When Downsizing, Does a Continuing Care Retirement Community Make Sense?

In 2015, I was teaching a class on estate planning at a local continuing care retirement community. During the audience-participation section, I asked the attendees if they had recently updated their documents. A woman in a wheelchair who'd appeared to be asleep for the entire class, yelled, “None of your (bleeping) business.”

She may have had a point, but it was the last time I raised my hand to teach at that community.

Between 2015 and 2020, I spent many a day teaching financial planning classes for retirees at continuing care retirement communities (CCRCs). I could tell you which communities leaned young, old, left and right. In Washington, D.C., that left or right leaning is often a dealmaker or breaker.

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The point is that these retirement communities are all different. The same person may love one and hate another, which is where we will land in this article. Whether a CCRC makes sense depends on you, your priorities and how aligned they are with a specific community.

Below, I will highlight major pros and cons as you consider your next move, literally.

PROS OF CCRCS

1. The care will be there when you need it

If you pick the right community, this will be your last move. Residents can move along the spectrum from independent living to nursing care. You may change locations within your community, but you will not be moving furniture up and down stairs right when you start to need help.

2. You’ll have a ready-made community

According to that often-cited Harvard study on happiness, two of the greatest drivers of happiness in retirement are health and social connections. Hopefully, the continuum of care helps with the former. The built-in community of a CCRC should help with the latter.

Having friends in a community is a real bonus, as this can shorten the friend-making curve.

3. Your home will be turn-key, maintenance-free

The general advice for when to move into a CCRC is when you are still active and independent. That means you’re still going places.

You don’t want to have to worry about a pipe bursting when you’re skiing the Rockies. You don’t want the call telling you your HVAC is broken during your summer trip to Europe.

These communities, even if they are not really rentals, carry many of the benefits of being a tenant. And as you age, those benefits become even more important.

CONS OF CCRCS

1. Get ready for hefty entrance fees and monthly fees

The financial structures of these communities come in all shapes and sizes. For the purpose of this column, we are excluding rental communities, and we are not differentiating between A-, B- and C-level plans.

The expense of a CCRC comes in the form of a buy-in and an ongoing monthly fee. You can think of this as a down payment and a mortgage payment.

The buy-ins can be large, often at $100,000 to $500,000 or more, which is one reason they are on the “cons” list. On top of that, monthly fees for those in independent living can be in the neighborhood of $2,500 to $5,000.

Another con: Entrance fees are often touted as, at least partially, refundable. While this is the case, even a 100% refundable buy-in doesn’t adjust for inflation.

So, if all goes according to plan and you spend your 20 greatest years in the community, the amount refunded to your estate may be worth half what you put in, when you account for inflation.

2. Expect rising costs

It’s 2025, and we are all used to living with rising prices. It’s easy to forget that the decade between 2010 and 2020 had almost no inflation, despite the Fed’s best efforts.

During this period, advisers in my firm got into hot water telling a few of our clients they couldn’t afford a particular community. We received some unhappy calls from the community’s sales office.

The thing that made this community unaffordable was not the buy-in fee. In the D.C. metro area, clients can usually cover large buy-ins with the equity realized from the sale of their forever home.

It was the 4% COLA, which caused the monthly fees to increase every year on a compounding basis, regardless of the inflation rate.

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Even very secure financial plans can get a little iffy when you change inflation from 3% to 4%. If you’re considering a move, I’d encourage you to build out a plan in the free version of the software we use.

3. Prepare for a lifestyle adjustment

Earlier, I cited the conventional wisdom of moving into a CCRC while you’re still active and independent. The problem with this is that you’ll likely be one of the youngest in the community. You don’t want to do water aerobics if you can still swim laps. You’re unlikely to take the shuttle to the zoo if you can walk there.

It’s easy to age up quickly, though. Pretty soon, you’ll be yelling at me from a wheelchair.

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