An estimated 10,000 Baby Boomers per day are retiring in this country, and the resulting expansion of the retired population is having a ripple effect across the retirement planning industry. Many seniors have a strong desire to remain in familiar surroundings, making aging in place a popular option in many cases, as we’ve discussed previously.
But another means of building your retirement plans around familiar places, people, and activities is rapidly emerging: the continuing care retirement community (CCRC) concept. Offering convenience, community engagement, and—most important to aging seniors—easier access to healthcare, CCRCs can provide a number of amenities designed to create a smooth transition into an enjoyable retirement lifestyle. These facilities are designed to offer a range of housing and care services, from those aimed at active retirees who enjoy a more independent lifestyle, to the “oldest old” who may need long-term care and other health-related services, along with more assistance for daily living. Many facilities are being developed that offer such a range of amenities, providing seniors with the opportunity to stay in the same place, even as their needs change over the span of the aging process.
The idea of “staying put,” or remaining in familiar surroundings, is strongly favored by many retirees, according to an AARP survey finding that 77% of seniors preferred such an arrangement. By offering a continuum of services catering to independent retirees on one end and those in need of skilled nursing care on the other, CCRCs aim to provide a stable, familiar environment for seniors across the spectrum.
Not All CCRCs Are the Same
CCRC contracts come in different shapes and sizes, depending on the services and levels of care you are interested in. Most CCRC contracts involve an entrance fee and monthly fees that vary based on the level of services provided. The average entrance fee can be around $400,000, and monthly fees often run $3–5,000. Obviously, the more care you want to assure yourself of—either now or in the future—the more expensive the arrangement will be. For example, a “Type A” contract, where all health-related services are prepaid, is the most expensive. A Type B, or “modified care” contract, typically includes only partial prepayment of skilled care costs, but the monthly fees can increase as more care is required. A Type C, or fee-for-service contract, usually involves the lowest up-front and monthly fees, with residents paying for additional levels of care as needed (typically, out-of-pocket). Type D contracts are pay-as-you-go arrangements with no entrance or monthly fees; residents pay for various services as needed. Some CCRCs have begun offering a “CCRC from home” option, where the resident remains in their own home but receives services from the retirement community. There are currently just over 30 such programs in the US.
What You Need to Know
As you can probably see, it’s important to understand exactly what type of CCRC you are looking at and what you would be getting for the money paid. Further, depending on your state of health and the resources available to you, different types of CCRC arrangements may be advisable. Here are some questions that you will probably want to ask:
- What type of contract (Type A, Type B, Type C, or Type D) should I consider?
- How much are the entrance and monthly fees?
- Do I like the facility, its location, the staff, and the other residents?
- What level of care do I need now, and what level am I likely to need in the next five to ten years?
- How long is the waitlist? Is my waitlist fee fully or partially refundable?
- How will paying the fees affect my retirement nest egg? Will I be able to afford continuing to do the things I enjoy?
- Do I need to sell my home to cover the entrance fee?
- Are there financing options available to cover the entrance and other fees?
- Are there tax considerations involved? Is any portion of my fees deductible?
- Are any of the medical services covered by Medicare?
Your professional financial advisor can help you sort through the various options available and, based on their knowledge of your situation, help you choose the alternative that makes the most sense for your unique needs. Planning ahead is also important because, as suggested above, many CCRCs have waiting lists; to get in the most desirable situation may require getting on the list a year or more ahead of time.
At The Planning Center, we take your retirement planning needs seriously. By helping you build a financial foundation for your desired retirement lifestyle, we can assist you in finding the peace of mind that comes with having a solid plan in place, ready for when you need it. To learn more, visit our website to read our article, “Social Security and Retirement Planning: Making the Right Calls.”
