Is a continuing care retirement community right for you?

Deciding where to live later in life isn’t an easy task. Many seniors prefer to stay in their own homes but may need help managing medical issues or day-to-day tasks. Others might move in with their adult children or family members.

One potential solution is a continuing care retirement community, or life plan community.

A CCRC is a community living facility where retirees can access a spectrum of care as they age—care levels typically include independent living, assisted living, nursing care, and memory care. Most CCRCs also offer a range of amenities and activities, such as on-site fitness centers and groups for different hobbies.

There’s evidence that people living in CCRCs enjoy better health outcomes, and higher levels of social and emotional well-being. It can also be an attractive option for couples as they can continue living near each other even if one person eventually needs a higher level of care.

Moving to a CCRC requires a substantial financial commitment, and it carries the sobering possibility that it might be the last time you get to choose where you live. Here are some key things to consider:

Fees and living arrangements

People entering a CCRC generally start in independent living, with their own living quarters.

In many cases, the cost of admission could be on par with buying a house in the same area. Based on data from US News & World Report, entrance fees average about $400,000 but can range from $100,000 to more than $1 million. The hefty price tag doesn’t mean you’re buying the property you live in; instead, the money helps cover part of the costs you may incur while living there and may be partially refundable to your estate after death.

Residents also pay monthly fees, which averaged about $4,200 for independent living as of the end of 2024. Monthly fees, which often increase about 4% per year to cover inflation, generally cover housing, meals, housekeeping, maintenance, transportation, and recreational activities. Depending on your contract, monthly fees may also cover certain healthcare costs.

Three types of CCRC contracts

Type A contracts are the costliest option. They have the steepest entrance fees and the highest starting monthly fees, which generally cover comprehensive long-term-care services and remain the same (except for annual inflation increases) even if you need a higher level of care.

Type B contracts have lower upfront costs than Type A contracts, and lower monthly fees when you first move in. They provide the same access to housing and residential services as Type A contracts, but not the same level of access to healthcare services. If a resident needs a higher level of care, the monthly fee grows to cover the higher cost. In exchange for lower monthly fees at move-in, people in these contracts take the risk that their costs could significantly increase.

Type C contracts generally have the lowest upfront costs and may not include any entrance fee. Instead, the monthly fee changes to reflect the market rate for the type of healthcare needed. Monthly fees start lower when a resident first enters independent living but can grow dramatically if they need higher-level care. As with Type B contracts, people in these contracts pay lower monthly fees when they move in but may end up paying significantly more.

Other factors to consider with contracts

The upfront payments included in Type A and Type B contracts are often partially refundable after you leave the facility or pass away. Though, there fundable portion of the fee varies.

Taxes are another factor to consider.

For Type A and Type B contracts, part of the entrance fee may be eligible for a one-time tax deduction as a prepaid medical expense. A portion of the monthly fees may also be eligible for annual deductions if they’re considered a prepaid medical expense. (In both cases, deductions are only allowed if the costs are more than 7.5% of adjusted gross income.) Facilities typically provide residents with specifics on the portion of fees that may be deductible each year.

Finding the right fit

ACCRC can help seniors maintain a happy, healthy, and rewarding life. But it’s imperative to make sure the facility is not only a good fit for your needs, but financially strong before signing a contract.

The National Continuing Care Residents Association offers resources that include a Consumer Guide, a Handbook on CCRC Finance, and a Model Bill of Rights.

___

This article was provided to The Associated Press by Morningstar. For more personal finance content, go to https://www.morningstar.com/personal-finance

Amy C. Arnott, CFA is a portfolio strategist for Morningstar.