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CCRCs are expensive! Can you afford to live in one? Can you afford not to?  

You’ve got to live somewhere

As you age and become weak and frail, you will need a place where you can live comfortably, safely, with dignity, and have your health needs cared for without being a burden to your family. No matter where you live, the expense to live there must be paid. If you are lower-class, the government will pay for it for you. If you are middle-class, you will pay for it yourself until you become lower-class and the government takes overpaying for it for you. If you are upper-class, you will pay for it for yourself while also paying extra taxes to fund the government paying it for the lower-class. 

If you are considering moving to a CCRC, first look at your finances. Then look at what it costs you to live at home now and what it will probably cost to live there as you get older. Then look at what it will cost to move to and live in a CCRC and what it will cost in the future. If a married couple is considering moving to a CCRC, there will be additional costs for the second person so this must be considered. Finally, analyze your finances and all the costs to see if you can afford to move to a CCRC and whether it is a cost-effective option for you to consider.

Singles

• According to the U.S. Census Bureau, about 49% of women and 35% of men ages 45 to 64 are widowed, divorced, separated, or have never been married.
• According to a recent survey by Northwestern Mutual, 38% of singles reported they did “not at all” feel financially secure versus 23% of married people.

Look at your finances

When looking at your finances, be sure to consider: 

• Your net worth (assets minus liabilities).
• Your guaranteed monthly income during retirement. If you are a couple, will the amount of income change after the death of one.
• The effects of future downturns in the economy on your assets.
• The effects of inflation throughout the years of your living at home compared to your living in a CCRC.
• And especially, you must consider the ANNUAL increases in the CCRC monthly maintenance fees and the assisted living and skilled nursing daily rates, usually between THREE TO SIX PERCENT A YEAR regardless of the amount of national economic inflation. If you cannot afford to move into a CCRC, then there is no need to consider a CCRC now; it would just be a waste of your time. If you are still interested and have time to increase your net worth, then a CCRC may still be in your future.

Retirement savings

When it comes to retirement savings, how do you stack up?

According to a report from the Economic Policy Institute (EPI), the mean, or average, retirement savings of all working-age families, those between 32 and 61 years old, is $95,776.

However, since so many families have no savings and super-savers have a lot of savings, it is better to look at the median savings. In a smallest to the largest list of all the savings, the median is the amount at the midpoint. The savings median for all working-age families in the U.S. is just $5,000.

The following is a breakdown of the mean and median retirement savings of U.S. families at every age:

Ages: 32-37

Mean: $31,644

Median: $480

Ages: 38-43

Mean: $67,270

Median: $4,200

Ages: 44-49

Mean: $81,347

Median: $6.200

Ages: 50-55

Mean: $124,831

Median: $8,000

Ages: 56-61

Mean: $163,577

Median: $17,000

Nest egg

How big should your nest egg be? 

The answer is highly personal, but according to Fidelity Investments, a good rule of thumb is to have 10 times your final salary in savings if you want to retire by age 67.

Fidelity suggests a timeline to use to get to that number: 

• By age 30: Have the equivalent of your salary saved.
• By age 40: Have three times your salary saved.
• By age 50: Have six times your salary saved.
• By age 60: Have eight times your salary saved.
• By age 67: Have 10 times your salary saved.

Quality living

Living in a CCRC is quality living; while living at home as you age may or may not be quality living. There are so many differences between living at home and living at a CCR that it is like comparing “apples to oranges” when trying to compare your current cost of living with what you will pay while living in a CCRC because of all the services and amenities you get at a CCRC. If you choose to age in place at home, as you age and become sick and frail, your home and your quality of life usually begin to deteriorate, while, if you choose to live at a CCRC, it is like living in a resort spa where comfort, wellness, and quality of life are stressed.  

 

To get all these services and amenities at home you would have to pay a lot for them, and sometimes you would have to go outside the home and pay even more to get them. While CCRC living is not cheap, when compared to the cost of aging in place at home it is not as expensive as it first seems; especially when you consider the high quality of living offered at a CCRC.

Current expenses

Know your CURRENT expenses to live at home. Many people think they know how much they spend each month to live at home but, unless they are tracking their spending or have a strict budget, they usually underestimate their expenses grossly. They need to consider such things as insurance, taxes, property maintenance and improvements, landscaping, cleaning services, and things that pop up from time to time, such as needing to replace the water heater, roof, faucets and fixtures, appliances, HVAC, and flooring, and the need to paint, fix plumbing, and repair storm damage. 

Future expenses. 

• Know your FUTURE expenses to live at home. You may think living in a CCRC is expensive but, as you get older and frailer, you will find it will also become problematic and expensive to live at home. When all the problems of aging at home become too much for you to deal with, you will probably withdraw from social interaction, become a recluse, and allow your home and health to deteriorate.
• Modifications to the home. If you plan to age in place at home, you need to think about the modifications your home may need to keep you safe and your life simple as you age, such as grab bars near the tub and toilet, widening doorways, remodeling a bathroom, or two, installing lifts or ramps, replacing door knobs with handles, and lowering cabinets for wheelchair use. While these are mostly one-time expenses, they can add up to a major expense over the years. 
• Inside home medical assistance. As you age and need assistance, you may need to bring service providers into your home for health care needs. The national average cost for home health aides is about $20 per hour and for home health care it is about $135 per visit. You may need to install equipment to monitor your behavior or medications and alert health professionals and family when you have a need. Beyond the initial cost, monthly monitoring fees are about $40. 
• Outside home medical assistance. If you reach the point where you need to move from your home to an assisted living or skilled nursing facility, it will be oppressively expensive. Quality care can cost up to $6,000 a month at an assisted living facility and $10,000 a month at a skilled nursing facility and this does not include the medical costs of the stays that must be paid by you or your medical insurance. Sometimes finding a facility that will take you is difficult. After you move to an assisted living or skilled nursing facility, you must still maintain your home or sell it, which can be expensive and stressful to do, especially if you are not able to take care of it yourself. If you are married, the spouse that stays at home must maintain the house and deal with its problems and costs. 

