Continuing care retirement communities offer a resort-like setting and care when you need it. By Pat Mertz Esswein, Associate Editor and Sandra Block, Senior Editor From Kiplinger's Personal Finance, September 2014 Pat and Arne Cook thought they had made their last, best move when they retired to a golf community on Skidaway Island, near Savannah, Ga., 17 years ago. The couple had lived for 25 years in Connecticut, where they raised their four children (and shoveled their share of snow). Avid golfers, they were eager to live in a place where they could pursue their hobby year-round. Their new community, The Landings, had six golf courses and two marinas. “We were very happy little golfers,” says Pat, 76.See Also: Risks and Rewards of Moving to a CCRC But in 2012, Arne (now 78) suffered a health problem. “Afterward, his memory wasn’t as good, and he just didn’t have the confidence that he used to have,” says Pat. “We realized that we were okay now, but the situation could change very quickly.” Both of their mothers suffered from dementia at the end of their lives. “We didn’t want our kids to worry about taking care of us,” she says. The Cooks began shopping for a continuing care retirement community. Such communities, known as CCRCs, provide independent living, assisted living, skilled nursing and memory care (or just independent living and skilled nursing) on the same campus, typically in exchange for a sizable up-front fee. The idea is that residents will have a place to live for the rest of their lives, with access to care as they need it. Advertisement CCRCs are generally limited to people age 62 and older; the average age of entry is 80. Most people leave their homes only when they need assisted living, says Andrew Carle, executive-in-residence and founder of the Program in Senior Housing Administration at George Mason University, in Fairfax, Va. To entice residents who might otherwise stay at home, CCRCs offer country-club amenities, including posh dining rooms, fitness facilities and plenty of activities. They also offer safety backups, such as monitoring systems that let security guards know whether a resident has fallen or is otherwise unable to move around the apartment. In their 30 years of existence, CCRCs have largely been built, says Carle, “on golf courses and mountaintops in the middle of nowhere.” Lately, however, CCRCs are expanding to attract niche or affinity groups, and they have greater involvement in the community. CCRCs may now be university-based, focused on the arts, or geared toward the lesbian-gay-transgender population. During the recession, demand for entrance to CCRCs fell as people had trouble selling their homes and freeing up equity to pay the entrance fee. But with increased consumer confidence and improvements in the housing market, demand has begun to rise again, says Beth Burnham Mace, chief economist of the National Investment Center for the Seniors Housing and Care Industry, in Annapolis, Md. Conducting the search In researching their next move, the Cooks looked at CCRCs down one coast of Florida and up the other. “We wanted to see all our options,” says Pat. They were tempted by a CCRC located close to the beach on Amelia Island, one of the Sea Islands stretching from South Carolina to Florida. Ultimately, however, they chose The Marshes at Skidaway Island, just a couple of miles from The Landings. “If we had moved, we would have had to reestablish everything. But here we already have friends, doctors and our lawyer,” says Arne. About 60% of The Marshes’ 233 residents come from The Landings. Advertisement Founded in 2004 as a nonprofit by members of the local business community, The Marshes is governed by a local board of directors and operated by Life Care Services LLC, a national developer and manager of retirement and assisted-living communities. It offers one- and two-bedroom apartments, duplexes and cottages. For single occupancy, the units range in cost, depending on size, from $259,143 (with a monthly maintenance fee of $2,576) to $685,540 (with a fee of $4,729). A second person pays an extra $17,340 and $1,171, respectively. The fee structure, known as Type B, includes some health care. Although the entrance fee has remained stable in recent years, monthly fees have increased by about 3% to 5% annually. Those fees include a meal allowance, utilities, basic cable TV, weekly cleaning, property taxes, an emergency medical response system, many activities on and off campus, and scheduled transportation. A la carte services include handyman repairs, computer help, transportation (say, to the airport and back), laundry service and pet walking. The hub of this 58-acre, gated campus is the Island Club, which includes a dining room, a café, a cocktail lounge, an Internet café, a library and a ballroom, plus private dining rooms, a screened-in veranda and apartments. The fitness center and the health care center, The Oaks, are a short walk away. The Oaks provides assisted living and skilled nursing, including rehabilitative, memory and respite care. Residents can also obtain health care and therapy in their homes. Jumping the hurdles Most residents at The Marshes take about 18 months to sign up after their initial