Moved into CCRC today

[Sunset]

I've looked at perhaps half a dozen places between here and on the mainland. Not one of them had an immediate opening (IOW there was a waiting list.) So my guess is the "industry" is doing quite well as a whole. So the more subtle things are what I would ask a CPA to evaluate. YMMV

And yet the largest one in IL went bankrupt. We had considered it for FIL just before it went belly up !

Certainly part of the issue in this case was the misleading sales techniques they used to make us think we had to get in now or lose a spot. When in reality they had lots of empty units and were wishing to fill them.

So just watching out for lies and things not seeming "right" are important, and yet hard to detect.

https://therealdeal.com/chicago/2023/06/12/schaumburg-retirement-community-files-for-bankruptcy/#:~:text=Illinois%E2%80%99%20largest%20nonprofit%20retirement%20community%20filed%20for%20bankruptcy,Friday%20filed%20a%20Chapter%2011%20petition%2C%20Crain%E2%80%99s%20reported.

 

[harllee]

OP here. It was a big advantage to me to live near the CCRC I chose, to be able to visit often and to have many friends who were residents there already. Of course I had a CPA and attorney look everything over but it was very beneficial to have friends who were residents tell me about things that the raw numbers did not show.

 

[Koolau]

And yet the largest one in IL went bankrupt. We had considered it for FIL just before it went belly up !

Certainly part of the issue in this case was the misleading sales techniques they used to make us think we had to get in now or lose a spot. When in reality they had lots of empty units and were wishing to fill them.

So just watching out for lies and things not seeming "right" are important, and yet hard to detect.

https://therealdeal.com/chicago/2023/06/12/schaumburg-retirement-community-files-for-bankruptcy/#:~:text=Illinois%E2%80%99%20largest%20nonprofit%20retirement%20community%20filed%20for%20bankruptcy,Friday%20filed%20a%20Chapter%2011%20petition%2C%20Crain%E2%80%99s%20reported.

We actually wondered about that - maybe the place isn't actually full. So, at least locally, we did some sleuthing (during our visit and asking a couple of residents we knew.) Turns out, they were telling the truth. The place was full and the waiting list was very real.

In our original home state, the building expansion is breath taking at the place we would be most interested in. It has (in 40+ years) grown from a complex of 3 connected buildings to a multi city block complex with duplexes and low rises in addition to housing units. We have friends who live there and they had to move because they tore down their single unit to build a low rise. They love the place though it's very expensive (well, for that area - here in Paradise, it would be a bargain!) YMMV

 

[Happyretired]

We actually wondered about that - maybe the place isn't actually full. So, at least locally, we did some sleuthing (during our visit and asking a couple of residents we knew.) Turns out, they were telling the truth. The place was full and the waiting list was very real.

In our original home state, the building expansion is breath taking at the place we would be most interested in. It has (in 40+ years) grown from a complex of 3 connected buildings to a multi city block complex with duplexes and low rises in addition to housing units. We have friends who live there and they had to move because they tore down their single unit to build a low rise. They love the place though it's very expensive (well, for that area - here in Paradise, it would be a bargain!) YMMV

Taking on too much debt for construction can be tricky. A CCRC can be full and have a waiting list, yet still get into financial trouble. Sure, they can raise their monthly fees, but only so much, as at a certain level, residents will no longer be able to pay. It is extremely critical for you or a financial professional to carefully srutinize the CCRC’s financial statements before signing the contract. To say that a CCRC’s relatively poor financial condition is due to construction debt would not be sufficient for me. We are looking for a CCRC that has been in existence for many years, is CARF accredited, and is in excellent financial condition, regardless of construction debt. They’re out there, it just takes some research. You are basically giving a CCRC a large sum of money for the guarantee of lifecare. You don’t want to have to worry about the CCRC being able to live up to this guarantee.

