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I don’t believe I’ve ever enjoyed life more than I do now. What is there not to like about my life? I have my health, financial stability, plenty of free time to do the things I want, and I have a companion to share my journey with. I wish this stage of my life was never-ending.
But at age 73, I know my life could be turned upside down tomorrow. Lately, I’ve been thinking about what Rachel and I should do if we can’t take care of ourselves. Although I’m six years older than her, there is a chance she could need a caregiver before me. Women tend to have fewer years of good health to live than men. According to a Washington Post article, “Women are more physically frail than men in old age.”
We, like many folks, want to remain in our house until the very end. But I know that might not be possible, especially if it’s only one of us left behind. It can be expensive to hire a caregiver, and you can run the risk of running out of money. In California, where we live, the median hourly rate is $38.19. Also you might not get the quality care that you need.
As an alternative, we have been looking into a continuing care retirement community, or CCRC. Enrolling in one might be the biggest financial commitment of our lifetime. Here is what we learned, along with some of our preferences.
CCRCs can be either not-for-profit or for-profit. We believe a not-for-profit CCRC would better serve our interests than one that has to answer to investors or shareholders. We would also try to avoid a CCRC that is part of a consortium because we wouldn’t want someone from far away making important decisions concerning our community. This would also prevent our fees from subsidizing another poorly run entity. Hence, we would prefer to enroll in a CCRC that is a stand-alone.
Entry fees and monthly payments can vary greatly. You can’t thoroughly evaluate how much you should shell out for fees and payments unless you know what type of contract you’re agreeing to.
There are four types of contracts: A,B,C, and D:
A Type A contract, which is sometimes referred to as an extensive or full life care contract, is substantially more expensive because you’re guaranteed that you will not be paying higher fees, except for cost-of-living adjustments, when you need a higher level of care, such as assisted living and skilled nursing care. Some view this type of contract as an insurance policy against soaring medical expenses, while it keeps your costs predictable.
A Type C contract is also known as a fee-for-service contract. If you’re living independently, you’ll have considerably lower entry fees and monthly payments, but fees will increase dramatically according to market rates for assisted living, skilled nursing care, and memory care when needed. This type of contract is suited for someone who has long-term care insurance that would cover their additional health care expenses.
A Type B contract, also known as a modified-fee-for-service contract, is like a hybrid between Type A and C. A Type D contract is like a short-term rental agreement.
We would choose a Type A contract because we want to know what our future costs will be. It would also guarantee us continuing care, even if our money runs out. In addition, part of our entry fee and monthly payments would be tax deductible because they are considered prepayment for future health care.
How do you know if the CCRC is financially sound? Every nonprofit CCRC is required to file Form 990 with the IRS. This is a public document that you can view online here. You can search for a CCRC by its name. The last line on page 1 gives the net assets (assets minus liabilities) or fund balances at the end of the year. Of course, you would like to see a large positive number. If the number is negative, we would walk away.
The occupancy rate of the CCRC could be a useful indicator of its financial health. One with a waiting list to get in would be a better sign of financial stability than one with a 90% occupancy rate.
How can you evaluate the medical facility? When my mother was discharged from the hospital, I had to find a skilled nursing facility for her quickly. I used this Medicare.gov site that rates nursing homes and rehabilitation facilities based on health inspections, staffing, and quality measures. Even though her facility was rated above average for care, we would still not stay there.
The place was dated. The inside badly needed a new facelift. It looked like it was stuck in the 1950s. My mother shared a room with a woman who was in so much pain that she would moan and groan. Her half of the room had, besides her bed, an old dresser for her clothes, a small end table, a lamp, a chair, and a television. This facility belongs to a CCRC that my wife and I once thought would show some potential.
The upshot is that you need to tour the medical facility to get a feel for the place. Don’t just focus on the independent living aspect of the community. We would want to make sure the health facility wasn’t isolated from the rest of the community, so we could still participate in some of the activities. We would like to see a single room occupancy standard for all the rooms. Most importantly, they must have a policy that allows the spouse and community friends to visit the patient.