visit, says Amy Blevins, director of sales and marketing. Prospective residents must make an emotional leap, coming to grips with the idea of a last move and their own mortality, she says. One partner may anticipate freedom from lawn mowing or cooking, while the other may dread “living with old people.” That’s a needless worry, says resident Jim Fendig, a friend of the Cooks. “You get younger here just trying to keep up with the people.” Advertisement Once the decision is made, applicants must meet financial and health requirements—as is true of most CCRCs. On the financial side, The Marshes expects couples to have total assets equivalent to twice the entrance fee and monthly income that is 1.5 times the monthly maintenance fee of the unit they have earmarked. Next, applicants must submit a health assessment signed by their physician affirming that they can perform several activities of daily living, regardless of any preexisting medical conditions. They must also pass a mental acuity test given by the director of nursing at The Oaks. If applicants are approved, they have 90 days in which to close on their contract. The Cooks moved into The Marshes in June 2013. When they applied, a few units were still available, but now The Marshes has sold all of its 182 units. That’s a good sign: Full or near-full occupancy indicates financial stability. The worst part of the process? Downsizing their possessions, says Arne. They sold their things on consignment and now wish they had held on to some. Arne says he still misses a painting they acquired on their travels. (For more on downsizing, see The Upsides of Downsizing Your Home.) Local real estate agent Brooke Bass, who specializes in assisting seniors, helped the Cooks create a floor plan for furniture that would fit in their new home. The Marshes, as well as other CCRCs, offers new residents assistance with moving, such as recommending movers and contractors. Advertisement Settling in The Cooks live on a street that curls around a park filled with live oak trees dripping with moss. The homes have pitched roofs, raised foundations and porches in the Low Country style. The couple chose a duplex with two bedrooms, two bathrooms and a garage, which they use for storage. Their home has a small but fully equipped kitchen, a great room with a cathedral ceiling, and a screened-in porch that backs up to the woods of Skidaway Island State Park. At 4:30 p.m., Pat announces that the “cocktail bell” has rung, and Arne serves the wine. Arne and Pat’s unit had already been renovated, so the only work they did was to screen in the deck. CCRCs typically allow residents to choose paint and carpet, and sometimes more. Residents at The Marshes can customize their units as much as they want, short of removing load-bearing walls. However, unorthodox changes—say, eliminating the closets in favor of armoires, as one resident did—may prove unacceptable to the next resident. At The Marshes, the cost to undo such changes is noted on the resident’s contract and deducted from the eventual refund of the entrance fee. Enjoying the social scene For the Cooks, living at The Marshes is like being on a cruise ship—starting with food and drink, a focal point for socializing. Residents can have breakfast and lunch in the bistro at the Island Club and dinner in the dining room, which has the look and ambience of an elegant restaurant. Each person has a monthly food allowance of $250, and dinner costs $15 for five freshly cooked courses. Residents joke about the weight they gain from enjoying the fare. The happy hour in the cocktail lounge at the Island Club, three afternoons a week, “fills up with lots of happy people,” says Pat. As for activities, the Cooks no longer play golf, but Pat plays bridge and attends exercise class at the fitness center, where there’s also a pool. And she “burns up the highway” between The Marshes and Savannah, says Arne, where she belongs to a local newcomers group and a women’s group at the Cathedral of St. John the Baptist. The Cooks volunteer at a soup kitchen downtown and serve on resident committees at The Marshes. Anticipating health care If a health crisis occurs or one of the Cooks can no longer live at home, a plan is already in place. Residents of The Marshes who are hospitalized at one of Savannah’s three hospitals are guaranteed a bed at The Oaks, if necessary, upon their return. Residents who need more help transfer to assisted living, skilled nursing or memory care. In-home health care and hospice care are also available. Medicare covers all or part of residents’ first 100 days of qualified skilled nursing care, which generally excludes assisted living. In addition, each resident receives a lifetime guarantee of 90 days of skilled nursing care at The Oaks. After that, residents must pay out of pocket. Few of The Marshes’ residents have long-term-care insurance, says Blevins. But the CCRC has a benevolent fund that provides for residents who need financial assistance. Prospective residents of CCRCs often don’t tour the health care facility. “They should, but they think, I’m glad it’s there, but I hope to God I won’t need it,” says Larry Minnix, president of LeadingAge.com, a membership organization for