Ep. 238 – Rae Dawson – The Basics About a CCRC in Retirement – Part 2

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In this Episode of the Secure Your Retirement Podcast, Radon and Murs have Rae Dawson discuss the basics of CCRC around cost, the waitlist, deciding a CCRC and the right age to move to a CCRC. Rae is a CCRC expert and spent her original career primarily managing people and projects in high-tech in Silicon Valley for many years before gaining an interest in CCRC.

She explains why CCRC cost is determined by the type of contract and the location of the community and things to consider when considering the cost of a CCRC.

Listen in to learn the importance of being flexible in your requirements to avoid a long waitlist that can go up to 4-15 years. You will also learn about the typical age of a CCRC entry and the advantages of joining a CCRC earlier.

In this episode, find out:

• Things to consider when thinking about the cost of a CCRC as per the contract in the Triangle area.
• The meaning of buy-in and monthly fees for a traditional CCRC for single or double occupancy.
• CCRC’s rule of thumb – know whether you qualify for a CCRC and should pursue that dream.
• Why you should consider placing your name on a waitlist at multiple communities to have options.
• The advantages of joining a CCRC earlier on when you’re healthy and not very old.
• Things to think about when you decide to live in a CCRC to choose the suitable community for yourself.

Tweetable Quotes:

• “You should have in assets three times the CCRC entrance fees, and your monthly income should be two times the monthly fee.”– Rae Dawson
• “You might be able to enter a community more quickly if you’re flexible in your requirements.”­- Rae Dawson
• “People that live in CCRCs tend to live longer than the average American, and so it’s not unusual to find people in their late 90s to 100s living in the community.”– Rae Dawson

Get in Touch with Rae:

