Fee for Service Retirement Communities

[wpackbob]

My wife and i are starting to look at the next phase of our retirement when we sell our home and move into a retirement community. One of the communities we looked at bills itself as different from others in that they are a class c fee for service community. The require a substantial up front fee, 80% refundable and a monthly service fee in the range of $3500 - $4500/month. Would like to hear others thoughts on this type of community.

 

[KingOfTheCheapos]

My wife and i are starting to look at the next phase of our retirement when we sell our home and move into a retirement community. One of the communities we looked at bills itself as different from others in that they are a class c fee for service community. The require a substantial up front fee, 80% refundable and a monthly service fee in the range of $3500 - $4500/month. Would like to hear others thoughts on this type of community.

I think you need to provide more detail. Is this a facility with substantial health care services? $40k-$50k is a lot of money to pay in monthly dues.

 

[Sunset]

More details (name) would help, maybe someone has experience with the one you are looking at
I'm guessing this is a CCRC.

I know when we visited a CCRC here, for DF, they tried the subtle pressure of "only 1 room left" thing, "it may be gone by the end of the week"

Two weeks later they called back to see if we were still interested, so I guess it didn't go so fast

 

[Bamaman]

My mother was in a very plush CCRC. $170K up front security deposit and $2050 a month including 20 meals by a Dutch chef. We ended up having to have 24/7 help watching after her and taking her to appointments, and she was going thru an incredible amount of $.

When she passed at age 91, she was down to her last $5K cash. It was time. We got back 90% of the upfront money. She had a great time there, however.

 

[Silver]

My guess is that you are considering a continuing care retirement community (CCRC). There are a variety of contracts used at CCRC's, and I have included a link that might be helpful in describing the most frequently used four types of contracts; type A, B, C, and D.

https://www.seniorliving.org/contin...full range of higher medical care is included.

My DH and I have selected a nearby CCRC and plan to move there when we are in our mid-late 70's, or about 6-8 years from now. We will be using a type A, or life care, contract because it "prepays" the future medical services allowing for expenses to be more predictable. It is pricey.....about $300k entrance fee and about $4K monthly, but since we have no children or family to leave any money to, we're going to spend on a comfortable, safe, nice place for our final years.

The other thing we like about this CCRC is you "own" your apartment for as long as you are alive. Assisted living is provided in the apartment, and only when highly skilled nursing care is required you may be moved to a different area within the CCRC campus.
This is important to us because my DH and I don't want to be separated, which often happens in other settings.

 

[Jerry1]

So, I'm pretty young for a CCRC, but I was looking at them and thinking about that for me and DW. Question, is the initial fee (the $300K) for me and DW to occupy one unit? Or, do we both need to come up with $300K? Seems like just a single payment but the literature on line doesn't really specify.

 

[harllee]

So, I'm pretty young for a CCRC, but I was looking at them and thinking about that for me and DW. Question, is the initial fee (the $300K) for me and DW to occupy one unit? Or, do we both need to come up with $300K? Seems like just a single payment but the literature on line doesn't really specify.

At the CCRC where DH and I have our name on the waiting list the initial fee for 2 people is somewhat higher but not double. For example the initial fee for one person is around $300,000 and for 2 people the total fee is around $400,000. We are age 70 and hope to move in within the next few years. We put our names on the waiting list in our early 60s and paid a $1000 fee at that time to get on the list (which will be applied to our initial fee). We are glad we got on the waiting list when we did--the waiting list is at least 10 years long now.

 

[Jerry1]

In ten years, I will be 70 and DW 75. I think we can wait a few years to decide. I think the 10 year waiting list is typical. I’m thinking more like me at 80 and DW at 85. But, I think it’s a bit of a gamble since I believe you have to be in reasonably good health to get accepted.

 

[harllee]

In ten years, I will be 70 and DW 75. I think we can wait a few years to decide. I think the 10 year waiting list is typical. I’m thinking more like me at 80 and DW at 85. But, I think it’s a bit of a gamble since I believe you have to be in reasonably good health to get accepted.

