One of the biggest challenges when evaluating a life plan community (also called a continuing care retirement community or CCRC) is determining whether it is a sensible financial fit. Rather than asking simply “Can I afford it?” many prospective residents want to know how joining a community will affect their long-term finances: How much will remain in my estate? What will be left for children, grandchildren, or charity? What if I live longer than expected or require more care?
This article provides a practical roadmap you can use yourself or share with your financial advisor to evaluate those questions and estimate lifetime affordability.
Lifetime affordability
When assessing a life plan community’s affordability, plan for the remainder of your life rather than using a short-term comparison. Life plan communities typically offer a continuum of care—from independent living to assisted living to skilled nursing—so most residents can remain on campus if their needs change. That access to future care is a primary benefit of choosing a life plan community.
Because residents in these communities often live longer than the general population, it’s prudent to add two to three years to standard life-expectancy estimates in your financial projections. If your family tends to live longer, or you want a more conservative estimate, add a few additional years to your planning horizon.
>> Related: Senior Living Affordability: A Top Priority For Choosing a Retirement Location
Type of CCRC residency contract
Understanding the residency contract is essential to an accurate affordability assessment. Two contract elements matter most:
Entry fees
Many life plan communities require an entry fee, though rental options are becoming more common. Generally, rental communities charge higher monthly service fees than entry-fee communities, all else equal.
If an entry fee applies, include it as a cash outlay in the first year of your projection. Often proceeds from a home sale fund the entry fee; if not, you may need to withdraw from other assets or accounts. Consider the tax implications of selling assets or taking distributions when modeling your cash flow.
Also note whether the entry fee is refundable. For example, an 80% refundable entry fee that will pass to heirs should be included in estate projections.
Monthly service fees
Monthly service fees and how they change if you need higher levels of care are a major driver of long-term cost. Different contract types treat care costs differently: some require residents to pay the full cost of care as needed, while others include care within the monthly fee. Accurately projecting how fees will adjust—especially for couples—is essential for realistic comparisons.
When reviewing contracts, confirm how fees change on transfer from independent living to assisted living or skilled nursing so your long-term budget reflects potential increases.
Additional monthly expenses
Beyond entry fees and monthly service fees, include other recurring expenses you’ll likely incur. The monthly service fee covers many daily services, but you should account for items such as Medicare and supplemental insurance premiums, out-of-pocket medical costs, groceries or dining out, subscriptions, transportation, and personal expenses.
Clarify which services are included in the monthly fee and which carry extra charges. For communities offering lifecare contracts, be aware that meals in the healthcare center may not be fully covered. If the care center adds meal charges, that can increase monthly costs by a few hundred dollars while a resident is receiving care there.
>> Related: Crunch the Numbers: Aging at Home vs. Moving to a CCRC
Simplifying a complex calculation on CCRC affordability
Estimating lifetime costs for a life plan community involves many variables: community policies, contract type, housing choice, lifespan, health needs, and more. That complexity can overwhelm prospects trying to project future costs and benefits.
To simplify this calculation, look for tools and resources that model lifetime scenarios and compare contract options side by side. These tools can help you visualize how entry fees, monthly fees, fee adjustments for care levels, and additional expenses interact over time, producing a clearer picture of long-term affordability.
If you represent a life plan community or senior living organization and want solutions that provide prospective residents with greater financial clarity, consider reaching out to industry providers that specialize in affordability modeling and resident education.
Careful planning—factoring in lifespan, contract details, refundable entry fees, fee escalations, and other monthly costs—will help you determine whether a life plan community is a sound financial fit for you and your family.