The benefits of a continuing care retirement community (CCRC) or “life plan community,” may sound appealing to those considering the needs of a parent or senior loved one. In a CCRC, residents are able to age in place if and when their needs progress from assisted living to memory care to skilled nursing. Because there is a continuum of care, they don’t have to worry about relocating — and they have peace of mind that the cost will remain consistent for whatever level of care they need. The downside of a life plan community is that the upfront costs put this form of senior living out of reach for many.
With those factors in mind, here is what you and your parent need to know about CCRCs to make an informed decision about whether it’s a good option for you and your family.
Here are four things to consider before you decide if a CCRC makes financial sense for you and your parents or senior loved ones:
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The number one factor to consider about a CCRC is whether your parent can afford the large entry fee. These fees range from the low six figures all the way up to $1 million-plus for the most affluent communities.
It’s important to keep in mind that the entry fee is only one part of a life plan community’s cost. There are also monthly fees, which again vary by community but can cost in excess of $4,000-5,000 at some of the nicer communities. A portion of the entry fee is refundable — in some cases, as high as 90% — in the event that the resident dies or decides to leave the community. However, while living at the community, your parent won’t have access to those funds for monthly service fees or other expenses.
Affordability will depend upon your parent’s net worth and the market in which the life plan community is located. Selling a home may provide the money required to finance the entry fee and ongoing monthly fees.
Some senior living experts compare the CCRC payment model to an insurance policy. Residents pay more at the outset, when they are relatively healthy, with the understanding that they’ve locked in a price for a greater level of care — assisted living, memory care or skilled nursing — in the event that they need it.
According to the 2018 Genworth Cost of Care Survey, the median cost of a private room in a skilled nursing facility is $8,365 a month and is expected to rise to $11,242 by 2028.
Considering the continued rise in senior living costs, locking in a fee can be a prudent long-term decision.
Because of the cost of a CCRC, planning is essential.
Look into these life plan communities while your parent is still in good health and plan to work with a financial planner to ensure the affordability of a CCRC for your parent before making a commitment.
Moving into a life plan community should not be a financial burden. It should offer a great retirement lifestyle and the peace of mind your parent deserves.
For example, you can deduct medical expenses that exceed 10% of your income so your parent may want to sell their home and pay their CCRC entry fee in two different tax years. That way, they avoid boosting their income from the net proceeds of the home sale, which would make it more difficult to meet the deduction threshold.
In addition, if you move into a Type A, all-inclusive life plan community, you may be able to deduct a portion of your entry fee and your monthly independent living fee as a pre-paid medical expense. The same advantage is sometimes available in Type B (modified) models as well.
Diane Franklin is a freelance writer and editor who writes regularly about senior living and healthcare. She has also written hundreds of articles for business and trade publications, including leading magazines for the credit union and retail paint industries.
Are you considering a move to a CCRC or another senior living option? We’d like to hear more about your plans in the comments below.