• Email: rae01dawson@gmail.com

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:	Welcome everyone to the Secure Your Retirement podcast. We are excited today to continue a conversation that we get asked about so much and that is continuous care retirement communities. We have brought back one of the consultant experts that we have in the area, Rae Dawson. In fact, we had Rae on episode 236, which we started down this path of the basics of what are called CCRCs, Continuous Care Retirement Communities. And we had so much as we were talking to Ray that we wanted to talk about that and we said, “Hey, will you come back and continue the conversation?” So we’re calling this part two. So thank you very much, Rae, for coming on and chatting with us again today.
Rae Dawson:	You’re welcome. Glad to be here.
Radon Stancil:	Just to let everybody know, the agenda for the conversation today is we’re going to talk about in particularly the cost of CCRCs, and we’re focusing this one on the Raleigh Triangle area. So we’re just using this as an example. We’re going to talk a little bit about waitlist, how long it takes to get into one of these, what age should I move into one of these locations, and then how should I decide any of these? So these are great, great questions and topics. So thank you Rae for putting that together.
Rae Dawson:	You’re welcome. Should I get started?
Murs Tariq:	Yeah. So the last episode we did with Rae, by the way, is a little bit more understanding of the types of CCRCs and everything like that. If you’re a visual person, by the way, today, Rae does have a slideshow presentation, so you can hop over to YouTube and look at some of the visuals that she has. But if you’re listening to the podcast, we’re going to make it nice and smooth for you too. The first topic, Rae, let’s jump into it. Triangle Area CCRC costs.
Rae Dawson:	Great. All right, let’s get to it. So costs for all CCRCs, regardless of whether they’re in the Triangle or elsewhere, are basically driven by the type of contract. And last week we talked about contract types. And the location of the community. So if you’re in a popular real estate area like the Triangle has become, costs are going to be more than they might be in more rural areas of North Carolina, for example. So there are two things to consider when you’re thinking about the costs of a CCRC. One is if you’re talking about a traditional CCRC, there’s a buy-in. And the second is there’s a monthly fee. So the buy-in and monthly fees that I have listed and I’m going to talk about today are primarily for traditional CCRCs. Last week I talked about, I also covered rental CCRCs. Rental CCRC don’t have buy-ins and their monthly fees are much higher than a traditional.
	So the costs of a CCRC are typically broken into two different kinds. One for a single occupant of a residence and the second for a double occupancy. And that can be roommates, it can be spouses, it can be siblings, it can be whatever. But there are typically no more than two people who would occupy a residence. So buy-in ranges in the Triangle range anywhere from $60,000, and that’s a one-time cost for a studio. And there’s only one community in the Triangle that I’m aware of that has a studio size unit and that’s Croasdaile Village, all the way up to $990,000 for a cottage. Once again, remember that these prices are driven by contract types. So that $990,000 cottage is for an extensive contract. And those types of communities are more expensive upfront because you’re prepaying for your higher levels of care over time. For a double occupancy, the ranges are from $140,000. The reason it jumps up so much is because most communities won’t let two people occupy a studio. So those are for a one bedroom and a cottage for two people, the buy-in might be as high as $1,065,000.
Radon Stancil:	I’m sorry. Before you go, these buy-ins in this range here, are those buy-ins… I know that with some communities there’s an AB option, but are these a version where that when I pass away that my heirs will get this money back or is this just I’m paying this money and then it’s gone? Not gone, but it’s there for the rest of my life.
Rae Dawson:	Thank you for that question. On the low end, they are fully amortized. So when you leave the community, if you stay more than 50 months, in most cases, your money is amortized to zero. The particular community that I grabbed for the higher end is a community where a hundred percent of your buy-in goes back to your estate. So that’s another reason why those dollar amounts tend to be on the higher end because that community is giving you your money back when you leave. [crosstalk 00:06:02]
Murs Tariq:	Good to know. And also, just another quick question. I think studio is pretty understandable, that’s really no room, it’s all in one big square box. One bedroom is understandable. What is a cottage? Is that a couple of rooms? Go ahead.
Rae Dawson:	Yes. So when I use the term, and I use it generically, I’m using a cottage to mean a standalone, what would in most neighborhoods be considered a single family home. All communities, all traditional, have apartments and standalone homes. They might also have duplexes or triplexes and they will refer to them as different things. So I’m using the more generic term of a cottage being a single family home. And one of the things to mention too is that price is driven by square footage. So these are the largest examples I’m giving because I’m trying to give you a range from lowest to highest. These cottages might be 3000 square feet for example, whereas the studio might be 600 square feet. So another piece of information about costs is that prices typically, although not always, but it’s typically driven by square foot. So if you think, oh my goodness, I can’t afford a million dollars, then think about getting a smaller footprint.