 

[starry night]

Regarding annual reporting for CCRC non-profits

You can search ProPublica for disclosures about CCRCs as well as other non-profits.
Here is report of the one I think we are hearing about in NC.
https://projects.propublica.org/nonprofits/organizations/562277623

 

[Happyretired]

You can search ProPublica for disclosures about CCRCs as well as other non-profits.
Here is report of the one I think we are hearing about in NC.
https://projects.propublica.org/nonprofits/organizations/562277623

Looking at the financial disclosures, since 2015, this particular CCRC has had negative net assets for every single year. In four of the seven years, its expenses have exceeded revenue. It is encouraging that in the last two years (2020 and 2021), it has had a positive net income. The 2022 figures (found on the NC website) still show negative net assets but a continued positive net income. If, in fact, the construction bonds account for the majority of debt, at some point, these will have to be paid off. It will likely need a good bit of liquid assets for the payoff. Where is this money going to come from? They had a steep drop in net income from 2021 to 2022. Given that they are near full occupancy, I would want to know what their plan is to pay off this debt. Many CCRCs prepare pro formal financial statements showing this.

 

[bmcgonig]

Looking at the financial disclosures, since 2015, this particular CCRC has had negative net assets for every single year. In four of the seven years, its expenses have exceeded revenue. It is encouraging that in the last two years (2020 and 2021), it has had a positive net income. The 2022 figures (found on the NC website) still show negative net assets but a continued positive net income. If, in fact, the construction bonds account for the majority of debt, at some point, these will have to be paid off. It will likely need a good bit of liquid assets for the payoff. Where is this money going to come from? They had a steep drop in net income from 2021 to 2022. Given that they are near full occupancy, I would want to know what their plan is to pay off this debt. Many CCRCs prepare pro formal financial statements showing this.

Not that I’m any expert in reading financial statements, but if you subtract out depreciation etc. their income exceeds expenses at least for one of the negative years, e.g., 2019. Didn’t look at any of the others. They were cash flow pos by about 4m that year. In 2021 they were positive by over 10m.

They’re already paying off the bond to the tune of about 2m per year. Seems like they’re in good shape to continue this?

 

[ChrisC]

Not that I’m any expert in reading financial statements, but if you subtract out depreciation etc. their income exceeds expenses at least for one of the negative years, e.g., 2019. Didn’t look at any of the others. They were cash flow pos by about 4m that year. In 2021 they were positive by over 10m.

They’re already paying off the bond to the tune of about 2m per year. Seems like they’re in good shape to continue this?

An issue with any of the analysis of prior years is that you can't really forecast future sustainability in the event of black swan events, like a pandemic, which resulted in several luxury level CCRCs in TX and IL going into Chapter 11 -- and all this occurred with significant Government assistance to their operations. I'm convinced that the business model of Type A contracts is more susceptible to shocks or drastic changes in residential profiles of CCRCs than pay-as-you-go per diem plans for entry into the assisted living/skilled nursing wings of a CCRC. The risk of LTC expenses in Type A is all on the CCRC and the CCRC better have sound actuarial assessments for future financial planning. I noticed that one major non-profit CCRC with campuses in several states, conducts an actuarial assessment every 3 years, and if the assessment shows financial risk -- it books a liability for that risk and establishes reserves for it!

Moreover we don't know what the future advances in medical treatment or drug pharmacology might bring to us.For instance, what happens if these weight loss drugs prove to be modern day miracle drugs prolonging life spans and that a significant number of baby boomers at CCRCs become very healthy and stay in independent living or, if sidelined with some other illness, their lifespans in skilled nursing become much longer and require more care?

 

[harllee]

Op here, back to my life at the CCRC. DH is having his second knee replacement in a couple of months. Yesterday we met with the Community Navigator here at the CCRC about how they can help. After the first knee replacement (when we still lived in our house) DH had some complications that put a great burden on me as the primary caregiver (in addition I am primary caregiver for my mother with Alzheimers) and I am stressed about how I can possibly get every thing done with DH's upcoming knee replacement. I felt very reassured after meeting with the CCRC Community Navigator. The CCRC is proving all transportation to and from the hospital and all doctor appointments. When DH leaves the hospital he will go into short them rehab here at the CCRC for a week or two or as long as necessary. There are physical therapists right here in the building that will be working with DH and his doctor. When DH returns home I can get additional services such as grocery and meal deliver, home health aides, etc as needed. We are feeling much less anxious about the upcoming surgery.

