Understanding the Costs of CCRCs

Continuing care retirement communities are the most comprehensive retirement option for seniors, but it comes at a cost. They have the most complicated contracts and are the most expensive. Here we discuss the costs that go into joining a CCRC.

Primary Costs of Joining a Continuing Care Retirement Community

Here are the two primary cost components to consider:

Entrance Fee

Also known as a “buy-in”, this is a one-time entry fee based on the size and location of the residence, as well as the type of residency care contract you choose. (More on that later.) The fee can range anywhere from $50K to even over $1M. The fee will be used to cover the costs of your growing care needs as well as providing funds for the community to operate.

Recurring Monthly Fee

Once the contract begins, the resident will pay a monthly fee to cover the costs of some meals, most activities, and services. The monthly fee may likely increase every year. And, depending on the contract, the fee may also increase should the resident enter into assisted living, memory care, or skilled nursing. Fees typically range from $2000 to $6000, depending on the community, its offerings, and the level of care required.

Couples entering the CCRC together would pay an additional supplement to the entrance fee and the recurring monthly fee.

Fees can vary broadly among different communities and even within the CCRC itself. Factors that determine the size of the fee, include:

1. Size/location of the unit. The larger the unit and/or the better the view, the higher the entrance fee and monthly fee.
2. The type of residency care chosen. Or another way to look at it is, how much you are willing to pre-pay for more care.

Types of Contracts

There are three main types of contracts, each with many variations. CCRCs will offer one, two, or even all three types of contracts:

Type A: ”Life Care”

A Type A or "Life Care" contract is one of most expensive CCRC contracts, but also provides the most benefits. The contract allows residents to essentially pre-pay for healthcare expenses that may incur in the future. This provides for predictability.

Entrance fee: The largest

Monthly fees: Will remain the same despite growing service and healthcare needs

Benefit: Provides price protection as assisted living, memory care, and skilled nursing costs can become much more expensive

Type B: "Modified"

A Type B or "Modified" contract offsets some of the costs of joining a continuing care retirement community, especially for healthcare. However, there are limits to the amount of care given.

Entrance fee: Reduced

Monthly fees: Will include an allotment of days (often 30, 45, 60, or 90 days) in assisted living, and an allotment of days in skilled nursing at the same monthly fee as independent living. If the resident needs more days in assisted living or skilled nursing than what is allotted, they would have to pay the present monthly rate for those facilities

Benefit: Provides some price protection as a resident may not need assisted living, memory care, or skilled nursing at all.

Type C: "Fee For Service"

A Type C or "Fee For Service" contract has much lower entry fees, as well as monthly fees. The trade-off is that residents must pay the market rate for services including assisted living and skilled nurses, which can get very expensive.

Entrance fee: The lowest out of three types

Monthly fees: Will guarantee access to the necessary services and care as they increase over time. However, expect to pay the going rate at the time.

Benefit: Allows one to pay for only the services that are needed.

Type D: Rental

A Type D or "Rental" contract is one of the least expensive contracts in terms of initial fees. However, residents must pay full market rate for care and healthcare services, possibly making it the most expensive contracts over the long term.

Entrance fee: None to minimal entrance fee

Monthly fees: Will cover rent for the unit but any additional services will be billed at market rate. Support services will be available on-site but not necessarily guaranteed.

Benefit: Less financially prohibitive with a much lower or no entry fee.

Type E: Equity/Co-op

Type E or "Equity/Co-Op" contracts are distinct from other contracts, in they allow ownership, either in the CCRC itself or of the house or apartment the resident lives in. Monthly service fees still apply though.

Entrance fee: In lieu of an entrance fee, the resident much buy his own residence or ownership within a co-op

Monthly fees: Can also be considered homeowners association dues. Residents will need to pay property taxes. Medical services would be paid as you go either at market rate or at a slight discount, or through a separate Type B or Type C contract.

Benefit: Opportunity for asset appreciation.

Usually, the entrance fee is not refunded should a resident decide to move elsewhere or passes away shortly after moving in. Popular variations of the above contracts would include either a 50% or 90% refund to the resident or the resident’s estate when the resident passes away. The higher the refund, the higher the entrance fee.

The entrance fee, monthly fees, and contract types will all vary from one community to the next. Once you find a community you like, make sure you sit down with a financial advisor to see which option would be best for you.