Get help. Since we would be making a significant financial commitment, we would consult a qualified elder lawyer for advice and guidance before signing on the dotted line. Sometimes the CCRC will insert clauses in the contract that allow them to raise the daily rates after providing a 30-day written notice. We would want to make sure we completely understand what we’re signing up for.
How can they do this?
http://enewspaper.sun-sentinel.com/infinity/article_share.aspx?guid=bab72fac-2501-46c9-8d32-7c96d298c49d
That is tragic and despicable. It appears to have been a full CCRC although the article keeps talking only about Assisted Living.
One reason I prefer non-profits is because I think for-profits are more likely to be targets for take over, although more often by entities that want to run them than destroy them, but I could be wrong. It may also be a reason to prefer a group over a stand-alone.
What really does matter is the state regulation. Florida appears to be particularly weak. I looked up N.C. G.S.58-64, which governs CCRCs in NC and found this:
§ 58-64-15. Sale or transfer of ownership.
No license is transferable, and no license issued pursuant to this Article has value for sale or exchange as property. No provider or other owning entity shall sell or transfer ownership of the facility, or enter into a contract with a third-party provider for management of the facility, unless the Commissioner approves such transfer or contract. (1989, c. 758, s. 1.)
https://www.seniorlivingforesight.net/what-is-senior-living/
Steve Moran of Senior Living Foresight asked where senior living leaders want to end up themselves- not many choosing a CCRC.
At my CCRC the parents of the Executive Director and the parents of the Director of Facility Services all reside in Independent Living. A number of residents are second generation. As has already been said, you need to select a facility with care.
That’s a good endorsement for the quality of the facility. Just improve food quality but many residents are probably quite happy with it.
Regarding making sure the retirement community is financial solvent – https://www.nytimes.com/2025/01/18/health/retirement-community-bankruptcy.html
This article from January is from about a retirement community on Long Island NY. And the resident, Bob Curtis mentioned in the article, was someone I worked with at a management consultant firm and very intelligent. So you no matter your due diligence, you never know …..
We discussed that article here. What puzzled me was that the Curtises moved in even though the facility had already been through bankruptcy twice. That didn’t sound very diligent…
Kathy – thanks for the link to the original discussion. Must have missed it.
I posted last year about the food quality at CCRCs. Almost all of them are using Morrison Living/Compass. I’m mystified why this isn’t more of an issue for residents. Morrison/Compass has a great marketing dept claiming “farm to table” “sustainability” and “health and wellness” which is all nonsense. We’ve sampled it over and over in NC and Calif. There would be a lot of contract cancellations if the CCRC administrators who agreed to these plans had to eat it themselves on a daily basis. Sysco, another huge food supplier, might be slightly better (not sure). A former Compass exec is starting a new institutional food company called Restaura and claims it will feature foods without chemicals and emulsifiers..I don’t know if it will be an improvement- maybe.
We’ve been on several non profit CCRC waiting lists for quite a few years. We’re trying to make a decision but there are too many stumbling blocks- best location for our circumstances, safe financials and appealing meals.
I am not a fan of Morrisons but the older residents seem to like them. The newer ones have been trying, sometimes successfully, to get some changes. We have one more expensive sit down restaurant outside their control with very good food. One sit down restaurant they run with good food aside from the green veggies (but this is the south), two bars serving the same food as the restaurants, a food court style eatery and two cafes. If I’m not eating in one of the restaurants I usually eat build-your-own-salad plus protein for lunch, and pick up protein and fix my own veggies for dinner. Our administrators do regularly eat lunch in the dining venues.
The food in our CCRC is generally excellent. However, we are in an upscale facility in Westchester County which is just north of NYC. Meals are reasonably priced (entrees $15-$25) but there are also occasional gourmet offerings such as the option of signing up for a four course meal next Saturday for $135 per person. That is too pricey for us, but it does reflect the fact that more CCRCs are catering to the rapidly growing number of affluent retirees.
We reviewed 10 CCRC’s before making our decision. My suggestion is take the tour, meet some actual residents in Independent Living, check out the Assisted Living and Skilled Nursing Home and then look at the financials, and the rating of the Skilled Nursing and any other rating by magazines or the like. It turned out the most important factor for us was the Residents of Independent Living discussions. Get all the information you personally need to make a good decision. There can be a lot of options.