Yes, at the CCRC where we plan to move you have to be in good mental and physical health to move in. They require you to pass a physical and cognitive test. I have taken the cognitive test and it is pretty tough (counting backwards from 100 by 7, remembering 5 word for 15 minutes, etc). Good friends of ours were rejected by the CCRC recently because the wife could not pass the cognitive test. Other things will also disqualify you--Parkinsons and MS can disqualify you. Cancer (such as breast cancer) can disqualify you for 5 years.

In order to even get on the waiting list we had to give them a financial statement. They don't want anyone to move in without adequate assets. But if you live too long and run out off assets they have a trust fund that picks up your monthly costs--they will not kick you out.

 

[ncbill]

My mother was in a very plush CCRC. $170K up front security deposit and $2050 a month including 20 meals by a Dutch chef. We ended up having to have 24/7 help watching after her and taking her to appointments, and she was going thru an incredible amount of $.

When she passed at age 91, she was down to her last $5K cash. It was time. We got back 90% of the upfront money. She had a great time there, however.

Grandparents moved into the nicest CCRC here in town around 1990...only a $75k buy-in for a 2BR/2BA cottage, no meals, but no refunds.

A decade in, shortly after grandad died, the CCRC pointed out she (and others who came around the same time) was only paying $1,000/month where new residents were paying $2,000/month, so they were going to double her monthly residence charge starting the following month.

Be aware, absent specific state laws, you have NO landlord-tenants rights in a CCRC & the agreement you sign specifically mentions that.

In the end she (and others in her situation) got that doubling phased in by adding $50 each month until they reached the new level, but technically the CCRC didn't have to accommodate them.

 

[bmcgonig]

In ten years, I will be 70 and DW 75. I think we can wait a few years to decide. I think the 10 year waiting list is typical. I’m thinking more like me at 80 and DW at 85. But, I think it’s a bit of a gamble since I believe you have to be in reasonably good health to get accepted.

I think that this gamble applies only to class A places. But not 100% sure. The other places will let you in as long as you’re willing to pay the higher prices.

 

[SecondCor521]

I think the fee structure and the community are two separate but interrelated things.

My Dad lives in a CCRC. They initially were only offering units on the type of fee structure you mentioned - a large buy-in (which was mostly refundable within certain limits and timeframes) and a regular monthly fee. Based on popular demand, they started offering the same units with a different fee structure: a $500 deposit and then a higher monthly fee.

I did the math for them and the imputed rate of return (difference in monthly fees divided by buy-in) was about 7%, which seemed good. However, the large buy-in makes it more difficult to move, and at the time my parents were considering this, they weren't entirely sure they'd stay in this place.

The other thing I didn't like and my parents agreed, was that the contractual language about how and when and how much of the deposit we would receive back was very loosy-goosey and gave them wide latitude to shaft my parents.

My parents decided to not do the buy-in when they moved in in 2006. They sold their house about that same time and put that money in the market. I haven't actually checked but I think the money has done better in the market than it would have helped in lowering the fees. And my parents have had the flexibility of moving (which they didn't/haven't done yet, but I think they like the option because they (well he) has brought it up a few times).

One thing to note is that this CCRC has been pretty much full since it opened in 2005 or so, and they've regularly had a solid waiting list. As a consequence of this, they raise the monthly fees (and probably the buy-ins) 3-5% like clockwork every January.

 

[harllee]

I think that this gamble applies only to class A places. But not 100% sure. The other places will let you in as long as you’re willing to pay the higher prices.

Not so where we live, all CCRCs of all types have long waiting lists here.

 

[bmcgonig]

Not so where we live, all CCRCs of all types have long waiting lists here.

Harilee I was referring to the possibility of being rejected cos of ill health. Since the ones that aren’t Class A charge you full price for assisted living and nursing care, they don’t mind taking you. I think that’s the case.

 

[harllee]

Harilee I was referring to the possibility of being rejected cos of ill health. Since the ones that aren’t Class A charge you full price for assisted living and nursing care, they don’t mind taking you. I think that’s the case.

