Want a better, lower-stress retirement? For many older adults, a continuing care retirement community (CCRC) offers a path to a life they love. According to a 2018 study1 that compared seniors who moved to a CCRC to those who did not, one year after the move, CCRC residents reported greater satisfaction with their living situation and improved well-being.
A CCRC (also called a Life Plan Community) offers a better life right now as well as the peace of mind that comes from knowing there’s help available if your needs ever change. That’s because these unique communities offer independent living homes and future care options all on one campus. This allows you to move to a different level of care if you want or need to while still living in the same community among people you’ve come to know and love.
Spending the next chapter of your life in a familiar, welcoming home offers myriad health benefits, such as making it easier to stay physically active while supporting nurturing relationships. Yet many people wonder, “Can I afford a CCRC?” The reality is that a CCRC can be an affordable option and, in some cases, may even cost less than continuing to live in your current home.
Here’s what you need to know about CCRC entry fees, finances and budgeting.
Can I afford a CCRC?
“If you move at an appropriate age, then amortize what you’d pay over, say, a period of 20 years, a CCRC is often cheaper over the long term than staying at home,” said Dan Ogus, chief operating officer of HumanGood, a nonprofit provider with more than 20 Life Plan Communities in six states.
For most seniors, the biggest expense is the upfront entrance fee. These fees fund long-term capital improvements within a community, so you are investing in your own future. In a more traditional assisted living model, by contrast, the care and condition of the community and amenities can wax and wane with the economy and market demand.
Another advantage to a CCRC is that, typically, entrance fees make it possible for the community to offer a reduced monthly service fee. This reduces your monthly budget, giving you more breathing room and perhaps funds to do the things you love most.
Additionally, the upfront buy-in price may protect your investment down the road. Many nonprofit CCRCs offer benevolence funds as part of their mission. This means residents do not have to move even if they outlive their financial resources.
“Certainty is important to people,” Ogus said. “If someone outlives their assets, then he or she is taken care of for the rest of their lives. So it’s a form of insurance.”
Ultimately, a CCRC can save you money, especially if you have significant care needs down the road. In the right CCRC, you won’t have to budget additional funds for:
Home health aides
Programming and activities
Meal planning and preparation
Assistance with activities of daily living
You’ll also retain more independence even if you experience health issues.
In a CCRC, you and your money are safe.
We’ve all heard horror stories about senior communities that suddenly close or decline in quality, affecting residents’ well-being. This won’t happen in a well-run CCRC.
Most states provide strong oversight of CCRCs. For example, if a CCRC doesn't maintain certain levels of reserves, the state may intervene and demand changes and possibly new management. “States protect consumers with respect to CCRCs,” Ogus said. “You rarely hear of a CCRC closing.
“Basically, there are three contract models,” he said. “There's the extensive life care model, where, as you travel through the care continuum, your fees don't go up. That’s the classic CCRC model. There are also modified month-to-month and pay-as-you-go models.”
Contracts should also include clauses about how much of the entrance fee you and/or your loved ones will be reimbursed if you leave the CCRC or die. Typically, the amount of the entrance fee returned to the individual or the person’s estate depends on how long he or she lived at the CCRC. Many CCRCs offer special rebatable contracts that guarantee 50% or 75% of an entrance fee will be rebated when a resident passes away or leaves.
There are many options for affording a CCRC.
From selling your home to making use of long-term care insurance, you have several options to pay for a CCRC. Your strategy will likely depend on your individual preferences, assets and insurance.
“The typical CCRC resident sells their home to pay the entrance fee,” Ogus said. Some residents also tap into savings or investments. “Another method is to pay an entrance fee, with a certain amount repayable — not refundable — based on if and when the CCRC resident passes away or leaves. This is appealing since it guarantees money will be left for the kids.”
There’s also bridge financing that helps people fund their entrance fee by bridging the financial time gap between the sale of a house and moving in. This is a form of short-term lending.
Long-term care insurance generally won't kick in and cover residential living expenses, but some policies cover assisted living. Every policy is written differently. Ogus advises against making assumptions and suggests looking at what each state, policy and benefit covers. “One of the things that breaks my heart is when someone thinks they'll have a covered benefit and they don’t,” he said.
Finally, Medicare, and at times Medicaid, can be used to pay for some services, and many CCRCs accept either Medicare or Medicaid. But while Medicare usually doesn't cover long-term nursing care, it does cover services that a CCRC resident might receive, such as physician visits and hospital stays. Note that because the financial requirements for CCRC residence can be strict and the costs can be relatively high, very few CCRC residents are eligible for Medicaid.
Each CCRC you’re considering should have audited financial statements to document good stewardship of residents’ assets. A financial advisor may be able to help you assess whether a CCRC is right for you, in addition to offering support to gather together the funds to pay for a community.
Even if you’re not yet ready to move, planning now can help you secure the future you hope for.