Key Takeaways
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A Life Plan Contract stabilizes expenses by bundling housing, utilities, maintenance and dining into a single monthly fee.
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Unlike aging in place, where home care costs fluctuate with the market, Life Plan contracts (particularly Type A) ensure that care costs remain steady even if your care needs increase.
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There are four distinct contract types in Life Plan Communities: Type A (Extensive), Type B (Modified), Type C (Fee-for-Service) or Type D (Rental).
The Predictability Factor: How a Life Plan Contract Helps Combat Inflation
Many adults believe that aging in place in their current home can help save on costs. However, in reality, remaining at home offers virtually no way to hedge against rising prices — most notably expenses such as caregiving, home insurance, maintenance and renovations.
As medical research advances, people are living longer and the average lifespan is lengthening. As a result, people are stretching budgets and retirement funds. The result is financial ambiguity now and in the future.
How can you create a bit more consistency in your retirement costs? This article offers advice on planning for potential future costs, including details about Life Plan contract types and how choosing a Life Plan Community (sometimes known as a continuing care retirement community or CCRC) can help combat uncertainty.
Creating Financial Predictability for the Long Term
How can you create greater predictability as you plan for the long term? Surely, no one can know with any certainty what their exact expenses will look like in 10 or even five years. The idea is to get a grasp on your needs as they stand right now and do your best to plan and prepare for the future in the ways you can foresee.
You can start by identifying the things you spend the most on. For seniors, that usually consists of:
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Housing: mortgage payments, property taxes, home insurance or rent
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Health care: physicians, medications and medical equipment
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Food: groceries and other meals
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Transportation: car payments or ride services
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Utilities: gas, water and electricity
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Subscriptions: streaming services and internet connectivity
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Home maintenance: housekeepers, repairs, landscapers and pest control
Create a budget sheet outlining your approximate spending on each of these line items every month and any other consistent expenses. After all, planning for retirement and knowing how much you need to save starts with an understanding of your current spending habits.
Preparing for the Costs of Senior Living
Once you’ve taken a closer look at your finances as they stand today, think about where (and how) you want to live as you age. Where will you be the happiest and most supported? Rightsizing to a smaller home or apartment, aging in place in your current home or moving to a senior living community are a few options to consider.
For assistance narrowing down your choices, consult with the people you love and family members. How much assistance can you expect to receive from them if you need it? Who will be nearby, and how much effort can they realistically commit? Although these conversations aren’t always easy, they’re vital for minimizing future uncertainty and keeping everyone on the same page.
When it comes to preparing for the costs of senior living, you want to be as proactive as possible. After conducting a financial self-assessment and developing a plan for where you want to live, you can start building a realistic budget. Consider what’s important to you now and what may be in the future, and then generate a budget around these wants and needs. Tools such as retirement calculators can be incredibly helpful for estimating these costs and setting appropriate savings goals.
Moving to a Life Plan Community
One of the many benefits of moving to a Life Plan Community is the greater degree of stability it can allow your finances. A Life Plan contract helps create much-needed predictability in everyday expenses, especially as prices increase around the country.
All-Inclusive Living
The primary way that Life Plan Communities help is by including virtually everything — home costs, chef-prepared meals, housekeeping, utilities, local transportation, fitness programs, campus entertainment and more — in the monthly fee. All home maintenance is included, so you won’t have to worry about surprise home repairs, such as a new roof or water heater. And you’ll live with greater predictability — and perhaps even a reduction — in your everyday expenses when everything is bundled into one monthly fee.
Care Costs
Should a time come when you could benefit from care services, such as in-home assistance with activities of daily living (e..g, bathing, dressing) or memory support services, a Life Plan Community once again brings a greater degree or predictability to those costs.
A Life Plan contract ensures that if a resident's physical needs increase and care services are added, their monthly bill won’t increase in an unforeseen manner. The Life Plan contract will give you a good line of sight into these future care costs. Life Plan contracts also allow residents to add these care services at rates generally below market should they become necessary.
Older adults who opt to age in place, for example, have no way of determining how much they can expect to pay for care or housing as their needs change. Meanwhile, the continuous care offered at a Life Plan Community assists in securing your financial future.
Nonprofit Communities: The Ultimate Reassurance
Even with proper planning and the stability of bundled costs at a Life Plan Community, no one can entirely eliminate financial risk. For added financial security, many look to nonprofit Life Plan Communities, which make a commitment to their residents that the community’s benevolence fund will ensure they have a home for life if they outlive their financial resources through no fault of their own.
What Are the Four Types of Life Plan Contracts?
What do Life Plan contracts cover? An individual Life Plan Community will generally offer one or two of the following most common contract types:
Type A: Extensive Life Care Contracts
These Life Plan contracts typically require a larger entrance fee than the other contract types, but the monthly fee remains steady regardless of your level of care. These provide a sense of stability because, essentially, what you pay monthly when you live independently will be what you pay if you’re living in one of the community’s care areas. Note that this contract type isn’t offered at the majority of CCRCs.
Type B: Modified Contracts
These contracts are similar to Life Care contracts, but instead of covering all future care needs for the same monthly rate, they have step-up pricing for higher levels of living. However, those care costs are typically discounted from the going market rate.
Type C: Fee-for-Service Contracts
These contracts tend to have a lower entrance fee and offer housing, amenities and care services on a pay-as-you-go schedule. This type of contract is favorable to those carrying private long-term care insurance.
Type D: Rental-Only Contracts
These month-to-month contracts cover residential and service expenses but aren’t considered continuing care contracts and require higher monthly costs and fee-for-service rates.
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Contract Type |
Contract Name |
Typical Entrance Fee |
Contract Details |
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Type A |
Extensive |
Higher |
An entrance fee contract that provides lifetime care at a predictable, steady monthly rate regardless of the level of care needed |
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Type B |
Modified |
Moderate |
A mid-range entrance fee contract where monthly rates increase for higher levels of care, but services are provided at a guaranteed discount below market rates |
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Type C |
Fee-for-Service |
Lower |
A lower entrance fee contract where residents pay the full market rate for care services only as they are needed, making it ideal for those with private long-term care insurance |
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Type D |
Rental |
None/Low |
A month-to-month rental agreement with no entrance fee that requires paying full market rates for all care services as needed |
How Does a Life Plan Community Provide Long-Term Peace of Mind?
Greater predictability in your monthly expenses isn’t the only advantage of choosing a Life Plan Community. This stability extends beyond finances to include virtually all aspects of life in retirement.
HumanGood Life Plan Communities, for example, take a holistic approach to senior wellness, accounting for the entire person to maximize connection, well-being and security — the key ingredients in the formula for living your best life. Programs, amenities and residences are specially designed to provide maximum independence and peace of mind for both residents and their families.
No one can predict the future, which can make planning for costs in retirement a bit tricky. Make efforts to sufficiently prepare yourself for what your next chapter holds by starting right now. Explore all your options, assess your personal budget and discuss the decision in-depth with the people you love to get a better idea of what’s best for you as you age.
For a detailed breakdown of what you can expect to pay in a Life Plan Community, check out our Complete Guide to the Costs of Senior Living.
