This blog was originally published in 2021. It was updated in June 2022.
While many people express the desire to stay at home as long as possible, there are senior living options that might make more financial sense.
What Care Is Commonly Needed for Older Adults?
Research shows that the majority of adults who reach age 65 will eventually require long-term care. According to the US Department of Health and Human Services, at least 70% of people over age 65 will require some long-term care services during their lifetime, and more than 40% will need skilled (nursing home) care. And, unfortunately, the cost of long-term care can be very expensive.
In evaluating what care might be needed, it is sometimes helpful to think about the natural progression of aging:
- A senior has a health incident that leads first to home health care, and this may last many months.
- Eventually, the individual is deemed unsafe to live alone, and they move into an assisted living apartment, where the average stay is between two to three years.
- Finally, the last chapter of life may include skilled nursing care, which tends to occur from nine months to two years.
That’s a total of about four to five years of nursing care, which conservatively may cost over $300,000. And that doesn't include other costs of ongoing doctor’s appointments, medications, supplies, and more.
How Do You Plan for Your Future Health Needs?
You might be wondering how you plan for these costs, and where you will go to receive care. To answer these questions, realize that there are basically two choices: pay as you go as your needs arise, or plan ahead by finding a housing option where you can pre-pay for future health care needs.
Option one is a popular solution. In this scenario, much like the natural progression listed above, an individual will find providers to address health care needs as they arise, and then pay the fair market rate for each service as needed.
However, there is another option: choosing to move to a life plan community, where the full continuum of services is available on one campus. In life plan communities, residents may move to various residences within the same campus as their care needs change, traditionally with no additional cost for the higher degree of care.
What Care Do CCRCs and Life Plan Communities Provide?
Continuing care retirement communities (CCRC) originated in Europe with faith-based organizations as a means to care for and shelter the elderly. In the early 1900s, there were seven CCRCs in the United States, but as the aging population continued to grow, so has the number of CCRCs. Most of the organizations are still non-profits with a mission to serve seniors, and some have maintained their religious affiliations.
Unlike other types of housing, life plan communities provide a commitment to take care of residents regardless of any changes in their health, for as long as they reside in the community. Residents typically sign a contract that essentially pre-pays a portion of anticipated future costs for long-term care. Often, there are tax advantages for this prepayment.
Potential residents are offered a contract stating that the community will offer a private residence, social activities, a list of services and amenities, and access to on-site levels of health care. Within the community, there are normally at least three levels of care available, providing a phased approach to senior living accommodations:
- Independent living, in which the person lives on their own in an apartment or cottage-style housing
- Assisted living offering some level of assistance with daily activities such as medication reminders, dressing, food preparation, housekeeping, and more
- Skilled nursing care for residents requiring ongoing nursing care
Is a Life Plan Community or CCRC Expensive?
A life plan community or CCRC’s financial risk for residents’ care is defined in lifetime contracts between the community and the individual residents. There are usually various types of contracts with differing levels of risk for each party (the community and the resident).
Future residents normally pay a one-time entrance fee as well as a monthly service fee for the maintenance and management of the facilities. The contract then provides residents with long-term security and a lifelong assurance of care.
In addition, the entrance fee may be fully or partially refundable under certain conditions (refunds are typically rewarded to the resident upon moving or to their estate). If you financially qualify to pay an entrance fee, this is usually a good option to consider because it provides you and your loved ones with peace of mind and a refund at a later time.
What Are the Advantages of a Life Plan Community?
There are numerous advantages to life plan or continuing care communities. Here are a few reasons to consider this senior living option for your future care needs:
- Pre-planned care — residents don't have to make health care decisions in a crisis
- Quality of life — freedom from caregiving chores and home maintenance provides more time to pursue hobbies and other interests
- Financial stability and predictability — several tax advantages and control for future health care costs
- Estate protection — out-of-pocket expenses are minimized, and refund options for entry fees may provide a legacy
Is Senior Living an Affordable Option for You?
To help determine if senior living is a good financial option for you, try Otterbein Granville's financial calculator. You'll take a short quiz using a MoneyGauge Financial Calculator by answering questions about income, assets, and age.