Whether you are approaching retirement or have already retired, you have probably thought about your options regarding residential living in your senior years. Should you remain in your current residence indefinitely or look for a situation that might better fit your evolving needs?
This is one of the most important decisions an individual or couple will make, as it involves lifestyle preference, retirement financial security, and protection against the high cost of health care. The majority of people choose to remain in their home, whether for emotional or financial reasons. Some, who have equity in their home, but a shortage of disposable income, turn their home equity into cash flow through the use of a reverse mortgage. Those who are facing increasing health care needs often contract for home health care services.
You may also have wondered how you will remain active and socially involved during your retirement years. Common questions include: Will I be subject to increasing feelings of isolation and powerlessness, especially if i am single? Will I have a dignified and comfortable place to live if my health declines? It is these types of concerns that have led to the development of retirement communities, which are designed to serve the needs of seniors with varying levels of ability to live independently.
According to the 2016 Ziegler Megatrends in Senior Living survey, the different types of senior living communities (arranged in order by the least care needed to the most) include the following:
Type Approximate # of Residents
Independent Living 300,000
Assisted Living 1,100,000
Nursing Home 1,400,000
Memory Care 50,000
Independent living communities are also called 55-and-over communities based on their age requirements. Assisted living communities are designed to provide residents with assistance for basic ADLs (activities of daily living), such as bathing, grooming, dressing, and more. Some states also allow assisted living communities to offer medication assistance and/or reminders. They differ from nursing homes in that they don’t offer complex medical services.
The Continuing Care Retirement Community (CCRC) combines independent living, assisted living and nursing home care in one package. There are almost 2,000 such communities in the United States, with around 900,000 residents. By incorporating the three facilities on one campus, or in closely contiguous locations, CCRCs allow you to find a community that meets your social needs now, while providing peace of mind that you will be cared for in the manner you desire should your health care needs increase. Uniquely, 80% of CCRCs are run on a not-for-profit basis, either by faith-based or other charitable organizations. These groups tend to run their facilities on the basis of their caring mission, but also must meet high standards of financial rectitude. You may also want to focus your search on communities accredited by the widely-recognized CARF International organization.
Joining a CCRC is not something that is done based on an emergency need. It is intended to be a long-term plan. Thus, you should thoroughly research the communities, discuss your desires with loved ones, and spend time visiting the communities and talking with managers and residents. Research the features, costs and financial strength of the CCRC before signing a contract. In turn, the facility will require a physician’s statement of your ability to initially live independently and a financial statement indicating your ability to cover the cots. Typically, you start in the independent living section and move to assisted living or nursing home care only if needed.
There are three main types of CCRC contracts, all of which include an entrance fee as well as a monthly fee. They are as follows:
- Extensive – This has the highest initial fee, but offers the most complete health care cost protections; it’s like a long-term care insurance policy combined with a lifestyle choice.
- Modified – This offers some health care protection, but you take on some of the risk of future care costs.
- Fee-for-service – This has the lowest initial fee, but future long-term care costs will be your responsibility.
If you currently own a long-term care policy, you may want to retain it and choose either the second or third type of contract. Entrance fees average $250,000 nationwide, and are often higher in this part of the country. The entrance fee may be partially refundable if you leave the facility or at death. In addition, there are monthly fees, which cover your residential unit, meals, housekeeping and maintenance, and the use of community facilities, activities and other amenities. The monthly fees have had annual increases above the rate of inflation, so this must be considered in your planning process. Neither of these fees represents an ownership interest in your home – although some facilities do offer a purchase option.
For those who do not have sufficient home equity or savings to cover the high entrance fees, rental-only options are available, charging monthly fees to cover the unit and related services. About one-third of all contracts are rentals.
Check to see if the contract has a “benevolence care” clause, which states that the community will provide financial assistance if you run out of money. Though there have been instances when residents have been “discharged” when they thought they were protected, in most cases these clauses are effective. Also review the procedure for determining when a resident is to be moved to the next level of care, which may result in a couple living separately. The contracts are complex, so have a financial planner and/or attorney review yours.
The average age of people who move into a CCRC is 81. Two-thirds are single and two-thirds are female. Those who pay an entrance fee rather than rent tend to be couples and have a higher income and net worth. In general, it is the economic middle class and higher who populate the CCRCs, especially because Medicaid is usually not an option and Medicare has only limited applicability.
While such a decision has a major financial component and a long-term health care protection component, you must believe you will be happy living int he community. “An overall objective of any CCRC is to create an environment and choices that enable older adults to experience fully actualized, creative and satisfying aging” (American Seniors Housing Association). Many residents testify that the pace of social and recreational activities is greater than what they had before moving to the community, and this keeps them feeling young. Singles may find the communitarian experience particularly appealing, while couples may realize that the three levels of care will enable them to remain comfortably in place for the rest of their lives.
It’s a big decision. After all, you are intending to join a community that will be yours for many years to come.