Retirement and aging brings many questions to the table. One of the biggest concerns is whether keeping the family home with all the maintenance and upkeep will be the best place for our golden years and whether our healthcare providers will be readily accessible when needed. One solution may be moving into a Continuing Care Retirement Community (CCRC).  However, the costs and corresponding contracts need to be carefully examined before making any decisions.

Understanding the type of community you are considering is of vital importance. There are four types (A to D) of CCRCs with varying degrees of care coverage. All have general amenities like meal plans and residential maintenance. The difference boils down to what type of health and long-term medical care is covered by each type of contract.

Type A contracts known as Lifecare or Extensive care contracts have the most health and long-term care features allowing you to age in place. They generally require a large upfront fee and have stable monthly fees.  Residents can move from independent living through long-term care for little or no extra fee. Essentially one is buying a prepaid long-term care insurance contract. Lifecare communities will also continue to care for their residents who become unable to pay for services.

Type B contracts offer services like Type A, but have limited care. Some health care services may incur additional costs and may be limited to a certain number of days for higher levels of care before incurring market rate costs. Your health history and ability to finance those additional expenses need to be considered.

Type C contracts are Fee for Service arrangements. These communities have lower entry fees, but health care services are charged at market rates. Monthly fees will increase as more care is needed. The more care you need, the more you pay out of pocket. Your finances will determine if you are able to cover Type C expenses and long-term care insurance needs to be considered to cover the cost of home health or nursing care.

Type D contracts are equity contracts and are not always considered a CCRC. The resident purchases their home and pays fees for service or home association fees. Healthcare is available in the community at market or discounted rates. Essentially these are adult communities with nearby health care.

While CCRCs provide lifetime services not all have on campus care. Some outsource to other care providers located outside of the CCRC campus and may require relocation.

No matter what choice is made you will need to also maintain your health care insurance coverages and supplemental insurance plans. You will also need to check to find out if those insurance plans are accepted by the CCRC.

Lifecare communities bring peace of mind to those concerned with future care and aging in place but the upfront costs need to be compared to the cost of long-term care insurance coverage. For instance, if the upfront admittance fee is $300,000 and you are 80 years old and expect to live until age 95, your average pre-paid cost is $25,000 per year plus your monthly fees. But if only live to be 88 the annual cost is $37,500 plus your monthly fees. This simple formula can be used to quickly compare the cost of entry fee for a type B or C contract and a long-term care insurance contract if those service are outsourced by the CCRC.  Clearly health, family history, and life expectancy need to be seriously examined.

Many CCRC are beautiful places to live and offer very nice facilities and amenities, however, you need to understand all the shapes and sizes before you sign on the dotted line.  We hope this information gets you pointed in the right direction.  We are happy to help you evaluate your options.

Bill Mayer, CFP
[email protected]