The cost of continuing care retirement communities: Can you afford it?
A CCRC can provide its residents with varied levels of care, from independent living to assisted living and nursing home care. There are pros and cons to joining a CCRC, and one major deciding factor is the financial investment. Seniors considering a CCRC should be aware of the costs and potential financial risks before making the commitment.
The cost of CCRCs is two-fold: There’s the upfront fee and a monthly fee. Before you move in, you’ll be required to pay a substantial upfront fee. This fee will vary from one facility to the next, but expect to pay between $100,000 to $1 million to secure entrance into the community. This fee is used to “prepay” for your care and living arrangements during your time there, as well as to contribute to facility operating costs. In some cases, this fee may not be refundable, should the resident decide to leave the community or if the resident passes away. (Refund policies should be covered in detail upon contract signing.)
In addition to the upfront cost, residents will pay a monthly fee, which again will vary depending on the facility and the level of care the resident requires, the type of housing they choose, whether they rent or buy their homes and the type of contract they sign. These monthly fees are not fixed and can be raised should the occupancy rate of the facility fall, the needs of the resident change or the community experiences financial difficulties. Residents may also incur other fees that are not included in their contract.
The majority of CCRCs offer three levels of contracts to residents:
Life care or extended contracts: These are the most expensive option and will have the highest entrance and monthly fees. Extended contracts offer unlimited amenities and assisted living, medical and nursing care without additional charges. This is a good option for couples or partnerships where one spouse requires more care. The entrance fee for an extended contract can range between $160,000 - $600,000 or more, depending on the type of housing you choose, whether you rent or buy and the size of the facility. Monthly rates can run between $2,500 - $5,000.
Modified contracts: These are in the mid-range for entrance and monthly fees. These contracts cover medical services for a specified amount of time or up to a specified amount. After the resident has reached those limits, they will pay additional charges to use the services. Entry fees for modified contracts will run between $80,000 - $750,000, and monthly rates will be between $1,500 - $2,500.
Pay-as-you-go contracts: These are the least expensive option up front but charge market rates for medical services, like assisted living and nursing care. Upfront fees for these contracts can range from $100,000 - $500,000, with monthly fees in the $900 - $10,500 range, depending on the level of care.
Exact figures for CCRCs are hard to come by. Assisted living and nursing home costs are published annually by Genworth Financial, but there isn’t much published or publicly available information about the price of living in a CCRC.
According to Senior Homes, the states with the highest average monthly retirement living (55+ senior apartment communities, continuing care retirement communities and independent living without medical support) costs are:
New York ($3,895)
New Hampshire ($3,537)
The states with the lowest average monthly costs are:
South Dakota ($1,399)
When budgeting for your future in a CCRC, you’ll need to consider not only how you’ll pay the entrance fee but also how you’ll pay the monthly fees. Many residents finance their entrance fees with proceeds from the sale of their home, but you’re still responsible for paying for your care and housing every month.
According to investment planning company Goal Investor, the average age of residents in a CCRC is about 80 years old. The Social Security Administration says the average life expectancy once you reach the age of 80 is 84.3 years for a man and 86.6 years for a woman. So, assuming you choose an extended care contract with a monthly fee of $3,500, men would need to budget approximately $180,000 for fees. Women would need to budget about $277,000.
In addition to the expense of living at a CCRC, there are some financial risks that can be out of the hands of those who live there. Core Capital Solutions CPA James Sullivan warns that an unstable facility may go under at any time, causing its residents to lose part or all of their investment. It’s important to do your research when considering a CCRC. Is it a for-profit or not-for-profit community? For-profit communities may experience a sale from one owner to another, which may void or change resident contracts. Non-profit facilities often rely on entrance and monthly fees from residents, so low occupancy rates could affect their ability to maintain day-to-day operations. Thorough research and understanding the stability of the community you wish to join will help avoid these scenarios.
For many seniors, it comes down to figuring out their monthly expenses while living on their own or in a typical assisted living or nursing facility and deciding if the additional cost is worth the benefits of living in a CCRC.
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