ABCs of CCRCs: Choosing a Life Care Community

 

My husband and I recently took a big step in planning our future. We paid a $1,500 refundable deposit to get on the waiting list for a continuing care retirement community (CCRC) with a target move-in date of 2033. Why the long timeline? We are healthy, active, and not ready to leave our beautiful single family home. At the same time, we don’t want to wait until our 80s and find 200 people ahead of us. The waiting list is about 200 with annual turnover of about 20-25 units.

Also known as Life Care or Life Plan communities, CCRCs provide housing for older adults on a continuum beginning with independent living and including assisted living, memory care, and/or skilled nursing care services, if needed. Below are seven things to know about CCRCs:

 

Rationale for CCRC Selection- Three common reasons why people select CCRCs are 1. to have a “forever home” in later life, 2. to not burden their family with end-of-life housing and health care decisions, and 3. they do not have family members to assist with end-of-life decisions.

 

CCRC Ownership- Approximately 80% of CCRCs are non-profit organizations. Some are faith-based, some have affiliations with educational institutions, and some are independent non-profits.

 

Entry Fees- There are different payment models. Many CCRCs charge a substantial six-figure entry fee and some offer rental contracts. Entry fees increase with the square footage of the independent living unit that an individual or couple selects. Entry fees at the CCRC that I selected ranged from $237,000 (488 sq. ft.)  to $863,100 (2,350 sq. ft.) with an extra $59,000 for a second person. Part of the entry fee is used to pre-pay residents’ future health care services.

 

Monthly Fees- Like entry fees, monthly fees increase with the square footage of units and the number of occupants. For the units noted above, the monthly fees are $3,190 and $9,455, respectively, with an extra $1,850 charged for a second person.

 

Health Evaluation- Prospective residents must generally complete a health questionnaire and undergo a cognitive assessment to be offered entry into a CCRC. This is done when they reach the top of the waiting list and are near the time that they plan to move in. It is a standard risk management practice to reduce the risk of a high number of residents needing nursing care.

 

Financial Evaluation- Prospective residents must also prove that they have the financial resources necessary to live at a CCRC. A net worth statement and supporting documentation is generally required. Common metrics used by CCRCs are that prospective residents should have assets totaling at least twice the entry fee and income totaling at least twice the monthly fee.

 

CCRC Contracts- Most CCRCs have several contract options. The difference boils down to how much care is prepaid. Lifecare contacts prepay unlimited care with a level inflation-adjusted monthly fee for predictability of housing and health care costs. A disadvantage is pre-paying for care that may not be needed. Some people opt to pay less up front and more later, if necessary.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Financial Planning for Longevity

 

Longevity risk is the possibility of living longer than expected and having adequate income/assets for an extended period of retirement. I recently attended a webinar that predicted future life expectancy will increase due to medical technology advances such as CRISPR (modifying DNA).

The webinar also noted that many older adults no longer follow a linear lifeline (birth-school-work-retire-die) but, rather, a cyclical lifeline. They reinvent themselves in later life, often with additional education and new jobs or other meaningful pursuits. Lifelong learning is a key factor.

 

The webinar further explained that the 3-legged stool of retirement income sources (pension, Social Security, investment earnings) is very wobbly. Fewer than 20% of employers provide pensions and the Social Security trust fund is estimated to run out of money in 2033. At the point that reserves are depleted, FICA tax income will be able to pay only about 77% of scheduled benefits.

 

What to do? Below are seven financial planning strategies for “the age of longevity”:

 

¨   Develop a Long-Term Care (LTC) Plan- Consider various options including self-funding LTC expenses, moving to a continuing care retirement community, and LTC insurance. Buy a LTC policy with comprehensive coverage (in-home, assisted living, and nursing home).

 

¨   Optimize Social Security Benefits- Learn about various claiming strategies for Social Security. Consider delaying benefits up through age 70 to increase monthly payments if you are in good health, are financially secure, and expect to live a longer life span.

 

¨   Plan for Health Care Costs- Estimate health care expenses in retirement and work them into your budget. Costs include Medicare premiums, deductibles, copayments and other out-of-pocket expenses. Shop around for coverage during annual open enrollment season.

