Are “Continuing Care Retirement Communities” a Good Option for Me?
When is the right time to start planning for retirement living arrangements?
We always tell our clients that it’s much easier to consider what they will enjoy and need in retirement while they are still well. We give this advice for many reasons. First, many facilities have waiting lists that are years long, so getting a head start makes a real difference. Second, certain options may not be available if a client is dealing with health issues like dementia or memory loss. Third, strategies to mitigate the medical cost of aging, such as long term care insurance, become less financially viable when sought later in life. Finally, preparing for retirement living involves decisions surrounding estate planning, philanthropy, inheritance and more. Having ample time to consider and weigh the interplay of these variables leads to better results.
What’s the right choice?
There are many options for folks looking to move beyond home ownership and find a living situation that suits their lifestyle and financial portrait. The “right choice” very much depends on each individual client’s goals and values.
Should I age in place?
A major decision that clients need to make is whether to age in place or move into a facility. Aging in place can be attractive because it allows individuals to stay in their home and not uproot themselves in their later years. However, this decision also comes with substantial risk considering the cost of in-home care. As individuals move into their 80’s and 90’s, many may require in-home care around the clock which can easily run into a 6-figure cost per year. Aging in place can also put undue stress on other family members, especially if finances get tight. It also generally becomes harder logistically to maintain a home as a person ages.
Each client has different resources and preferences, and so there is no one-size-fits-all approach. Some clients will move in with family to spend their later years. Some clients with more resources will age in place and set up a self-insurance plan. Still, we are finding that many clients strike a great balance between individuality and medical needs by moving to a Continuing Care Retirement Community (CCRC). It’s not right for everyone but it is working for many of our clients.
What are Continuing Care Retirement Communities?
An option that many of our clients pursue is seeking placement in a Continuing Care Retirement Community. These facilities provide a continuum of independence and care that accommodates residents as they age. Folks may begin with a beautiful two-bedroom apartment with a garden and then, perhaps in the last few years of life, transition to an on-site assisted care living unit or memory unit. The fee schedule, medical capabilities, and general environment range between CCRCs, so it’s important to take the time to gather information and compare before making decisions. Having known many of our clients for years and visited many of the CCRCs in the area, we can relatively quickly help narrow down choices for our clients.
What are some CCRCs in the Bay Area?
Please find below 9 CCRCs we have either directly engaged with or become familiar with thanks to our client network. The list is presented in no particular order.
The Forum at Rancho San Antonio
At a high level, how do CCRC’s work financially?
Generally, an applicant pays a nominal fee (for example, $1,000) to get on the waiting list and, upon acceptance, will pay an entrance fee, which in Silicon Valley can range from $300,000 to $1,400,000. The two major variables that affect the entrance fee are the type of living accomodations desired (e.g. square footage, which floor the unit is on, which way it faces) and whether the purchaser of the CCRC receives any estate value back at the end of his or her lifetime.
On the lower end, applicants may be securing a modest one-bedroom apartment with no value given back at the end of the lifetime; we can think of this like renting. On the higher end, applicants may be securing a three-bedroom apartment and an arrangement so that when they pass on, their estate receives a return of the principal paid for their apartment or their estate may sell the unit back to the CCRC and is credited some portion of the proceeds. This latter option can be attractive in terms of enhancing estate value, but it locks up more money up front. After the entrance fee is paid, residents pay a monthly fee which varies according to the housing and medical services provided.
Another important financial aspect to consider with CCRCs is the variability of what is included in the monthly fee and what is offered à la carte. It’s important to do your homework and learn what is included and what optionality surrounds increased care and cost in CCRCs.
How does one apply to live at a CCRC?
The process for applying to CCRCs is generally rigorous and may require extensive financial as well as medical disclosures. Once the CCRC accepts the application, the applicant is put on a waitlist that is usually two to three years long. When the applicant’s name comes up, it’s not uncommon that a CCRC will conduct further interviews with applicants to assess things like cognitive abilities and memory retention.