aging-services nonprofits (see its Find Services search tool). Still, vetting the nursing home is a key part of shopping for a CCRC. For starters, use the Nursing Home Comparison tool at www.medicare.gov, which rates facilities based on various criteria and lets you compare up to three facilities at a time. Note the total number of licensed-nurse staff-hours devoted to each resident per day. The more, the better, especially for registered nurses. (The Oaks has earned a five-star rating.) When you take the tour, use all your senses to observe the environment, says Minnix. Look for positive interaction between members of the staff, as well as between staff and residents. When the Cooks’ unit becomes vacant, through death or a move, The Marshes will refund 90% of their original entrance fee to them or their estate as soon as the unit or an equivalent one is reoccupied, usually within six months. But their family can vacate the home on their own timetable, as long as they continue to pay the monthly maintenance fee. Some states govern the percentage of the entrance fee that must be refunded and the deadline for returning it. Pat and Arne say their only regret about where they chose to retire is that family members haven’t been able to visit them in Savannah as much as they had hoped, given work and family obligations and the high cost of airfare. Still, the couple say they feel as though they’ve joined a family at The Marshes. “People here are outgoing, friendly and nice,” says Pat. “We’re freed from worry, and we live in this gorgeous place. We do feel that this is our final home.” CCRCs: The fine print Don’t let the bucolic grounds and heated pool of a continuing care community distract you from the finances and the quality of the health care. Here’s what to consider. Type of contract. You usually have a choice of four types of plans. Communities with life care contracts, also known as Type A plans, typically provide unlimited access to assisted living or long-term care, with only modest increases in monthly fees. For this security, you’ll pay a substantial fee up front. For the first quarter of 2014, the average entrance fee was $284,373, which includes the cost of the home, according to the National Investment Center for the Seniors Housing and Care Industry. With modified, or Type B, plans, residents pay a lower entrance fee than for a life care contract, but they may receive only a specified number of days of assisted living or skilled nursing care or be responsible for a percentage of health care costs. Fee-for-service, or Type C, plans usually charge lower entry and monthly fees than A and B plans, but the fees don’t include the cost of assisted living or skilled nursing care. Unless you have long-term-care insurance, you’ll pay the full cost at market rates. The median monthly rate for a semiprivate room in a nursing home is about $6,448, according to the Genworth 2014 Cost of Care survey. The median monthly cost for assisted living is $3,500. With rental contracts, residents pay no entrance fee, but monthly fees are usually higher than those for Type A and Type B contracts. If you need skilled nursing care, you cover the cost. Some CCRCs allow residents to buy their units and pay monthly service fees plus the cost of any care. Terms of the refund. Most CCRC contracts allow a full refund of entry fees if you move or die during the first two to four years, says Brad Breeding, author of What’s the Deal With Retirement Communities (People Tested Publications). The percentage of the fee that’s refundable will gradually decline until you’re no longer eligible for a refund. Some contracts guarantee you or your heirs a refund of 50% to 100% of the entrance fee no matter how long you live in the community. In exchange, you’ll pay a higher entrance fee—usually 35% to 50% more than you’d pay for a contract without the guarantee. Tax deduction. The percentage of your fees that covers health care is a deductible medical expense. The CCRC should tell you how much of its fees are allocated for medical costs, says Twila Midwood, an enrolled agent in Rockledge, Fla. If you’re 65 or older, you can only deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income; taxpayers younger than 65 are limited to expenses that exceed 10% of AGI. You must itemize to claim this deduction. CCRC residents who choose the equity model can usually deduct interest on a mortgage of up to $1 million. Long-term-care insurance. A full-service CCRC offers many of the same benefits as a long-term-care insurance policy, so if you already have the insurance, you may be better off choosing a modified or fee-for-service contract. Even if you do opt for a full-service contract, don’t drop your LTC coverage. Your contract may not cover all of your health care costs. Financial stability. Ask for the CCRC’s audited financial statements, and review them with an accountant or financial adviser versed in retirement communities. The CCRC should be able to cover expenses out of operating income. Also look at the CCRC’s occupancy: Debt-rating agencies prefer a rate of 90% or more. Ask the CCRC what provisions it has to assist residents who run out of money. Many have a benevolent fund for that purpose.