As older adults weigh the vibrant lifestyle and security offered by life plan communities, also known as continuing care retirement communities (CCRCs), a primary question is how to pay for the move—especially when the community requires an entry fee. We created a free guide with our colleagues at Second Act Financial Services, Funding Your Move to a Life Plan Community (or CCRC): A Helpful Guide (PDF). Below is a concise, updated summary of that guide outlining common funding methods and practical tips for making a financially informed move to a life plan community.
Understanding the life plan community concept
Life plan communities offer a flexible retirement option that combines independent living with access to assisted living, memory care, and skilled nursing on the same campus. Residents benefit from a range of amenities, social activities, and the assurance that higher levels of care are available if needed.
About three-quarters of life plan communities require an entrance fee, which may be fully or partially refundable to the resident’s estate or refunded sooner if the unit is vacated. The remaining communities typically operate on a rental basis or as equity/co-op models, where residents own their unit or a share of the community and still pay monthly service fees.
The primary community payment models are:
- Entrance fee: A one-time payment at move-in that can be fully, partially, or nonrefundable depending on the contract. Entry fees can be substantial, sometimes reaching six figures, so it’s important to understand refund terms and contract details.
- Equity or co-op: Residents hold title or ownership rights to their unit or a share of the community corporation. Some equity models share potential appreciation with residents or heirs when units are resold.
- Rental: No large entry fee is required; residents pay monthly rent and possibly a modest community fee.
Types of life plan community contracts
When moving into a life plan community you will sign a contract specifying housing, payment structure, and how care costs will be handled. Common contract types include:
- Type A (lifecare): Typically requires a higher entry fee and/or monthly fee in exchange for predictable, comprehensive care with little or no additional cost if higher-level care is needed later.
- Equalized rate lifecare: A Type A variation that standardizes care costs regardless of the independent living unit previously occupied.
- Type B (modified): Offers some included care benefits, such as discounted care services or a set number of care days included in the contract.
- Type C (fee-for-service): Features lower entry and/or monthly fees but charges for care at market rates when services are needed.
Funding options for your life plan community move
There are several practical ways to cover an entry fee and ongoing monthly service fees. Common strategies include:
- Selling your home: Many people use proceeds from selling their primary residence to fund entrance fees. If you don’t own a home, other funding strategies will be necessary.
- Bridge financing: Home equity lines of credit (HELOCs) or other bridge loans let you move in before your home sells, offering flexibility and potentially avoiding a rushed, low-price sale.
- Withdrawals from retirement accounts: IRAs or 401(k) withdrawals can provide funds but may carry tax consequences. Consult a tax advisor or financial planner before taking distributions.
- Selling securities: Liquidating stocks, mutual funds, or ETFs can fund the move, but capital gains taxes and broader tax impacts should be reviewed with a professional.
- Loans against securities: Some institutions offer loans backed by investment accounts. These can provide quick access to cash but carry market and margin risks.
- Life insurance options: Unneeded life insurance policies can sometimes be sold, exchanged for an annuity, or accessed for long-term care benefits.
- Long-term care insurance: Existing LTCi policies may help cover part of care costs—know the policy details to maximize benefits.
- Veterans’ benefits: Eligible veterans and spouses may qualify for programs such as VA Aid and Attendance to help offset long-term care expenses.
Additional considerations for funding a CCRC move
When planning a move to a life plan community, keep these financial details in mind:
- Potential tax deductions: Portions of entry fees or monthly service fees may qualify as medical expense deductions if they exceed 7.5% of adjusted gross income and you itemize deductions. This is often relevant for Type A and Type B contracts—confirm specifics with your tax professional.
- Comparing overall costs: A CCRC may appear expensive at first glance, but when you factor in the costs of maintaining a private home—property taxes, upkeep, utilities—and the potential cost of future care, a life plan community can be cost-effective and simpler to manage.
Making the senior living choice that’s right for you
Moving to a life plan community can provide a rich, secure lifestyle and peace of mind. The key is understanding contract types, comparing community models, and evaluating funding options that fit your financial situation.
Whether you plan to sell a home, use bridge financing, draw on retirement assets, or use other resources, it’s wise to consult financial and tax professionals to create a clear plan. For more information, download the free guide, Funding Your Move to a Life Plan Community (or CCRC): A Helpful Guide (PDF), produced by myLifeSite and Second Act Financial Services.