It would be nice if every senior living community offered the same type of services at the same price and all you had to do is figure out which one was the best lifestyle fit for your parent. But, as you’ve surely discovered, not only are there different types of senior living communities, but each community also has its own financial and admission agreements.
Some communities — known as continuing care retirement communities — charge a hefty upfront entrance fee as well as an ongoing monthly fee for services. Other communities offer a rental option and charge an all-inclusive rate for rent as well as most of the everyday services, such as meals, housekeeping, laundry, transportation to errands and appointments, social and recreational activities, and exercise and wellness programs.
Both the Continuing Care Retirement Community (CCRC) and the month-to-month rental senior community have their advantages, but the month-to-month model offers families the biggest benefits. Here’s a closer look at the two most common senior living models and why the rental option might be best for your family.
Entrance Fees Model
A continuing care retirement community is a type of senior living that offers on the same campus or within the same building independent living apartment or townhomes for active seniors, assisted living units for those who need some help, and a skilled nursing home for those who need 24/7 nursing care. They may also offer a memory care option for those with memory loss.
If you choose to live in a CCRC, you typically have guaranteed access to this full continuum of care for the rest of your life — but this security comes at a significant cost. Because residents can move through more advanced levels of care without having to search for or relocate to
another community, CCRCs charge a substantial entrance fee, ranging from thousands of dollars up to half a million dollars or more depending on the housing market you select. In addition, there will also be ongoing monthly service fees.
Types of Entrance Fees
Entrance fees vary and are generally based on the size and features of the apartment, the community’s amenities, and the type of care contract. Most CCRCs will offer one, if not all, of the following types of contracts (and they may be have different names than what appear below). Here are the most common:
- Type A: You pay a higher upfront entrance fee, which essentially prepays for future care. Your monthly charges stay the same regardless of the level of care that is needed.
- Type B: You pay a lower upfront entrance fee, but your monthly payments will rise as your needs increase.
- Type C: You pay an even lower entrance fee, but if you do need a higher level of care, you pay full market rates.
Some CCRCs also offer refundable entrance fees, which can be even higher in cost but mean somewhere between 50 and 90 percent of the fee can be returned to the resident if they decide to leave the community or to their estate if they pass away.
A rental community is a type of senior living that offers independent living, assisted living, memory care, or a combination of any these on one campus or in one building. The most popular senior living option in the U.S., rental communities are usually the least expensive.
If you choose to live in a rental community, there is no entrance fee, and one monthly bill covers rent, base utilities (like heat, water, and garbage service), and meals. In some communities who use an all-inclusive pricing structure, services also can include housekeeping, laundry, some personal care, recreational activities, transportation, and more.
So What’s a Better Buy?
CCRCs aren’t the best fit for everyone and can potentially be the most expensive option for some families. For seniors living on a fixed income or with limited assets, the financial obligations can be a deterrent or eliminate CCRCs as an option altogether.
Because a CCRC is contractually obligated to care for a senior once they move in, there are specific financial and medical criteria they must meet to qualify for move-in. You’ll typically have to pass a financial screen to make sure you won’t run out of money, and you’ll have to sign the contract and move in when you’re still able to live independently.
And although a refundable entrance fee might mean there’s something left for your heirs, financial experts warn that you could lose your entire investment should the CCRC go bankrupt.
That’s why so many seniors and their families are attracted to the month-to-month rental option: There are no large upfront fees or complex medical and financial eligibility criteria that potential residents must meet.
Additionally, residents can easily move to another community if they choose. For example, if a spouse passes away, the widow or widower might be interested in relocating to be closer to other family members. When you live in a month-to-month rental community, this move is easy. CCRCs, on the other hand, have a much more complex move-out process, and you may be penalized for doing so.
Many families find the monthly rental structure the easiest and most convenient for their needs. It eliminates a hefty upfront fee while being readily adjustable to the changing needs of the resident.
To learn more about financial resources for senior living and how to find the right community for your loved one, download our guide Assisted Living Costs & Affordability.