I think all the CCRCs where I am require you to pass physical and cognitive tests. The Class A type are the strictest but I think all of them require you to pass tests. My mother is in the pay as you go type of CCRC and she had to pass tests to get in. The fact that they all have waiting lists means they can be very selective about who they take.

 

[bmcgonig]

I think all the CCRCs where I am require you to pass physical and cognitive tests. The Class A type are the strictest but I think all of them require you to pass tests. My mother is in the pay as you go type of CCRC and she had to pass tests to get in. The fact that they all have waiting lists means that can be very selective about who they take.

Good to know. Thanks!

 

[Scuba]

One point about these long waiting lists - in most cases, the waiting list consists of anyone expressing eventual interest who was willing to put down a small deposit. It by no means indicates that the vast majority of these folks would move in now if they were offered an accommodation. Therefore even places with long waiting lists may have immediately available accommodations.

I used to work in the CCRC industry and the most common phrase we heard from people on the waiting lists was “I’m not ready yet.”

 

[Scuba]

I suppose different organizations price their contracts differently to meet their own needs, but where I worked, we offered several contract types ranging from a large upfront fee with lower monthly fees to no upfront fee with higher monthly fees. These contracts were designed to be actuarially neutral to us as an organization. We used 6% as the implicit rate of return. Our long-term investment portfolio had a rate of return in the 6-7% range which is how we came up with that as the discount rate.

It truly did not matter to us whether someone paid the large upfront fee or the higher monthly fees. Most of the upfront fees are at least partially refundable upon death or move-out, so anyone moving into a CCRC and paying this large upfront fee should make sure the organization is very fiscally sound. Residents and their estates are considered unsecured creditors.

 

[SecondCor521]

One point about these long waiting lists - in most cases, the waiting list consists of anyone expressing eventual interest who was willing to put down a small deposit. It by no means indicates that the vast majority of these folks would move in now if they were offered an accommodation. Therefore even places with long waiting lists may have immediately available accommodations.

I used to work in the CCRC industry and the most common phrase we heard from people on the waiting lists was “I’m not ready yet.”

The waiting list at my Dad's place is ordered by deposit date. When a unit becomes available, I think they just go down the list until the get a taker. Another reason I know people pass (in addition to just not being ready, as you said) is that the unit that became available isn't the kind of unit they want (it's independent living when they want community living, or it's on the wrong floor, or has the wrong floor plan, or faces the wrong way).

 

[harllee]

One point about these long waiting lists - in most cases, the waiting list consists of anyone expressing eventual interest who was willing to put down a small deposit. It by no means indicates that the vast majority of these folks would move in now if they were offered an accommodation. Therefore even places with long waiting lists may have immediately available accommodations.

I used to work in the CCRC industry and the most common phrase we heard from people on the waiting lists was “I’m not ready yet.”

This may be true for some CCRCs but where I want to move has a "real" waiting list. I have been on it about 7 years and I am still not at the top of the list yet so it appears to be a real wait of about 10 years. For that CCRC once you get to the top of the list you can decline a unit 3 times and after that you go back down to the bottom of the list. To get on the list you put down a $1000 deposit and have to give them a financial statement to show you can afford to move in.

 

[Koolau]

With years-long waiting lists, these places must be able to command quite a premium for their services. So far, at least, we have decided to just wait until we need long-term care services - and hope we don't ever need them.

Having looked at some really "nice" CCRCs, we see the appeal to some folks but we just couldn't ever pull the trigger and commit to being "institutionalized." Only time will tell if we have made the right decision. YMMV

 

[nwsteve]

Having looked at some really "nice" CCRCs, we see the appeal to some folks but we just couldn't ever pull the trigger and commit to being "institutionalized." Only time will tell if we have made the right decision. YMMV

No question about it, quality life care CCRCs are not inexpensive. However, our read of the decision is we would rather choose where we were going to be "put" than depend on a family member making the "right" decision. YMMA