 

[Out-to-Lunch]

^^^ Yay! Good for you. Great to hear.

 

[pacergal]

^^^ Yay! Good for you. Great to hear.

Yes, this is a great advantage of CCRCs.
This will make DH surgery much easier for you, harllee. Glad you are there.

 

[Happyretired]

Not that I’m any expert in reading financial statements, but if you subtract out depreciation etc. their income exceeds expenses at least for one of the negative years, e.g., 2019. Didn’t look at any of the others. They were cash flow pos by about 4m that year. In 2021 they were positive by over 10m.

They’re already paying off the bond to the tune of about 2m per year. Seems like they’re in good shape to continue this?

You should want a positive net income, even including depreciation. CCRCs like this are out there…

 

[Alex The Great]

Op here, back to my life at the CCRC. DH is having his second knee replacement in a couple of months. Yesterday we met with the Community Navigator here at the CCRC about how they can help. After the first knee replacement (when we still lived in our house) DH had some complications that put a great burden on me as the primary caregiver (in addition I am primary caregiver for my mother with Alzheimers) and I am stressed about how I can possibly get every thing done with DH's upcoming knee replacement. I felt very reassured after meeting with the CCRC Community Navigator. The CCRC is proving all transportation to and from the hospital and all doctor appointments. When DH leaves the hospital he will go into short them rehab here at the CCRC for a week or two or as long as necessary. There are physical therapists right here in the building that will be working with DH and his doctor. When DH returns home I can get additional services such as grocery and meal deliver, home health aides, etc as needed. We are feeling much less anxious about the upcoming surgery.

Harllee, I hope everything will go smooth with your DH knee replacement and he will be back on feet soon after that. Thank you so much for your regular updates!

 

[Jerry1]

Harllee, I hope everything will go smooth with your DH knee replacement and he will be back on feet soon after that. Thank you so much for your regular updates!

+1

Really enjoy the updates.

 

[Koolau]

An issue with any of the analysis of prior years is that you can't really forecast future sustainability in the event of black swan events, like a pandemic, which resulted in several luxury level CCRCs in TX and IL going into Chapter 11 -- and all this occurred with significant Government assistance to their operations. I'm convinced that the business model of Type A contracts is more susceptible to shocks or drastic changes in residential profiles of CCRCs than pay-as-you-go per diem plans for entry into the assisted living/skilled nursing wings of a CCRC. The risk of LTC expenses in Type A is all on the CCRC and the CCRC better have sound actuarial assessments for future financial planning. I noticed that one major non-profit CCRC with campuses in several states, conducts an actuarial assessment every 3 years, and if the assessment shows financial risk -- it books a liability for that risk and establishes reserves for it!

Moreover we don't know what the future advances in medical treatment or drug pharmacology might bring to us.For instance, what happens if these weight loss drugs prove to be modern day miracle drugs prolonging life spans and that a significant number of baby boomers at CCRCs become very healthy and stay in independent living or, if sidelined with some other illness, their lifespans in skilled nursing become much longer and require more care?

Or more-or-less effective Alzheimers drugs that allow a patient to live longer in the facility. Talk about your double edged sword event! Lengthening our lives could be very expensive - espeically LTC wise.

 

[Koolau]

Op here, back to my life at the CCRC. DH is having his second knee replacement in a couple of months. Yesterday we met with the Community Navigator here at the CCRC about how they can help. After the first knee replacement (when we still lived in our house) DH had some complications that put a great burden on me as the primary caregiver (in addition I am primary caregiver for my mother with Alzheimers) and I am stressed about how I can possibly get every thing done with DH's upcoming knee replacement. I felt very reassured after meeting with the CCRC Community Navigator. The CCRC is proving all transportation to and from the hospital and all doctor appointments. When DH leaves the hospital he will go into short them rehab here at the CCRC for a week or two or as long as necessary. There are physical therapists right here in the building that will be working with DH and his doctor. When DH returns home I can get additional services such as grocery and meal deliver, home health aides, etc as needed. We are feeling much less anxious about the upcoming surgery.