 

¨   Stay Healthy- Invest time and money in maintaining good health through proper nutrition, regular exercise, and preventive care (e.g., screening exams). Healthy habits can reduce health care costs and improve quality of life in “old old” years (age 85+).

 

¨   Consider a Reverse Mortgage- Evaluate the option of a reverse mortgage to tap into home equity for living expenses without having to move. Be sure to understand the terms of the loan and downsides (e.g., relatively high fees and smaller inheritance for heirs) before proceeding.

 

¨   Explore Annuities- Consider purchasing low-expense annuities to provide a steady stream of income in retirement. Compare different types (fixed, variable, or indexed) to find the best fit for your financial needs and investment risk tolerance.

 

¨   Get Advice as Needed- Consult with a financial planner, tax professional, or estate planning attorney for guidance on investing and tax-efficient asset withdrawal strategies.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Financial Transitions in Later Life

 I recently presented a webinar for financial practitioners called Important Financial Transitions in Later Life. Based on content of my book, Flipping a Switch, “flipped switches” are a metaphor for later life transitions. Below is a brief summary of 11 financial transitions:

Spending Down Retirement Savings- It can be difficult psychologically for “super savers” to spend down accumulated wealth because it feels like a loss. Two good questions to ask yourself are “If you don’t spend your money, who will?” and “What are you waiting for?”

 

Deciding When You Have “Enough”- A good way to determine whether you have saved enough money is to try at least three retirement savings calculators and compare the results.

 

Creating a Retirement “Paycheck”- To create a regular stream of income, options include bond or CD ladders, low-expense annuities, and personalized modifications of the “4% Rule.”

 

Required Minimum Distributions- This is a mandatory “flipped switch.” Make a plan for the use of money that is withdrawn. It can be spent (for living expenses or fun), gifted, or resaved.

 

Later Life Investing- Investors generally get more conservative as they age and guidelines like 100 (or 110,120) minus age are a useful start. Asset classes should be rebalanced regularly.

 

Adjusting to Changed Income- Income changes vs. working years. To adjust to living on less, people can work longer, spend less, move to a less costly home or area, and/or tap home equity.

 

Changed Tax Withholding- Many older adults have multiple streams of income and must make sure that tax withholding/estimated payments are adequate to avoid underwithholding.

 

Becoming a Social Security Beneficiary- Key factors are full retirement age, the annual earnings limit, benefit planning for couples, and a possible higher benefit if you keep working.

 

Health Care Transitions- Older adults have more time for exercise and healthy eating and should earmark a portion of their household budget for out-of-pocket health care expenses.

 

Transitioning to Medicare- A good resource to “get up to speed” is the annually updated Medicare and You handbook. Higher-income beneficiaries need to understand IRMAA, which is the higher monthly Medicare premium that they must pay. There are five tiers of IRMAA.

 

Setting New Financial Goals- Once people get “to retirement,” subsequent financial goals are “through retirement.” Like all SMART goals, they need a projected cost and time deadline.

 

More information about financial transitions in later life can be found in Part 1 of my book.

 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

Five Years of 55+ Community Living: Six Barbservations

 

In 2019, my husband and I purchased a brand new home in an age 55+ community located in Ocala, Florida. With five years of experience living here, now is a good time to reflect on this experience. Below are some insights for others who might be considering a similar move:

HOA Living- Our homeowners’ association (HOA) fee includes two community clubhouses; amenities (e.g., spa, pool, bocce and pickleball courts), landscaping, and a lifestyle office that organizes dozens of monthly events for residents. Cable, internet, and lawn mowing are not included. In 2019, our HOA fee was $200. Today, it is $245, a relatively modest $45 (22.5%) five-year increase driven by inflationary trends and improvements and additions to community amenities. There are many rules (e.g. no political lawn signs and specified house paint colors) and changes to landscaping and house exteriors require HOA approval.