One very important factor is to insure you take advantage of the Federal Income Tax deduction on Schedule A Itemized deductions. The deductions in year 1 are significant, as you get a portion of the Deposit Entrance Fee, and on the Monthly Resident Fee, or rent. Use the percentage method, as it for both deductions. For our CCRC in year 2024 the amount for Entrance Fee Deduction was $125,000 for each person living in the apartment, plus up to 47% of the Monthly resident fee for the year, for 2 persons and 45% for one person. It is important to bring this up to your Tax advisor, because many are not aware of the medical deductions, which are part of Schedule A.
I did my late mother’s taxes and her Type A facility provided the information necessary to deduct both a percentage of her annual fees as a medical expense and a percentage of the CCRC’s property taxes.
I’m concerned about the type A plan as it inadvertently creates a financial incentive for one to die especially if there is a waitlist.
I commented on a recent post about CCRCs that as my wife and I are on 4 CCRC wait lists that I recommended prospective residents join NaCCRa-National Continuing Care Residents Association for a nominal fee. There are excellent resources there which address many of the topics in Dennis’ article including Consumer’s Guide to CCRCs, Financial Soundness Handbook for Residents and Prospective Residents and What ElderCare Lawyers Should Know about CCRCs. Also several docs on Actuarial Projections, Bankruptcies, Bill of Rights and State Resources amongst many others. Home – National Continuing Care Residents Association, Inc Also there is a good visit checklist here: Continuing Care Retirement Community Visit Checklist | Where You Live Matters
Thank you, Dennis. This was very helpful. We might be looking into this for MIL with dementia, so timely for us. Appreciate the link to the IRS page also. Chris
Thanks Dennis. This is one to bookmark.
Thanks Dennis. Your article, and the comments, are helpful as we start to investigate this potential next leg of the journey.
Excellent summary of an important and complicated decision.
I would add that you have to itemize for the tax deduction to be relevant in facilities where that is allowed. I did my mother’s taxes until she died two years ago and switched her to the standard deduction after the cap on the SALT deduction was passed (when she itemized she was able to deduct both a portion the facility’s health cares expenses and a portion of its property taxes). The $10,000 cap is due to expire next year but it is highly likely that a new tax act will be passed later this year. Several GOP politicians are in favor of removing or raising the SALT cap so more people may find it beneficial to itemize in the future..
I would also note that it is becoming more common for non-profit CCRCs to be managed by a for-profit CCRC management company, which is the case at the facility that my wife and I moved to when it opened in December 2023. There are clearly pros and cons to this arrangement.
You’re right, there are pros and cons for both not-for-profit and for-profit CCRCs. A for-profit might have more resources available, but if you belong to a not-for-profit CCRC, you will have more say in how your community is run because it’s the residents that are providing the capital, not the shareholders or investors.
Good to see you’re thinking about this and, clearly, doing serious research. Couple of points: my (non-profit) CCRC is a modified Type B. I will pay more in Assisted Living and Skilled Nursing than in Independent Living, but below market rates, and part of my entry and monthly fees are deductible. I did look seriously at a Type A, but decided I am likely to spend longer in Independent Living. The CCRC also promises not to evict me if I run out of money – I would not choose a CCRC that did not make that promise and back it with a benevolent fund of some sort.
My CCRC is also part of a small, local group. I believe that we are not obligated to help another member of the group if it gets into difficulties. BTW, one reason to choose a non-profit is that it may be less likely to be taken over, although apparently mine receives a lot of offers. UPDATE: I checked with my facility’s representative on the board. He says that “while each community has its own operating budget and [x] is a separate corporate entity, [we] are part of the same obligated group collateralizing all the debt of the group.” This helps us achieve better bond ratings with Fitch.
You might check to see whether your state regulates CCRCs. In NC the Department of Insurance does so under statute, and posts required financial disclosure statements online. Also, the wait lists are getting long, I just learned that there are around 1,100 households on the list for mine.
It sounds like you picked an excellent CCRC and signed a contract that you felt met your needs. Another reason why we lean toward a Type A contract is that we would have a better chance of leaving a legacy because our future costs for healthcare are more stable and predictable.
