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Financial Planning for a CCRC

Three-quarters of Americans would prefer to “age in place” and stay in their homes as long as possible. But less than half believe they will be able to, according to a recent AARP study. Some retirees can update and modify their homes so they can remain there longer. But many eventually pursue options such as age-restricted neighborhoods and retirement facilities. An increasingly popular option is a Continuing Care Retirement Community or CCRC. And while the price tag can be steep, advance financial planning for a CCRC can help.

What is a CCRC?

Thanks to the size of the Baby Boomer generation and their long-anticipated life spans, the number of Americans age 65 and older is expected to almost double between 2018 and 2060. This generation will reach about 95 million seniors, according to the Population Reference Bureau. As this population grows, so does the need and availability of various retirement living options. And the need for thoughtful financial planning.

An option that can suit all needs, ages, and stages, CCRCs bring together independent living, assisted living, and nursing care within one campus. With a focus on lifestyle as much as health care, many CCRCs now offer a “town center” feel. This is designed to entice younger retirees who are interested in a variety of amenities. These include fitness centers, yoga studios, private dining, cocktail lounges, green living, creative space, boutiques, and classes. Likewise, some CCRCs are specializing in the arts, golf, LGBTQ populations, and more. For example, more than 50 CCRCs have been built in conjunction or close to a local college or university. This offers easy access to continuing education as well as university hospitals, in many cases.

The ABCs of CCRCs

Continuing care retirement communities recognize that most people want to live independently for as long as possible. If a move to assisted living or nursing/memory care is needed, the transition is often more straightforward since the individual is already familiar and comfortable with the community as a whole.

Just like applying for your first apartment, however, there is some paperwork. While the average age of entry is 80, most CCRCs require residents to live independently initially. This typically entails a health screening as well as an extensive financial check-up to ensure the ability to cover both entry fees and monthly payments.

Financial Planning to Avoid Sticker Shock

The price tag for continuing care retirement communities can vary widely, but it is often steep. Residents pay an average of $320,000 initially (often with proceeds from the sale of a house), according to industry research, with monthly payments in the neighborhood of $2,000 to $4,000, based on the size of living space, amenities, and care contracts. Individuals and couples can choose to prepay for future health care or explore fee-for-service options. Contracts run the gamut in terms of price and coverage.

If you are considering a CCRC or another retirement living option, it makes sense to crunch the numbers with some financial planning ahead of time. An advisor can help you compare monthly fees with what you are currently paying for housing, food, and entertainment. This will help to hone your long-term financial outlook, so you are ready if you choose to make a move eventually.

Pros and Cons of CCRCs

As with any change in living situation, there is a potential upside and some challenges. If you are contemplating a continuing care retirement community, consider the following:

Pros:

  • Simplicity. You have all of your future living needs and options, as well as medical care, in one location.
  • Peace of mind when it comes to health care. You and your children can benefit when no one has to secure future living or healthcare arrangements since you will already have a plan in place.
  • Fewer financial worries down the road. While the entrance and monthly fees can be steep, they often cover part of future health care and medical costs.
  • Built-in community. CCRCs today offer a wealth of innovative amenities and activities, from trips to local museums to language lessons to cooking classes. You can be as social as you like and enjoy the convenience of food, fitness, entertainment, and more in one location.

Cons:

  • Costs. The fees can be significant, particularly at the outset, which is why CCRCs perform a thorough financial analysis for potential residents. However, many communities offer a partial or even a full refund of entry fees after residents leave or die.
  • Living with only seniors. Since CCRC residents must be 62 or older, there is less age diversity in these communities. If you enjoy children, young couples, and a mix of generations, this may not be the best option.
  • Stability. If a community has financial difficulties and declares bankruptcy, you run the risk of losing your investment. That is why it’s so important to vet communities before signing on the bottom line. Ideally, the CCRC should have an occupancy rate of 90 percent or above and stable financials.

How to Choose the Best Community for Your Lifestyle, Health, and Interests

First and foremost, schedule a visit. Many communities even allow overnight stays so you can get a good feel for the place throughout the day and night. Talk to residents and ask what they like and dislike. Ask how issues are handled, and what has surprised them. Make sure you tour all of the facilities, even if you are planning on independent living initially.

Then, investigate the nitty-gritty. Ask for the community’s financial disclosure statement, which should include audited financial figures. Your financial advisor can help you examine this statement to ensure the community has ample resources. A sample contract can help you learn more about the organization and advance your financial planning as well. Likewise, it is wise to view the monthly fee history; while fees typically grow with inflation, double-digit increases can be a warning sign of poor budgeting.

Pose questions about occupancy rates, staff turnover, future plans, and anything else you are concerned about or interested in. Ask about transportation, what happens when one partner remains in independent living as the other transitions to memory care, or dietary options, for example. Also, My LifeSite can help you explore and compare CCRC across the country.

Even if you are a detail-oriented person, you may want to enlist a friend or family member as you research your options and be another set of eyes. It pays to pay attention to the small print.

We Can Help

If you are interested in financial planning for the transition to a Continuing Care Retirement Community, and you want to delve deeper into financing options, Wolf Group Capital Advisors can assist you. We can take a look at bridge loans and long-term care insurance (which may cover some assisted living and nursing care costs). We can also help you explore the possibility of using Medicare to cover some fees. Most importantly, we can help you prepare a sound financial plan for retirement living. We can assist in making the transition more manageable when the time arrives.