Retirement communities – Figuring out the Finances
If you and other family members have decided that a move from your home to a retirement community would be beneficial, you are inevitably evaluating the costs and trying to figure out what you can afford. This is something Bridgewater can help you with.
Assisted Living and Memory Care Communities
The fee structure for retirement communities offering independent and assisted living arrangements is quite straightforward. They typically charge a monthly maintenance fee based on the size of the accommodation you choose, which covers most of the services offered. These communities may also have a Memory Care Unit, and should you need that type of support, your monthly maintenance fee will increase – sometimes substantially – to cover that additional support.
Continuing Care Retirement Communities
In contrast, the fee structure of Continuing Care Retirement Communities (CCRCs) can be more complex, and requires careful analysis. Typically, the CCRC fee structure includes a substantial up-front “buy in” plus ongoing monthly maintenance fees. While this structure may be initially off-putting, the long-term benefits can be many-fold.
Most CCRCs offer contractual arrangements at several levels, with “Lifecare” being the most common. This option provides a level of predictability – both personally and financially – that residents often find comforting. Should you need additional support or skilled nursing care, those services are provided within the community, and your monthly expenses do not increase, even though you may be receiving substantially more support. In fact, the up-front buy-in helps ensure that your long-term health needs can be supported indefinitely.
You may feel you do not need to pay for the Lifecare arrangement, but still want to enjoy the community benefits of a CCRC. Many of these communities now offer additional contractual arrangements for residents who are not looking for the Lifecare commitment. In fact, some contracts allow for partial refunds of your buy-in should you decide to leave the community for any reason, or if you intend to leave the funds to your heirs.
A Financial Review
We regularly prepare analyses to help clients figure out which options are affordable over the long run, because the financial arrangements for retirement communities can vary dramatically. It's essential to review your financial situation carefully to determine a workable long-term plan. For instance, after a thorough analysis, you may determine that moving to a retirement community – even a CCRC with up-front buy-in payment – is
less expensive than remaining in and maintaining your own home over time.
As you analyze your options, take note that it’s not just your financial advisor who will be looking over your finances. Be prepared to allow whichever retirement community you choose to access detailed financial information, including tax returns. They’ll want to know, for example, where your current home is located and what it is worth. They will be rigorous in their review, and sometimes people are turned away. If the community is a for-profit organization, they’re not obliged to let you remain in your apartment/accommodation if you run out of money to pay the monthly fee. This can be a concern.
On the other hand, non-profit CCRCs are making a commitment to you for the rest of your life, and that’s why the vetting process is time-consuming and extensive. They will want to determine if you’re a reasonable risk for them.
In turn, you must also confirm that the community you would like to join has a solid financial foundation. It’s vital that you also get all of their financial details, including current financial operating statements, so that we can help you with a thorough review. You should also ask for details on how frequently, and by how much, they increase their monthly fees. You will want to know that the community has sufficient financial reserves to meet all of their obligations.
Here is an excellent list of other questions to ask the community you’re considering from The American Bar Association Legal Guide for Older Americans by Charles P. Sabatino et al.
Finally, don’t delay. These life decisions can be challenging, but every time you delay, you risk health issues that might make you less attractive to an organization.
Please don't hesitate to reach out with questions or concerns you may have as you contemplate this type of move. At Bridgewater, we have worked with many clients to help them evaluate the benefits of different types of retirement communities, enabling them to make the best choice for their situation.