But your monthly payment will still go up each year as costs increase, right? Type A just means the increase will be the same for all levels of care.
Under a Type A contract, the monthly fees for independent living are much higher than necessary to cover the cost of Independent Living. As a result, residents are guaranteed no further increases in those fees, except for ordinary inflation. Of course, you still have to pay an entry fee. That’s why I would consult a lawyer before signing a contract.
I feel I must be missing something. Fees at all CCRCs go up each year. I checked the Disclosure Statement for a Type A in my general area. Fees have gone up every year since at least 2009, ranging from a low of 2.75% in 2016 to a high of 6.9% in 2024. Fees at my Type B CCRC went up 4.50% this year for all levels of care.
It seems to me that if you choose a Type A you are betting that you will spend longer in Assisted Living or Skilled Nursing, while if you select a Type B you are betting you will spend longer in Independent Living. People die without ever leaving Independent Living, or leaving only for a brief stay in Skilled Nursing. I was 76 and in pretty good health when I moved in: I could easily spend ten or fifteen years in Independent Living. Someone who is in poor health might well prefer a Type A. It occurs to me that if prospective residents sort themselves that way, with more people in poor health choosing Type A, it would put a greater strain on the resources of a Type A facility.
I know that in NY, Type A facilities are regulated by both the Dept of Health and the Dept of Financial Services that regulates insurance providers. As such, in order to meet actuarial standards, they are allowed to screen and reject applicants based on their health status in a manner similar to LTC insurance providers. Thus, people with certain chronic health conditions, such as MS, PD, and some forms of cancer can be rejected even if they are currently able to live independently. These restrictions and the rise in stand-alone assisted living facilities may limit the number of people in poor health who are admitted to Type A CCRCs.
It’s normal for prospective residents to have to pass both a physical and financial check, both when they get on the wait list and before they actually move in.
True, but there is clearly a difference between having to pass a physical evaluation and automatically being rejected because of pre-existing conditions regardless of one’s current ability to live independently. The conditions I mentioned aren’t deal-breakers at our Type B facility.
Ordinary inflation is quite vague. My mother was in a Type A facility and her annual price increases reflected increases in her CCRC’s overall expenses which included increases in healthcare, food, maintenance, emplyee compensation, property taxes, etc. I don’t see how any CCRC could remain in good financial shape if this wasn’t the case.
If you’re concerned about the financial solvency of a CCRC, you should ask if they use actuaries for creating financial reserves and determining entry fees and monthly fees. If so, ask to see the actuarial report. It would give you an insight into its financial viability.
Under a Type A contract, the entry fees and monthly fees are calculated actuarially to provide sufficient future revenue for living independently, in assisted living, in memory care, or in skilled nursing. That’s how folks who pay a substantial entry fee and monthly fee are guaranteed no increases, except for inflation.
I think the key difference between the different types of CCRCs is in the services that they contractually agree to provide and not whether they use actuaries to help them determine their fees, which I think is the case for almost all CCRCs.
As you pointed out, it is essential to thoroughly investigate a CCRC’s financials. I also don’t know if there is any evidence that Type A facilities are less likely to go bankrupt than other types of CCRCs.
The following is from a Dec 2024 article that while bankruptcies are rare, many Type A CCRCs are financially stressed despite their use of actuaries to set their fees.
Almost half of CCRCs surveyed by CARF International, a non-profit organization that accredits health and human services providers, said Type A are their predominant contract. And some 50% of those operating at a single site lost money last year and were dependent on new residents buying in just to stay afloat.
https://www.wealthmanagement.com/retirement/americans-risk-losing-life-savings-when-retirement-homes-go-bust
Wow. 1,100 on a waiting list sounds extremely large, but it depends on the capacity of the facility and the turnover. I assume turnover is somewhat high, given that it caters to the elder population.
The facility opened a new building in 2023, which considerably increased Independent Living capacity and somewhat increased Assisted Living. There are a number of really elderly residents who have been here a long time, but most of the people moving into the new building were younger, probably in their 70s. I don’t know the length of the lists at other facilities in this area, but the “baby boomer” bulge is hitting. Of course, people may drop off the list for a number of reasons, and some people sign up on multiple lists.