Great news! Keep us posted on how things go for you and DH. Aloha

 

[harllee]

Or more-or-less effective Alzheimers drugs that allow a patient to live longer in the facility. Talk about your double edged sword event! Lengthening our lives could be very expensive - espeically LTC wise.

Or an effective Alzheimer drug could substantially reduce long term care costs if it allows people to live independently longer.

 

[bmcgonig]

You should want a positive net income, even including depreciation. CCRCs like this are out there…

Disagree. I don’t think any CPA assessing Galloway Ridge would include it.

Harilee, congrats. That’s the kind of peace of mind we’re all looking for. Well done.

 

[Happyretired]

Disagree. I don’t think any CPA assessing Galloway Ridge would include it.

Harilee, congrats. That’s the kind of peace of mind we’re all looking for. Well done.

For us, we want a CCRC that is in the very best financial position possible, even including depreciation. They are out there, you just have to do thorough research to find them. When considering depreciated assets, at some point, these assets will have to be replaced or refurbished and a CCRC is going to have to have sufficient assets to do so. If not, you’ll find yourself in a CCRC in need of refurbishment. We recently visited one like this; it looked like it had not been touched since the 50s.

 

[braumeister]

For us, we want a CCRC that is in the very best financial position possible, even including depreciation. They are out there, you just have to do thorough research to find them.

I agree with this. I was on the wait list at five CCRCs. Since doing that, I have made an even deeper dive into their financials, and since two of them gave me a bit of concern I have dropped them from my consideration. The other three are extremely healthy from a financial standpoint and I would be comfortable moving into any of them right now.

This is out of over a dozen that made my short list several years ago, and that had been winnowed down considerably from the first set I investigated. It's a process that takes a lot of work, which is why so many people put it off.

 

[harllee]

OP here with an update--today we received a letter from the accountants for our CCRC stating the percentage of our entrance fee and monthly fees that are deductible as a medical expense on our 2023 taxes. The amount is substantial. Of course to take the deduction we will have to itemize and the medical expenses will have to exceed 7.5% of our AGI but the deduction will be substantial. A rough calculations shows that this deduction will substantially reduce our 2023 taxes. Yippee!

 

[SecondCor521]

OP here with an update--today we received a letter from the accountants for our CCRC stating the percentage of our entrance fee and monthly fees that are deductible as a medical expense on our 2023 taxes. The amount is substantial. Of course to take the deduction we will have to itemize and the medical expenses will have to exceed 7.5% of our AGI but the deduction will be substantial. A rough calculations shows that this deduction will substantially reduce our 2023 taxes. Yippee!

Yay!!

If you do end up itemizing, remember that any state and local or sales taxes and charitable contributions will further increase your itemized deductions and likely reduce your tax bill even further.

People have gotten used to not itemizing and tend to forget the state taxes and charitable contributions because most of the time they're irrelevant. Your CCRC medical makes them relevant again but it's easy to forget.

And taxes paid would include any estimated payments you made in 2023 (including 4Q 2022 paid in January 2023), and any paid with your state tax return filed last spring, and any state tax withheld in 2023 from income.

Obviously anything else on Schedule A would help too; taxes and charitable contributions just tend to be the most common ones I see.

 

[Sunset]

And mileage to medical appts , including dental and dental appt costs.

<edit> and prescription plan costs and out of pocket prescription costs

 

[Sunset]

OP here with an update--today we received a letter from the accountants for our CCRC stating the percentage of our entrance fee and monthly fees that are deductible as a medical expense on our 2023 taxes. The amount is substantial. Of course to take the deduction we will have to itemize and the medical expenses will have to exceed 7.5% of our AGI but the deduction will be substantial. A rough calculations shows that this deduction will substantially reduce our 2023 taxes. Yippee!

Looking ahead do you think the monthly fees will generate enough to make itemizing larger than the standard deduction ?

 

[harllee]

Looking ahead do you think the monthly fees will generate enough to make itemizing larger than the standard deduction ?

Looks like we might benefit from itemized deductions going forward. We do give quite a bit to charity but usually do it from our IRAs. We will have to run some numbers about the source of our charitable giving going forward.