We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for November 27, 2023
Rae Dawson – The Basics About a CCRC in Retirement – Part 2
In this episode of the Secure Your Retirement Podcast, join Rae Dawson as she breaks down the fundamentals of CCRC, covering everything from costs and waitlists to choosing the right time to make the move.
Ever wondered about the factors influencing CCRC expenses? Rae delves into that, offering insights on what to consider when evaluating the cost of a CCRC. Now, imagine this: How might being flexible in your requirements help you sidestep a potentially lengthy waitlist, which can stretch anywhere from 4 to 15 years?
How does the choice of location impact the cost of Continuing Care Retirement Communities (CCRC)? The expenses associated with CCRC are influenced by the contract type and community location. Living in a sought-after real estate location may come with a higher price tag compared to a more rural setting. As you contemplate the costs of CCRC, it’s crucial to factor in…
Rae Dawson is back with us this week to continue our series on CCRC (continuing care retirement community) and how it fits into your retirement planning. While much of this information is going to relate to your area, it is focused on Raleigh, NC.
Note: If you missed Part 1 of this series, click here to read it. You can also listen to the podcast version here.
CCRC costs are driven by the type of contract and community location. If you’re in a popular real estate area, you can expect to pay more than if you’re in a rural area. When thinking about the cost of a CCRC, you need to consider:
Buy-in
Monthly fee
Rental CCRCs are different than traditional ones because they do not have a buy-in, and monthly fees are much higher. Today we will be doing a deeper dive into Traditional CCRC costs.
For a traditional CCRC, you’ll often have 2 contract options: a single occupant contract, or a double occupant contract. The second occupant is often a spouse, friend, or sibling. Typically, no more than two people can live in a residency.
In the Triangle area, a buy-in for one of these communities ranges from $60,000 for a studio, and up to $990,000 for an extensive contract cottage. A higher buy-in rate for the extensive contract cottage because you’re paying for your higher level of care upfront. The buy-in is a one-time cost.
For double occupancy, your buy-in could be anywhere from $140,000 for a studio to $1,065,000 for a cottage. Why does the studio buy-in jump up for double occupancy? Most communities will not allow double occupancy in a studio.
Often, if your buy-in is on the lower end of the range, the community’s policy is if you leave the community after 15 months, your buy-in return is $0. However, if your buy-in is on the higher end, some communities offer a 100% return of the buy-in to your estate. If you secure your retirement and want to leave money to your heirs, it’s often best to pay the higher buy-in so that they receive the buy-in amount back.
What is a Cottage?
A cottage, in this sense, is a single-family home. The buy-in price is driven by square footage. A larger cottage may be 3,000 square feet, so a 600 square foot studio will cost significantly less. When moving to a CCRC, you have a lot of activities that you can engage in at the common area of the community. You’ll likely spend less time in a cottage by yourself, so downsizing is often a great option.
Different communities may have different names for types of homes. You may hear “duplex”, “triplex”, “apartment”, etc., in addition to studio and cottage. Keep in mind that the buy-in prices are driven by square footage if the different names for types of homes becomes confusing.
Monthly CCRC Costs
On top of your buy-in costs, you also have monthly fees. For a Traditional CCRC, there are ranges for the monthly fees:
Single person studio is as little as $2,150 per month
Cottage can run as high as $8,000 per month
Double-occupancy, one-bedroom ranges from $4,580 to $9,840 per month
In most cases, some meals, cable television, most utilities, transportation to and from the doctor’s office, gym or pool access, and some other perks may be included in the monthly fee. It’s important to know what amenities are included in the monthly fee, as they vary between communities and are probably things you pay for on an individual basis before living in a CCRC.
Qualifying for a CCRC
A general rule of thumb when pursuing a Traditional CCRC is that your monthly income should be at least 2 times the amount of the monthly fee. Your assets should be greater than 3 times the amount of your buy-in fee. If you’re moving into a $2,150 studio, your monthly income should be $5,000 to support this.
Traditional CCRCs will feel comfortable with allowing you to move in if you meet these income and asset requirements.
I’m Ready to Go. What’s the Waitlist on a CCRC?
CCRCs often have a waitlist because they’re in high demand and communities aren’t opening up at an adequate rate to meet the demand. It is not uncommon for a waitlist period to be 4 – 15 years. However, if you’re flexible with your floor plan requirements, you may be able to circumvent these long wait times.
In some communities, you can remain on the waitlist for your ideal floor plan and switch to your ideal unit in the future, but it’s often discouraged. What a lot of communities will do is allow you to downsize. Let’s say that you’re in a 3,000-square-foot cottage and one spouse dies. You would rather move to a smaller footprint, and the community may allow you to do this.