 

Transitory Residents- I’ve been amazed at how many residents have moved away from- or even within- the community in just five years. Common “triggers” for moving have included an unhappy spouse, desire for a larger house or more land or a smaller house, inability to afford and/or maintain a home following widowhood, desire to live closer to family (especially following widowhood or the birth of a first grandchild), illness, and just plain aging and a need for assistance with activities of daily living.

 

Plentiful Activities- There is literally a formally organized club or interest group for everyone. I joined several that reflect my interests (bocce, computer, culture vultures, and travel). In addition, there are plays put on by community residents, concerts, music bingo games, food truck nights, seminar speakers, and more. On top of that, the city of Ocala has so many events and cultural activities, all within a short drive, including those at the World Equestrian Center.

 

Conversation  Topics- People don’t spend a lot of time talking about work they used to do or, like me, are still doing….unless it is a conversation with someone who is also working. It turns out, there are a number of us. We now have a Facebook group just for residents who own small home-based businesses and I was amazed to see the variety (e.g., artists teaching painting classes, hairdressers, real estate agents, pet sitters, airport drivers, etc.). Top conversation topics among those who are not working include family members, health issues, community events, HOA rules, the price that departing neighbors’ houses are listed and selling for, and travel.

 

Peace, Quiet, Security, and Socialization- My community is located away from major roads and gated, which provides a decent level of security. Compared to our New Jersey house, it is also very quiet. There is no street noise or wild parties by neighbors with teenagers. Our houses are only 10 feet apart from each other so people know their neighbor’s names and often help each other out. We also have monthly ladies lunch groups to socialize with neighbors.

 

It May Be Temporary- Many people leave when their health deteriorates. Age 55+ communities are great when people can live independently. Not so much when they have major health issues, especially when they are solo agers (i.e., people without a spouse and children) or have family members that live far away. My husband and I have already made plans to move into our final home in a continuing care retirement (a.k.a., lifecare) community in 2033 for a seamless continuum of care in later life. 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Barbservations as a Sole Next-of-Kin Survivor

 

Earlier this year, I lost my only sibling to cancer/heart disease and became the sole next-of-kin survivor from my small family of origin. My brother had no spouse or children. In addition to grieving the loss of my brother, I dealt with financial matters (e.g., unexpectedly paying for a cremation and doing a forensic audit of my brother’s finances) and technological hurdles (e.g., searching for a digital assets inventory and learning how to navigate an Apple Mac computer).

With some recent perspective, I offer the following Barbservations to help other sole survivors:

 

Take Care of Yourself- Emotional and physical well-being are extremely important when someone is grieving. Eat well, engage in physical activity, and get adequate sleep. Also seek out social support. I was very lucky to have my brother’s long-term partner to share stories, memories, feelings, and a multitude of postmortem tasks. We formed a close bond as a result.

 

Organize Important Documents- I used my financial planning skills to create a postmortem net worth statement for my brother using information from bank statements, credit card bills, tax documents, and other sources. I also prepared a binder to hold documents related to my brother (death certificates, social media account closure information, cremation paperwork, information about my brother’s websites, and copies of my brother’s identification information etc.). Having everything in one place kept things organized and provided a sense of control.

 

Take Contemporaneous Notes- As this definition states, contemporaneous notes are detailed, accurate, time-stamped notes that are taken when an event occurs or immediately afterward. Think: former FBI director James Comey and his detailed memos about conversations with President Trump. Starting when my brother became ill, I took detailed notes of conversations with him, his partner, and various people who helped us out along the way. Several of my conversations with my brother were long and deep and I now have notes about them to refer to.

 

Celebrate Their Life- Find a way to honor a loved one’s memory by celebrating their memory in meaningful ways. For my brother, his partner and I spread his ashes at sites (e.g., Blue Ridge Parkway) that he wrote about in his blog. In addition, he was cremated in a favorite motorcycle jacket and his creative works will live on in a Pinterest page that I found by accident. I also paid to keep his website up another year so I could re-read and save all his blog posts.

 

Update Your Own Estate Plan- If your estate plans included your deceased relative, they will need to be reviewed and updated. For example, since my brother was a beneficiary of my will and “Plan B” health care proxy in my living will, I subsequently prepared new documents.