Financial Implications of Moving to a CCRC
In the last two newsletters, we talked about why you should consider moving to a continuing care retirement community (CCRC) and how you should start searching for one. Now, we will give you a brief overview of the financial issues involved in making that decision.
Most CCRC’s require an entrance fee based on the square footage of the house or apartment you plan to occupy and whether one or two people will occupy it. Most CCRC’s also have an option for you to pay a larger entrance fee with a guarantee that your estate will be reimbursed a percentage of that entrance fee (typically, 50% to 90%). CCRC’s in higher cost of living areas will usually have more expensive entrance fees.
The other part of your financial obligation will be to pay a monthly fee. That fee will cover some food costs (commonly a set number of meals a month or a set number of dollars to spend on food a month), maid service, home maintenance, basic cable, use of facilities and more. Every community differs on what is covered, so you should check on the details. Most communities’ monthly fees are structured to change as you progress through the varying levels of care (assisted living, skilled nursing, and memory care), but some charge a higher fee that will stay at the same level even if you need more care. As with all institutions, fees will go up over time, and you should be able to get the history of rate increases in the communities you are considering. The best thing you can do in assessing fees and your ability to pay them is to talk to your financial planner.
Financial Health of the Community
The other part of this financial decision is to determine whether a community is operated in a fiscally responsible manner. You will probably want your attorney and your accountant to look at documents outlining your legal and financial obligations and those documents denoting the financial position of the community (e.g., audited financial statements, annual report, projected five-year budget, etc.). There are a variety of key indicators they should consider such as occupancy rates, days of cash on hand, net operating margins, long term debt, and unrestricted cash and investments. The best way to approach this is to gather as much information as you can and ask many questions. We have found it helpful to talk to the resident who is the chairperson of the resident financial committee and consider the backgrounds of those on the board of directors.
If all of this seems like a lot of “homework,” it is. However, this is a big financial decision with a level of complexity to it. What you want is to be able to move into a community and focus on having fun with your peers instead of being concerned about your financial position or that of your chosen community.
This is the third in a series of articles on CCRCs by our former partner John MacIntyre and his wife Karen.