However, do not put all your eggs in one basket. Instead, you’ll want to be on multiple waitlists at a time. If you receive a serious diagnosis, you may be prohibited from entering a CCRC. It’s always best to have multiple options.
Joining a CCRC Waitlist
If you want to join a waitlist, there are steps that you’ll need to take to make all this work. You’ll need to:
Pay an application fee. It’s typically about $300, and it’s not refundable
Provide general financial and health information
Moving from a waitlist to a ready list will involve providing your financial statements
Communities will run a financial assessment before accepting you onto a waitlist, knowing the waitlist period is 4-15 years. You will also need to pay a $1,000 – $5,000 waitlist fee, which is refundable if you choose not to move to that community. If you do move to that community, the fee will be applied to your buy-in.
What Age Should You Start Looking Into a CCRC?
Today, the average CCRC entry age is 75. People are moving into these communities earlier than in the past due to competition and the attractive convenient amenities. The average age of a community may be 80 – 85. People who live in CCRCs often live longer than the normal person, with some living until 90 – 100.
Most communities require 6 months to 3 years of being healthy to move into a CCRC, so you can live more independently for longer.
If you wait too long and fall into bad health, you may not be able to move into one of these communities. Entering a CCRC early allows you to build friends and relationships early on, which is a nice perk of living in any type of community.
How to Decide What to Do
If you decide that you want to move to a CCRC, now you’ll need to choose the right community for you. You’ll want to think about quite a few different points, such as:
Family health history. Have your relatives lived through age 90 with few health issues? If so, you may not want to pre-pay for an extensive stay with higher levels of care.
Location. If all your friends and family are in one location, you’ll likely want to stay in their area.
Cost. It can be challenging to compare contract types and communities without a lot of organization first.
However, you will find there is one thing that’s even more important than all these points: culture and community. Visit multiple communities and find one that fits you and makes you feel comfortable. If you’re not visiting multiple communities, you may miss out on finding the community culture that is best for you.
Want to reach out to Rae Dawson to learn more about CCRCs? Email rae01dawson@gmail.com.
We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for November 13, 2023
Rae Dawson – The Basics About a CCRC in Retirement
In this Episode of the Secure Your Retirement Podcast, Radon and Murs have Rae Dawson to discuss the basics of Continuous Care Retirement Communities (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 what it means for a facility/community to be a CCRC and why most assisted care facilities are not CCRCs.
Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds.
But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.
Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds.
But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.
A Little Bit About Rae Dawson
Rae was mentioned to us by one of our clients, and after a great conversation with her on the phone, we knew that we had to invite her onto the show. She had a career in high-tech and worked in Silicon Valley.
She moved to North Carolina when she retired, and she worked with her friend, who taught a class on CCRC until 2021. Her friend eventually moved into a CCRC herself and Rae has been teaching the class on her own ever since.
What is a CCRC?
A continuous care retirement community (CCRC) is not well-defined and there are a lot of opinions on what a CCRC should include. A CCRC, by Rae’s definition, should offer:
Memory care may or may not be offered, but it’s a nice perk of these communities.
CCRCs offer a continuum of care while staying within the same community. Most residents live in these communities until they pass on. CCRCs are a topic that we cover when discussing retirement planning with clients, but many people are educating themselves on their community options.
What is the Mindset of People Attending Rae’s CCRC Class?
Educating yourself on CCRCs is important. Most people want to age in place and remain in their family home. However, planners take Rae’s class because they want to know:
If aging in place is for them and what that looks like
If CCRC is something they might prefer, and what criteria must be met before going into a CCRC
CCRCs are regulated and there are nuances that everyone considering these communities must know about beforehand.
Regulations on CCRCs
Note: We’re going to cover a lot here, and Rae has been kind enough to share some slides with us. We’ll be adding these slides to our YouTube channel for you.
A lot of money and resources go into CCRCs. You plan on living in one and ensuring that you receive the care you need in retirement. Regulations are a safeguard that offers you peace of mind and ensures that the community is “following the rules.”
In North Carolina, where Rae and our team are located, CCRCs are regulated by the NC Department of Insurance. Assisted living and skilled nursing facilities are also regulated by the Department of Health and Human Resources.
The NC Department of Insurance is your best resource for understanding the financial stability of a CCRC.
Luckily, in North Carolina, no CCRC has ever gone bankrupt. One almost went under, and the Department of Insurance stepped in to protect residents and help the community get back on the right financial footing.
Why?
Residents buy into these communities and make a significant investment to remain in one.
Familiarize Yourself with the Department of Insurance Website
Rae recommends that all her students familiarize themselves with the NC Department of Insurance website because it’s their go-to source for information. You can:
Search the site for CCRCs
Read through contract types
Read through community disclosure documents
Learn about the licensing requirements to be a CCRC
Access community search tools
Community search tools allow you to use an interactive search engine or download a PDF on all CCRCs.
