You’ve finally found the best Continuing Care Retirement Community (CCRC) to spend your retirement days in. They have numerous activities. They offer excellent services, and, from what you’ve read online, the reviews are mostly positive. But upon reaching out to the retirement community, you find out that they’ll require you to pay an entrance fee before moving in.
Why do retirement communities charge an entrance fee? At CCRCs, the entrance fee is required to cover the entire continuum of care. This way, active and healthy seniors can join as part of the residential living community and move to more advanced levels of care as they grow older and need more assistance.
Entrance fees vary from one CCRC to another, depending on the available amenities and services they offer. This article will help you understand how entrance fees work, what you should expect after paying, and how to identify the best CCRC for your needs.
Why Do Retirement Communities Charge an Entrance Fee?
Continuing Care Retirement Communities are becoming quite popular among seniors. This is mainly because these communities offer different types of housing and care, depending on a senior’s needs and how they change over time.
For this reason, you can start by living in the resident apartments independently and move to more advanced care as your needs change. With this setup, you always feel like you’re part of a community because you do not change your environment, only your living situation and care.
The communities also have many activities, and in most cases, excellent care for older seniors who need more assistance. But it doesn’t come without a price. The majority of CCRCs will require you to pay an entrance fee upfront before joining the community.
The entrance fee secures your place in the community. However, it also lowers your monthly expenses used to cater for things like transportation, cleaning, and maintenance.
According to Human Good, you should expect one of two types of entrance fees at a CCRC. These include:
- Refundable entrance fees: These fees are quite high. But the good thing is that, in the event of death or a senior moving out, 75% of the money is refunded to them or their family.
- Non-refundable entrance fees: These fees are lower compared to the refundable entrance fees. However, once the senior has lived in the community for more than five years, they do not provide refunds in the event of death or moving out.
It’s advisable to go for a refundable plan because it gives you a chance to leave some money to your heirs when you die.
How Much Are Retirement Community Entrance Fees?
If you’re thinking about moving to a CCRC for your retirement, it’s crucial to know how much you should expect to pay in terms of an entrance fee and monthly charges. These fees vary from one CCRC to another depending on their level of care, available activities, and quality of service.
According to AARP, you should expect to pay anywhere from $329,000 to $1 million. And that’s not all. After moving in, seniors are expected to pay monthly fees for maintenance and other services. These fees can be anywhere between $2000 and $4000.
However, some CCRCs don’t charge the upfront entrance fees. But you should expect to pay $3000 to $6000 per month in rent if you’re living independently.
What You Should Know About Retirement Community Entrance Fees
If you’re trying to decide between a CCRC that charges entrance fees and one that doesn’t, it may help to understand what you’re paying for to make the right choice. Here are answers to some of the questions that may be going through your mind.
What Are You Paying For?
If you’re still expected to pay a monthly fee, you may be wondering why you needed to pay an entrance fee. As we mentioned, these fees cater to the continuum of care at the retirement community. When you pay the entrance fees, you’re purchasing a contract of services that are listed on the residency agreement.
The entrance fee covers things like:
- Inpatient/outpatient therapy
- Assisted living
- Nursing care
- Independent living
Therefore, once you pay the entrance fee, you have the right to access any level of care you need as you age. The fee is based on the size and location of the home, as well as how many residents are living there.
Non-profit CCRCs that charge an entrance fee assure you that you’ll still have access to their care services even if you outlive your financial assets. This may be something to consider if you’re having a hard time deciding between two CCRCs.
Are You Buying the Home?
Considering how much they charge as an entrance fee, it’s not unusual to think that you are buying the independent living home when you pay the entrance fee. But according to Life Enriching Communities, you don’t get ownership of the home; it stays in the community’s ownership.
But this isn’t a bad thing. When you pay the upfront and monthly fees, you not only get to live in the home as if it’s your own, but you also never have to worry about maintenance and upkeep because that’s the community’s responsibility.
And because the home doesn’t belong to you, you never have to worry about real estate price fluctuations.
How Do Seniors Pay the Required Fees?
It’s not easy for a person in retirement to raise the kind of money CCRCs expect them to pay to be part of their community. So, how do seniors afford these payments?
The majority of seniors use the proceeds they get from selling their homes or condos to pay the upfront entrance fees. Furthermore, some liquidate assets or rely on savings and retirement plans to handle these expenses.
If you decide to use the proceeds from the sale of your house, it’s advisable to start making arrangements to sell before you’re ready to move to the retirement community. In most cases, they ask for a deposit to begin the application process and may require the entire amount before you move in.
Therefore, it’s better to have all the money ready before you begin the application process to avoid any delays that may cause you to miss a spot in the retirement community.
Do Residents Pay Taxes on their Community Apartments?
Residents are not required to pay taxes on their community apartments. In fact, they usually get sizable tax breaks on both their monthly installments and entrance fees in communities that offer health care services.
However, this also varies from one community to another. You should, therefore, find out before committing to anything.
Is it Affordable?
When you consider the upfront entrance fees and monthly fees you have to pay, a CCRC can seem quite expensive. However, Human Good says that it’s very affordable, especially for someone who has owned a home before. Nonetheless, it’s better to get into these communities before you need a higher level of care. This way, you’ll get the most out of your investment.
Make the Right Choice
Why do retirement communities charge entrance fees? The fee is crucial for providing seniors with continuing care. This care ranges from medical expenses to hiring a nurse that can monitor them in their home.
However, because the cost varies from one community to another, it’s advisable to do some research and compare different communities before making a final decision. This will allow you to choose a community that’s within your budget and provides what you need as you grow older.