Transitioning to a Continuing Care Retirement Community
The decision to move to a continuing care retirement community (CCRC) is rarely made quickly or by a single person. Many people, especially the prospective resident and their family, weigh their opinions together. Beyond the emotional and functional reasons for moving into a CCRC, there are also financial aspects that need to be discussed. Here are some key considerations that often arise for individuals or families facing these decisions.
A CCRC is a living option that allows seniors to reside in one location for as long as they need, often for the remainder of their lives. Most provide independent and assisted living options, with onsite healthcare services, which include easy access to doctors and nurses. They are helpful for those who want to be part of a community through the aging process and stay active in a setting that promotes wellness, as opposed to the sedentary lifestyle that too many seniors fall into when living on their own.
Financial Advisor Evaluation Checklist
Our checklist and interview questions help you make a side-by-side comparison, and suggest some of the critical decision points you should consider as part of your evaluation.
Reviewing Contracts
When individuals enter a CCRC, they are often charged an entry fee that averages about $350,000 nationally, although that amount varies significantly depending on location, care options selected, refundability options, and monthly fees. It is essential to review the contract in detail because most CCRCs ask residents to select a “life care” contract or a “fee-for-service” contract upon entry. The life care contract has a higher entry fee and a higher monthly fee. The advantage, however, is that the fee provides all necessary care services, whether someone is living independently or needs assisted living or skilled care at a later date. The fee-for-service contract is less costly upfront; however, the care center can raise the fees significantly if the resident enters assisted living or needs skilled nursing care.
Selling Home, Cars, and Valuable Belongings
Because there is a sizable entry fee associated with moving into a CCRC, most new residents opt to sell their homes and use the equity to pay the fee. If the resident cannot sell their home but needs to move into the CCRC, they can consider opening a home equity line of credit to pay the entry fee and promptly repay it once the house sells. CCRCs can be smaller apartment-like settings, so moving into one helps individuals downsize. Personal vehicles are typically not needed in a CCRC, so they can be sold, along with household items such as paintings or antiques, with the proceeds being used to pay the CCRC entry fee.
Using LTC Contracts
If you’re entering a CCRC and already have a long-term care (LTC) insurance policy, you can likely use the policy to help pay for expenses. Usually, LTC insurance policy benefits are triggered when the policy owner cannot perform two or more of the following activities of daily living (ADLs): bathing, dressing, eating, transferring in and out of bed, toileting, and continence for at least 90 days. There are also different kinds of LTC policies; some reimburse expenses incurred and flat cash amounts if they cannot perform the specified ADLs. Be sure to consult an insurance professional about your LTC policy to help you understand what it covers.
Emotional and Financial Considerations
There are several layers to consider when assessing a CCRC. Some seniors view CCRCs as communities for the elderly, and worries about their mortality can place a burden on the entire family. Or they can be reluctant to change, fearing they may eventually run out of money. Nonetheless, a CCRC may present an opportunity to provide someone with additional support from a new community that offers onsite healthcare and perhaps a robust social atmosphere compared to their current living situation. If you are interested in discussing your family’s situation or developing a household budget and financial plan, please contact us at Savant Wealth Management. We’re here to help.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Jonathon D. Merickel
Portfolio Advisor
CFP®, MBA