Is a Continuing Care Retirement Community Right for You?

If you're looking ahead to retirement and thinking about addressing your long-term care needs as you age, you may want to consider a continuing care retirement community (CCRC).

A CCRC, also known as a “life plan” community, is a retirement community that provides a continuum of care - independent living, assisted living, and skilled nursing care - all on one campus. It is designed to provide seniors with the opportunity to “age in place” and have a network of friends and family in one location. Someone who needs more care and assistance can stay on the same campus rather than go to a separate facility miles away. The biggest benefit of this type of community is the peace of mind that it brings. You are planning for potential health issues down the road and addressing the "what ifs" that come along with the exercise. Many residents like knowing they won’t have to scramble to find care later, burden their loved ones, or worry about being separated from their spouse or social circle.

Cost is a major factor when considering a CCRC. One of the most significant financial components is the large upfront entrance fee, often six figures. This fee not only covers the cost of one’s independent living unit but also essentially pre-pays for any future long-term care they may need. Additional monthly service fees, which can be $5,000 or more, cover living expenses and some services.

With premiums for traditional long-term care insurance policies skyrocketing, some retirees are looking at CCRCs as an alternative way to cover potential long-term care costs. The large entrance fee acts as a form of pre-payment, which can be more cost-effective than ongoing insurance premiums in some cases. In some CCRC contracts, the monthly fees increase when transitioning from independent living to higher levels of care. In these scenarios, the increase could potentially be submitted for reimbursement from a long-term care insurance policy. It is extremely important to thoroughly review the contract to determine if this coordination is possible in advance.

CCRCs come with a significant financial commitment, so it is important to conduct proper due diligence before selecting a community. Some ways you can research potential facilities are:

• Request detailed financial reports and occupancy rates
• Understand policies for residents who can no longer afford fees
• Consider the community's philosophy and whether it aligns with your values
• Get on multiple waitlists, as they can stretch 5-7 years
• Realistically evaluate whether the “CCRC lifestyle” suits your preferences

Careful planning will be required regarding potential tax implications associated with CCRCs, specifically the entrance fees. For example, in some contracts, a portion of the entrance fee may qualify as a medical expense tax deduction. A CPA should be consulted to determine the potential impact on your personal finances and tax situation.

Ultimately, choosing a CCRC is as much about lifestyle preferences as it is about logistics. Do you like the idea of community living? Are you comfortable committing to one place for the long haul? Would you prefer to stay in your current home and bring in care if needed?

There’s no right or wrong answer. It’s about finding what works best for you and your goals. Overall, CCRCs provide an intriguing option for proactive long-term care planning and can be appropriate for certain retirees. As with any major financial decision, due diligence and coordination with experienced professionals are highly recommended when evaluating CCRCs.