	And that’s not a bad thing to think about when you move to a CCRC because there are so many activities that you’ll want to take advantage of that take place in the common area that you’re not going to be, hopefully, spending a lot of time in your apartment or cottage all by yourself. So you don’t need as much square footage as you might when you live in a single family home where you have to drive your car to go to the movies, for example, or to go play bridge with your friends or to have dinner.
Radon Stancil:	All right, excellent. So now I think we’re going to move over into the monthly fees.
Rae Dawson:	All right. So monthly fees, once again, there’s a single occupancy rate and a double occupancy. So, oh, I forgot to change this slide, sorry.
Radon Stancil:	No problem. We’ll talk through it.
Rae Dawson:	Right. So I need to get my data then. Bear with me while I get my data because this I don’t have committed to memory. Bear with me here. Oops.
Radon Stancil:	All right, so now let’s go ahead and start talking a little bit about our monthly cost.
Rae Dawson:	Okay, so remember that these fees are for a traditional CCRC. So for a single person, a studio might be as little as $2,150 a month whereas a cottage could run as high as $8,000 a month. For a double occupancy, a one bedroom might run as low as $4,580 and as high as $9,840. One thing I should mention is, included in these costs are, all in most cases, and be aware that comparing CCRCs on prices is very difficult because some include meal plans, some include housekeeping, some don’t. So these are general terms. So what’s included is typically some meals, clearly your home, your residence, cable TV is usually included. Most utilities, if not all, transportation to and from your doctor’s office, they often have onsite transportation, you’ll have access to a gym, a pool, sometimes personal trainers, those kinds of things. So this is not comparable to your current house payment. It includes more than your current house payment.
Murs Tariq:	Okay, that’s a good clarification because I was going to ask that. If I’m going to pay 140,000 to a million bucks just to buy in, which is the cost of a house in itself, and then I’m also going to pay rent on top of that, what all is coming with that? So thanks for sharing that.
Rae Dawson:	Right, right. Good. So one question I get asked a lot is how will I know if I will qualify? Is there a rule of thumb for whether I know if I should even pursue this path? And so a rule of thumb for people to keep in mind is that your monthly fee should be no greater than two times your monthly income. And the entrance fee, you should have in assets three times the entrance fee and your monthly income should be two times the monthly fee. So if I’m moving into the $2,150 studio, my monthly income should be $5,000 to support that. That’s a general rule of thumb that says the CCRC, and this applies to traditional CCRCs, the traditional CCRC ought to allow me to move in, feel comfortable with me moving in.
Radon Stancil:	Excellent, thank you for bringing that up. That’s a great thing to know. Okay, so this gave us a nice overview of the cost. Let’s look at our next point here, which is, okay, I want to do this. Now, how long do I have to wait?
Rae Dawson:	That’s right. Wait list. You’ve heard about these, I’m sure. They can be long. There is no doubt about that. So four to 15 years is not uncommon. You might be able to enter a community more quickly if you’re flexible in your requirements. So what that means is, I really want a two bedroom apartment with a den. I like that floor plan. But maybe the community doesn’t offer a lot of those. And so you’d have an easier time getting in if you’d be willing to take a two bedroom apartment, for example. So you have to be flexible if you don’t want to experience those long wait lists.
Radon Stancil:	I hate to interrupt you here on that one, but on the being flexible, is there a scenario where I really want this other plan, but I say, Hey, I’ll take this one. That’s not exactly what I want. Can I still stay on the wait list for that other one even after I move in and go, Hey, can I go get that one later? Have you ever heard of such of that?
Rae Dawson:	Oh yeah. Oh yes, I’ve heard of it. It varies by community. And in general, most communities discourage that. Not all, but what they will allow you to do often without too much hassle is let’s say you’re in a very large residence, one of those cottages with 3000 square feet. And there were two of you and one spouse dies. And the remaining spouse says, “I really don’t want to live at the end of the community all by myself where I have to drive my car all the time to get to the clubhouse. I’d like to be in the main building. So I’d like to move to a smaller footprint.” For something like that. Many communities will allow you to move but they really don’t want you playing the game, shall we say, of I’ll take the two bedroom and move in later.
Radon Stancil:	Okay.
Rae Dawson:	The other thing I always tell people is don’t put all your eggs in one basket. It’s best to place your name on a wait list at multiple communities. And that way if something should happen in the future, let’s say you receive a serious diagnosis that if you wait too much longer, might prohibit you from being able to enter a CCRC, then you’ll have options you might have. Because they don’t all have the exact same wait list. And so you might find one that has exactly the floor plan you want when you’re ready.
Murs Tariq:	So just a quick question on the waitlist. I assume there’s a bit of a pre-application process that shows that you do have at least the basic financials. Maybe not a very deep dive into your finances, but understanding that maybe there’s an application fee as well or something like that to hold your spot.
Rae Dawson:	Yes, Mors, are you looking at my slides?
Murs Tariq:	I don’t know.