If you cannot find a community on the Department of Insurance website, it is not a CCRC. Often, nursing facilities may promote themselves as a continuous care retirement community, but they are not if they’re not on the site.
Browsing through the PDFs on the NC Department of Insurance website, you’ll find great information on each CCRC, such as:
Buy-in options
Refund options
Low and high costs
Meals on wheels info
Waitlist time
A new interactive portal is also available that makes it simple to browse through all of the CCRCs in the state.
Note: If you’re not in North Carolina, you can often find similar information on your state’s website.
Wait List Notes
CCRCs have limited space, which means there’s a waitlist. We’ve had some clients wait six months, two years, or even longer to get into one of these communities. Some communities have a 12-year waitlist!
CCRC Rating Agencies
Rating agencies for CCRCs do exist, and three of the main ones are: Fitch, CARF, and CMS.
Fitch
Fitch provides primarily financial liability ratings. The main factor in the Fitch rating is the Debt Service viability. When a CCRC is expanding, the community takes on a lot of debt. However, once complete, the community will sell residency and its rating will rise because it’ll pay off the debt.
CARF
Rather than focusing on the financial aspects of a CCRC, these agencies will look at the services provided and the quality evaluations. Communities apply for a CARF (Commission on Accreditation of Rehabilitation Facilities) rating and pay for the assessment that is done.
CMS (Medicare)
Medicare will provide quality of care and staffing service ratings for skilled nursing facilities. Note that not all facilities are Medicare-certified, which may sway your decision to join one facility over another.
Note: Remember, the NC Department of Insurance also has a rating system for each community.
Understanding the 5 CCRC Contract Types
1. Extensive or Type A
An “extensive” contract is the most popular and requires a buy-in plus a monthly fee. No matter what level of care you’re living in, your monthly fee does not increase. You’re pre-paying with your buy-in with a higher upfront cost but a stable monthly cost.
Moving into a Type A CCRC does mean that your doctor will need to state that you’re likely to remain independent for a longer period of time than with other contract types.
2. Modified or Type B
A modified contract means that you’re buying in for a higher level of care at a subsidized rate or for a fee for a certain number of days. You’ll have a lower buy-in and monthly fee than an Extensive contract, but you’ll be paying more than our next contract type.
3. Fee for Service or Type C
Fee for Service contracts are exactly what they sound like. You pay for what you receive. While you live in an independent living facility, you’re paying for this level of care. When going into an assisted living area, you’ll pay the going rate for this type of care.
4. Rental
Rental communities are growing in popularity in North Carolina and do not have an entrance fee. You may need to provide a deposit of two months of rent. These communities do provide access to higher levels of care at the going rate.
What we do want to point out is that Rental communities are for-profit while the other communities that we’ve mentioned are non-profit.
Traditional CCRCs are beneficial because they will often offer a benevolent fund, which means that if you move into one of their communities and you run into money issues, they will not make you move communities. However, they may require you to move to a smaller footprint within the community that is less expensive.
Rental communities will make you move out of the community if you cannot continue paying.
5. Equity
An equity contract comes with a real estate transaction because you’re buying the residence that you move into. The real estate transaction allows you to buy the home and contract with the community for a higher level of care services.
The cost of the contract with the community is roughly 10% of the cost of the unit you purchase.
While there is not a structured classification, equity contracts are, more or less, a fee-for-service type of structure for higher levels of care.
Which CCRC Contract is Best?
Rae finds that no single community is best for everyone. If you have long-term care insurance, your choice for a community may be different than someone else’s. Why? Your insurance can help you cover the financial requirements of the facility.
Extensive contracts with long-term care are often a good choice because you may pay less once long-term care kicks in.
A few things to consider when choosing a CCRC contract are:
Current level of health
Family health history
Do you think you’ll need a higher level of care for a long period of time?
Rae’s former co-teacher chose a fee-for-service community because she didn’t want to pay for any services that she may not use.
In terms of quality of care, you’ll find that the quality of care across all contracts is about the same. You will receive the same great care in a Rental community as you will in an Extensive one.
Many residents who are tired of caring for their homes will often go to a Rental community. The community allows them to avoid the buy-in and gives them the freedom to move to another community or move into their kid’s home if they wish.
Rental communities do have a lease that is 12 months, but you will need to pay some costs upfront.
We’ve asked Rae to come back onto our show, because we’ve really just covered the basics of CCRC here. We plan on covering this topic more in-depth in the future, so be on the lookout for more episodes with Rae if you want to learn more about CCRC.
If you want to learn more about CCRCs with Rae, you can contact her directly at rae01dawson@gmail.com.
