extensive documentation on pricing from CCRCs in all states in which they are regulated, this type of contract would cost a single person in an independent studio unit around $90,100 for the entry fee and a monthly charge of around $2,100. A couple in a two-bedroom unit would pay around $203,600 for an entry fee and a monthly charge of around $3,900, though these figures vary greatly by region and type of amenities. Moving up to advanced-level care in the future could easily double your monthly charges. Consider the fee-for-service contract if you have long-term-care insurance or if you are in good physical health and think you’ll have enough assets in the future to cover the cost of advanced health care.
A life-care contract has much higher entry and ongoing monthly fees, but there are no additional costs for advanced health care. An individual would pay around $159,700 as an entry fee and monthly charges of around $2,450…a couple, around $289,450 for an entry fee and a monthly charge of around $4,750. A life-care contract means that you essentially prepay for long-term care that you may not end up needing, but it provides financial security and peace of mind by limiting the risks of those costs skyrocketing in the future.
Important: CCRCs do not provide or cover doctor’s visits, most medication or hospitalization. These are costs that may be covered if you have long-term-care insurance or by Medicare or supplemental Medicare insurance for those age 65 and older.
Before signing a CCRC contract…
Consult a financial adviser. Whether it’s wise to choose a CCRC is not only about your lifestyle but also a long-term financial decision that will depend in part on your age, existing assets, your ability to absorb future cost increases and your health status. Most CCRCs require a prospective resident to have total assets equivalent to at least twice the entry fee and monthly income that is at least 1.5 times the monthly fees.
Check the refund policy pertaining to residents who leave the community. Most CCRC contracts allow a full refund of entry fees to you or your heirs if you and your spouse move out or if either of you dies during a specified time period, which might be two years or more. After that, the refundable portion of your fee may decline for each year that you stay.
About 80% of CCRCs are nonprofits, and some were started decades ago by churches or charitable organizations to serve their aging members. But you still want to make sure that any CCRC you consider has the financial reserves, income and cash flow to meet its long-term obligations to you. Although fewer than 2% of these communities have filed for bankruptcy protection over the past 10 years, a CCRC that runs into financial trouble could mean residents lose any refundable entry fees, or it could be bought out by a new owner, resulting in changes to amenities and services.
What to do to protect yourself…
Request a copy of the CCRC’s audited financial records, also known as disclosure statements, for the past five years. It’s a red flag if the CCRC doesn’t offer complete transparency about its finances. Consider hiring an elder-law attorney or CPA if you don’t feel qualified to evaluate these documents. Look for anything unusual, such as a large amount of debt, failure to meet bond obligations or evidence of liabilities exceeding assets, or expenditures exceeding operating income.