When they are offered a spot, applicants generally have the option to reject the first offer and their name is moved to the bottom of the list. However, upon the second offer, applicants usually must choose to accept or be taken off the waitlist. Once an applicant accepts, they can sometimes be rescreened to make sure they are a financial and medical fit for the CCRC. If there has been a significant financial or health change in the intervening years between application and offer of acceptance, a person may be denied entry. The particular process and timeline of application, testing, interviews, waitlisting and acceptance varies by CCRC, so it’s important to pay attention to the details.
Some of my clients who have enough resources will apply for a modest apartment at a CCRC early on when they are in good health and then accept the offer. Even though they are accepted, they don’t move in until later when they are actually ready to sell their home and change their lifestyle. At that point, they can then request an upgrade to a more ample unit if that is desired and the unit is available. The benefit of this approach is the peace of mind that when a client is ready, they can simply move in. This approach also can alleviate the stress families often experience when facing tough life transitions and the decisions that accompany them.
How do CCRCs differ aesthetically?
Each CCRC has its own environment that may or may not agree with a prospective resident. Some are quite upscale like The Vi at Palo Alto that boasts an elegant highrise building and an air of formality. Others, like The Sequoias, offer a more nature-oriented environment for those seeking fresh air and quiet. Once we understand what a client can afford, the next step is to find a place that really matches their values and lifestyle desires. I’ll often do site visits with clients and meet with the Directors of Sales at these various CCRCs and work to ascertain the best lifestyle and financial fit.
How does Long Term Care Insurance play into the picture?
Long Term Care Insurance generally begins paying out when a policyholder cannot perform two of six essential activities of daily living such as feeding or bathing oneself. Plans vary, but generally the policyholder pays out of pocket for the first 90 days and then the policy begins to pay out. When aging in place, Long Term Care Insurance is often a key strategy to mitigate financial risk associated with medical-care expenses in later life.
Whether or not Long Term Care Insurance would cover the fixed as well as à la carte expenses associated with CCRCs depends on a number of factors including the desired CCRC and the contract signed with the facility. CCRC residents will sometimes take out a Long Term Care Insurance policy so that potential à la carte expenses beyond their normal monthly fee can be covered by insurance. However, there are a number of variables at play here and it’s important to investigate all the fine print to be certain what may or may not be covered.
It is important to note that Long Term Care Insurance becomes more expensive as an applicant’s age increases. If financially feasible and of interest, we generally recommend that our clients consider this type of insurance in their 50’s or early 60’s. If one waits until they are in their 80’s, these types of policies are usually prohibitively expensive and don’t offer much value.
How do family dynamics play into these considerations?
Making sure your family is on the same page with your retirement living plan is an important aspect of the process, and one that is commonly overlooked. Far too often, the retiree’s adult children or siblings are left putting the pieces together when tough choices need to be made and options are limited. We also have clients that are part of the “Sandwich Generation” that represents folks that are paying for both their childrens’ and aging parents’ expenses at the same time. Threading the needle financially in these situations takes an extra level of foresight and strong inter-family communication.
While it may not be an easy conversation to have, talking to family about retirement living scenarios is necessary to align family financial goals and personal goals for the later stages of life. I have found that the best way to do this is to bring the family into a neutral place, like our office, for a discussion. I often ask clients to bring their children, parents and siblings along – make it a real family affair! This avoids any potential games of telephone down the road. Everyone is present to hear the preferences of the aging family members and potential sticking points can be addressed head-on and discussed. For a 10-point framework for having healthy family money conversations, click here.
How does Wealth Architects help?
Retirement living involves major decisions, and the right approach is not one-size-fits-all. Typically, because I know my clients’ preferences and personalities, I usually have an idea of which CCRCs they may want to consider. We will generally discuss first and then do site visits in anticipation of preparing the application, a process that we help drive and guide, including any follow up with the Director of Sales on behalf of our clients. Getting to genuinely know my clients and provide the best set of options for them to make these decisions is one of the most rewarding parts of my job.