Me-Search Project: A Deep Dive into CCRCs

 

I recently taught a 90-minute class about continuing care retirement communities or CCRCs. My audience was about 60 older adults. I was a little apprehensive that class members might be shocked and/or angry when I described entrance fees for CCRCs, which are typically hundreds of thousands of dollars. Less than 5% of Americans have $1 million or more saved for retirement.

 

As it turned out, my fears were unfounded. Nobody seemed "sticker shocked" about the cost. Many students had already been researching CCRCs and several were on waiting lists. About a quarter also had long-term care insurance. In short, they were a class of future-oriented planners.

The class was very much a “me-search” project; i.e., research on a class topic that is intertwined with an instructor’s personal life. Full disclosure: my husband and I are on the wait list for a CCRC. While developing slides for the class, I reached out to staff and residents of three CCRCs to get a “real world” perspective. Below are take-aways that I shared with my students:

 

Contract Types- While specific details vary among over 2,000 CCRCs in the U.S., there are three general contract types: A, B, and C. The major differences between them are the cost of the entrance fee and the amount paid for long-term care (LTC) services (i.e., assisted living, memory care, and skilled nursing). The higher the entrance fee (Type A), the less residents pay for LTC and the lower the entrance fee (types B and C), the more residents pay for LTC.

 

Fee Refundability- Refunds vary by community and contract. For example, 50%, 75%, and 90% partial refunds. Refunds offer an opportunity to preserve estate assets and recover funds if a CCRC resident decides to relocate. CCRCs with refund options generally charge higher entrance fees compared to those with non-refundable fees. The community needs to factor in the cost of returning all or part of the entrance fee to residents or their estate if they leave or pass away.

 

Financial Qualifications- Prospective residents must complete intake forms listing their assets, debts, income, expenses, LTC insurance details, retirement account beneficiaries, and more. A general rule of thumb is that assets should equal at least 2x the entrance fee and income should equal at least 2x the monthly fee. However, all three CCRCs that I interviewed actually used computer software with an algorithm that includes monthly income, age, and amounts in savings.

 

Health Qualifications- There is a quote in the book Retirement Communities 101: “It is better to be two years early than two minutes too late.” When people wait too long to consider a CCRC and develop a health issue, they may not be approved. A “we’re not ready” mentality could lead to a missed opportunity. The key is to move to a CCRC (independent living) before you have to.

 

Other CCRC Details- Pets are allowed at most CCRCs, but restrictions typically apply including pet type, size, breed, and number. Trends in meals at CCRCs include more dining venues vs. one standard “main dining room” and flexible monthly “dining dollars” vs. a fixed number of meals per month. Common reasons why people move out of a CCRC are wanting to be closer to family after the first spouse in a couple dies and dissatisfaction with aspects of communal living.

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.