Rae Dawson:	Yes. Wait list fees. All communities will have an application fee and the application fee typically runs $300 and it’s nonrefundable. In some cases, it might be $250, but $300’s average. And with that application fee, and when you sign up for the wait list, the community is going to ask you some general information about your financial and health situation. They’re not going to ask for all of your financial statements. When you move from the waitlist to the ready list, they will. But when you move on the waitlist, they will simply ask for, in general, what your financial situation is. And the reason that they do that is because in case you do put all your eggs in one basket, they don’t want you thinking that you’re going to be able to qualify for this community and five years from now find out that you cannot. And that happens to people. So they’ll run an assessment about your financial situation before they’ll accept you onto the wait list.
	Most communities also have a $1,000 to $5,000 wait list fee and that fee is refundable should you choose not to move to that community. And if you move to that community, that fee will be applied to your buy-in.
Radon Stancil:	Excellent. All right, great. So I think our next agenda item is to talk about age. How old should I be typically to look at these types of places?
Rae Dawson:	Right. And this particular topic is leading into the next topic, which is how do I make my decision? So one of the ways you make your decision is by, am I old enough? Am I too old? Am I too young? So in most communities, the typical age upon entry is 75 right now. In the past it used to be a little older than that but there’s such competition for communities and CCRC residences right now that people are tending to move in a little earlier. I think also the communities have a lot of activities and amenities that appeal to a younger senior citizen. So the typical age is 75. The age of the community, average age of the community might be higher, it might be 80 to 85, for example. Because what you find is people that live in CCRCs tend to live longer than the average American. So it’s not unusual to find people in their late nineties to hundreds living in the community. Another thing to keep in mind is that in most cases, you must be healthy to move into the community.
	And depending upon the contract type, the community may want you to be healthy for three years, for example, upon move in. Others might only, they don’t require it, but encourage six months to a year, for example. And this has to do with their financial model and how long they need you to live independently for them to be in case you are in a community where you’re prepaying for your higher levels of care. So if you wait too long to move in, you may lose your health and you might lose the ability to move into that community altogether. So that’s one of the disadvantages of waiting too long. The other thing is, one of the major reasons for moving to a CCRC is not only will you have someone to take care of your higher levels of care when you need them but you also want to integrate into the community and take advantage of all the features and amenities that the community has to offer.
	So if you wait until your health isn’t good or you’re very old, then you don’t have an opportunity to enjoy all that and you don’t have an opportunity to make those friends and relationships before you really need them. And we all need our friends as we get older.
Radon Stancil:	All right. So we’re moving on to the next topic now. This one is, all right, because you already set us up for this. How should I decide what I’m going to do?
Rae Dawson:	That’s right. So I’ve decided I want to move to a CCRC. How do I decide which community is right for me? So when you begin to think about this, these are some things that you might think about because these items that I have listed on the slide are those that have to do with, will I need higher levels of care sooner rather than later? So your family health history. Do your relatives live easily into their late nineties? If so, you might not want to prepay for an extensive stay in higher levels of care. Do you have long-term care insurance? It won’t dictate which contract type you might choose but it could help pay for a more expensive higher level of care because you do have long-term care insurance. Location is a really important one. If all of your friends are in the Triangle, you may not want to move to Charlotte, for example, and to a CCRC because you’re going to be leaving your friends behind. And so location is important.
	Clearly cost is important but I will tell you, location is an important consideration, cost is a difficult one because it’s very difficult to compare different contract types and even different communities unless you create a pretty extensive Excel spreadsheet, for example, or model. But I myself think that the most important criteria, after you’ve looked at your family history, which contract type might I be able to afford, as you’re visiting communities, you want to look at the culture of the community. Are these my people? People who take my class at OLLI at Duke tell me that when they start the class, they think, “If I’ve seen one CCRC, I’ve seen them all.” And as we go through the class and we visit different CCRCs, they realize that’s not true at all. Each community has a different culture. So you need to visit multiple communities and find one that fits your in which you feel comfortable.
Murs Tariq:	Rae, thanks, this has been great. I think the previous episode was more technical about you got to understand these things about CCRCs before you can even start to decide and think about it. But today was really around, I think the things that everyone is thinking about. How much is it going to cost? What’s the wait list look like? How old should I be when I do this? And then obviously how do I decide? So I think I really enjoyed this episode today. So thanks for hopping on with us again. If someone is interested in talking to you and starting this conversation with you, could you share the best way for them to get in touch with you?
Rae Dawson:	Yes. The best way to reach me is through my email address and that’s Rae01dawson@gmail.com.
Radon Stancil:	Again, thank you so much, Rae. You shared a lot of great stuff with us. We appreciate it.