On Sale: Retirement Havens
Jane Bennett Clark
It's an intriguing but tricky sell: Leave your home and neighborhood while you're still relatively healthy and move to a retirement community that offers a range of housing, country-club-style amenities and access to future care. To pay for your new setting, called a continuing-care retirement community (or CCRC), you fork over a hefty entrance fee, stiff monthly fees or both. Many people use the proceeds from the sale of their house to finance the price of admission.
When the real estate market and the stock market went south simultaneously, the pitch became more problematic. People who might have made the leap held off, either because they couldn't sell their house or because their retirement savings had taken a hit. Occupancy in these communities dropped, construction slowed, and a few major companies, such as Erickson Retirement Communities (now
You'd think that such circumstances would make this a bad time to consider a move to a CCRC. In fact, the industry may emerge from the downturn in better shape, says
"The recession forced CCRCs to be more efficient and pay more attention to the bottom line," says Maag.
Meanwhile, to get you in the door, the communities are offering everything from real estate services to bridge loans to a few hours of free packing. Some will even arrange to have a relocation company buy your house if you can't sell it. You wouldn't jump in just for a deal, of course. But if you are ready to move anyway, "now's the time to chase those bargains," says
"At my age, it wasn't fun taking care of landscaping and a 4,000-square-foot house anymore," says Bill, 82. The Erickson communities appealed in part for their relative affordability -- entrance fees range from
The news didn't bother the Vitales, whose apartment was already built and whose deposits had been placed in escrow as part of the bankruptcy proceedings. It did, however, rattle earlier waves of residents, whose deposits had no such protection, and it tarnished Erickson's long-standing reputation as an industry leader.
By the spring of 2010, Erickson had emerged from bankruptcy. It sold most of the properties still under development to Redwood Capital Investments but continues to manage them. Nonprofits own eight completed campuses, which Erickson also manages. Some campuses, including
"The intent would be to complete those campuses," says spokesman
THE RIGHT FIT
Most people wouldn't consider the drone of low-flying planes a reason to choose a community, but for the Vitales, that was part of
Finding a community that appeals to you is key to the process, says
"If you have Alzheimer's in the family, for instance, you want to make sure it has a good Alzheimer's unit," says Breeding. Some CCRCs contract with assisted-living or nursing-care units to deliver care off-campus. Better to investigate those arrangements now than find out later that you have to leave the community to receive care.
BALANCING COST AND RISK
By choosing Erickson, the Vitales opted for a fee-for-service arrangement, in which you pay less upfront but more down the road if you need care later. Some fee-for-service communities require that you buy long-term-care insurance to cover your bases.
Contracts that include care in the upfront fee -- essentially a form of long-term-care insurance -- are more expensive. Many of them require deposits of
A full refund generally entails a higher entrance deposit and is often contingent on the resale of your housing unit. With a partial refund, you get back a fixed percentage -- say, 50 percent -- and with a declining refund, the amount you are eligible to receive drops 1 percent or so each month until it disappears. A percentage of your nonrefundable entrance fee or monthly fees that the facility allocates to medical expenses may be tax-deductible. (Only those medical expenses that exceed 7.5 percent of your adjusted gross income are deductible.)
Despite all the payment-plan options, the decision usually boils down to your ability to cover current and future costs, including long-term care. Currently, the average cost of a year in a nursing home runs about
While crunching the numbers, keep in mind that many of your current expenses, such as home maintenance and groceries, will be covered after you move. Communities usually check out your finances while you're checking out theirs, says Breeding. In general, they suggest that your monthly income be at least one-and-a-half to two times as much as their monthly fee.
VETTING THE FINANCIALS
Once you've winnowed the choices, look at the sponsoring organizations and their track records. Generally, companies that run several communities give you more to go on than a single-site community, says Maag. "That doesn't necessarily mean the single-site community is not as safe, but you would have to look harder at its financial status."
Even with the recession, average CCRC occupancy hovers around 90 percent. Occupancy that falls much below that benchmark could reflect a problem that will presumably mend itself (such as a depressed real estate market or overbuilt construction), or it could be indicative of poor management. If a community has been around for seven or more years and has yet to top 85 percent, "I'd raise tough questions," says
Before you sign anything, have a lawyer or a geriatric care manager (find one through www.caremanager.org) help you review the community's financial statements, annual report and contract. Ask how much the community relies on entrance fees to finance future construction, how many new residents move in each year, and what percentage of the deposits is held in reserve for refunds.
If you're being guaranteed care at no extra cost, look at the actuarial analysis, which will indicate whether the community is capable of delivering care 10 or 20 years hence. Many CCRCs promise to cover your costs if you run out of money. Be sure the one you choose has the wherewithal to keep that commitment.
SAMPLING THE SWEETENERS
With occupancy flat and waiting lists short, you have the leverage to negotiate a unit with a spiffier view or in a more convenient location, maybe with a few upgrades, such as better cabinets or carpeting. ACTS Retirement-Life Communities, based in
Can't sell your house?
The Vitales had no qualms about moving to
The movers drove away with their stuff on the day before
"It looked just like this," she says, gesturing to the immaculate, cream-colored living room. "Not a box, not a piece of paper was lying around. The dishes were in the cupboards, the clothes were in the drawers and closets, the beds were made. Every towel and washcloth was folded perfectly. We could have had a party."
The Vitales spent about
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Real Estate - On Sale: Retirement Havens
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