Know CCRC expenses

When considering moving to a CCRC, you need to know what the entrance fee is and whether it is refundable, what the monthly fees will be and how much it will increase each year, any extra fees, and the cost of advanced care that you may need in the future. The entrance fee is large and is usually required to be paid in full at contract signing. Most people sell their homes to cover the cost. Some CCRCs offer a short-term, interest-free loan, usually one year, that allows you to pay a small percentage of the entrance fee at signing and then pay the remainder in payments until your home sells. 

As a rule of thumb, the CCRC monthly fee usually covers about 60 percent of a resident's total monthly living expenses. The resident’s remaining expenses, such as car payments, registration, insurance, and maintenance, renter’s insurance, health insurance payments, life insurance payments, long-term insurance payments, clothing, extra meals, etc. are things that would have to be paid even if still living at home. The industry uses the formula (monthly fee times 1.5 to 2.0) when they figure how much it will cost you monthly to live at the CCRC. 

Other retirement expenses

Know what other things you want to do with your retirement money. Consider all the other things you want to do with your money during retirement, such as leaving an inheritance, traveling, giving to charity, or helping pay for a grandchild's college education. Wanting to use your money for these things must be considered before you commit money to fund living at a CCRC. If you deplete your funds by giving away too much of the funds that were used to gain acceptance to a CCRC, the CCRC may ask you to leave.

Know how much money you have After you have a sense of what your expenses are and will probably be as you age, then you need to know your net worth, your guaranteed monthly income (pension, annuity, social security, trust, etc.), how much money you have invested, how much dividends and capital gains those investments generate each month or year, how much you can easily draw from these investments if needed without depleting them, and whether these investments, along with your income, will be enough to last through your, and your spouse’s, lifetimes, even if one or both of you need advanced care.

Do you have enough money?

To be accepted into a CCRC, you must prove you have the funds to pay the entrance fee and can pay the monthly fees for the rest of your expected lifespan. CCRCs use extensive actuarial analysis to know what this amount of funds needs to be, so, if they accept you, they think you have enough to stay with them for the rest of your life. CCRCs are not going to lose money if they can avoid it. 

After you are accepted, if a CCRC finds it misjudged you having enough money to live there, most will not ask you to leave. Most CCRCs have a benevolent fund that will pay your costs to live there until you die.

CCRC guidelines for funds needed for admission

As a rule of thumb, most CCRCs want you to have at least two times the entrance fee in savings and investments, and your monthly income should be one and a half to two times the monthly maintenance fee.

Example of cost to live in a CCRC

In this example, we: 

• WILL NOT include social security benefits or any pension you may receive during retirement. 
• WILL NOT consider the effects of inflation. 
• WILL assume you are not married. 
• WILL assume you pay a $200,000 entrance fee (no refund) for your unit in a medium price CCRC 
• WILL assume you pay $4,000 a month in expenses, which includes your CCRC monthly fee and your other living costs such as vehicle cost, life insurance payment, medical insurance payment, medical, dental, hearing, and vision costs, clothing costs, travel costs, extra food costs, etc. 
• WILL assume you are not concerned about leaving a legacy to your heirs. 
• WILL assume you live at the CCRC in your independent living unit for 10 years and then die suddenly with no need for assisted living, memory care, or skilled nursing. 

This means it will cost you about $48,000 a year to live in the CCRC. So it will cost you about $480,000 to live in the CCRC for ten years.

If we assume you are in a 20% tax bracket and get a 4% a year return on your investments, you will need about $500,000 in investments when you move into the CCRC to cover 10 years of expenses. Also, you will need another $200,000 in cash to pay the entrance fee. This means that you need at least $700,000 in net worth to live in independent living at the CCRC for 10 years. 

If you receive social security and/or a pension, this amount will be less. If you need to live in assisted living, memory care, or skilled nursing for a few years, this amount needs to be MUCH more. If you consider the effects of inflation (CCRC monthly fees increase about 3% a year), this amount needs to be MUCH more. So, to be on the safe side, you will need about ONE MILLION DOLLARS in net worth to live in independent living at the CCRC for 10 years. If you are married, this amount will be close to 1.5 million dollars. This amount will be smaller if you select a smaller residence at a facility, or larger if you select a larger, better appointed 

residence.

Bottom Line

It could cost you up to twice as much to live in a CCR as it does to live at home currently. However, if you consider the future costs to live at home as your age, this difference becomes much less. If you consider the quality of life, food, care, activities, and lack of worry about your future, the cost of a CCRC becomes a surprisingly good deal.

 

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