Am I eligible to live in a Continuing Care Retirement Community?
Posted by Rick Fine on August 27, 2018
In my previous articles on Continuing Care Retirement Communities (CCRCs), I described the amenities these communities offer, what it’s like to live in one, and the various types of contracts one can purchase. In this article, I will describe the application process and how a CCRC determines if you qualify for residency.
The application process
All CCRCs have a slightly different application process. But in general, it goes something like this:
- Get to know the CCRC you are interested in by requesting an information packet. Then, schedule a meeting with a marketing representative and take a tour of the community. Bring someone with you. Ask a lot of questions. Take good notes. (A second visit, perhaps including an overnight stay, might afford you more opportunities to participate in some social activities and speak candidly with residents about their experience with CCRC living.)
- Complete a waiting list application and pay a deposit. The application includes a health assessment, including medical diagnoses and current medications, and information about your personal finances.
- When a unit becomes available, and you would like to move in, submit updated financial information for a formal evaluation, and schedule an appointment for a health assessment which may be as simple as testing for balance issues, or it may be more extensive. Each CCRC has different requirements.
- If the CCRC deems you eligible for residency, provide a down payment (typically 10% of the entry fee) and schedule a move-in date.
- Sign the residency agreement and pay the remainder of the entry fee.
- Move in!
Determining your eligibility
CCRCs use three criteria, assessed as of the time you move in, to evaluate your eligibility to join their community
- Medical – Can you live and perform everyday tasks without requiring help?
- Mental – Do your mental faculties enable you to live independently and not constitute a danger to yourself or the other residents?
- Financial – Can you afford the entry fee and ongoing monthly service fee without prematurely depleting your assets?
Do you qualify, medically?
No one’s health is perfect; we all have issues. CCRC administrators understand this, but when it comes to serious illnesses or medical conditions, their evaluation criteria vary.
Some will admit a person who has a serious and permanent medical condition, such as Parkinson’s Disease, if the applicant is able to live safely and independently at the time they move in and for a reasonable period afterward. Since diseases have different progression rates and symptoms, facilities evaluate potential residents on case-by-case bases. It’s important to note that some CCRCs perform health, cognitive, and balance assessments both when you add your name to a waiting list and when your desired residential unit becomes available; others, only when you’re ready to move in. Waiting lists range from 2 to 5 to even 10 years, so if you are ill, it is important that you factor that in when applying. Some CCRCs that do admit seriously ill residents will charge them extra if they eventually need skilled nursing care.
Some CCRCs will not admit anyone with serious medical issues even when the illnesses are in their earliest stages. If applicable, it’s important to bring this up with your CCRC salesperson before adding your name to any waiting list.
Do you qualify, mentally?
Everyone past the age of 62 (the earliest age one can move to a CCRC) forgets things sometimes. Heck, I’m not 62 yet, and I can’t always remember the name of a movie I saw last week! Counting backward from 100 by threes is challenging at any age. CCRCs understand this, and their testing procedures are not overly stringent.
They do, however, disqualify applicants who have noticeable dementia or severe short-term memory loss, as these conditions can present a safety risk for the would-be resident or their neighbors in an independent living unit. Residents must be of sound mind when first moving to a CCRC. The likelihood of your forgetting the water running in the bathtub, leaving the stove on unattended, or stepping outside for a walk at three in the morning with nothing on but your skivvies are all deal breakers for CCRCs.
As with the medical health assessment, some CCRCs carry out the mental health assessment when you add your name to the waiting list and again when you are ready to sign the contract, while others do so only once, when your unit becomes available.
Do you qualify, financially?
The CCRC will fully evaluate your personal finances when your desired residence becomes available and you indicate you would like to move in. Many CCRCs will do a cursory evaluation of your finances at the time you join the waiting list. This evaluation gives you an idea if you are “in the ballpark” of qualifying financially. When considering a CCRC, ask if they do this initial evaluation. If they are not willing to give you some idea of your eligibility before you join the waiting list, you could be wasting valuable time.
Sensible Financial can also analyze a client’s financial situation for CCRC eligibility. We start with pricing information from the CCRC under consideration and adjust for potential rate inflation, since the client may not move in for a few years. Then we assess whether the client can live comfortably in the residence in question without exhausting their assets prematurely.
That said, the CCRC, not your financial advisor, will have the final word on whether you qualify for residency. CCRC finance departments have their own formulas and algorithms. Their assumptions about inflation, future tax and interest rates, lifespan, increased rates, and other financial and economic assumptions may differ from those of your financial advisor. Despite our requests for information, CCRCs aren’t as forthcoming with their evaluation criteria as we would like.
CCRCs provide general recommendations about the amount of assets and income an applicant needs to qualify. Every CCRC has a different formula, but they typically require a resident to have a “multiple” of the entry and monthly service fees. For example, a CCRC might require that an applicant have 3 times the entry fee in total net assets, and 2 times the monthly service fee in monthly income. The income can be in the form of a pension, investment portfolio income (e.g., Required Minimum Distributions from IRAs), annuity income, family trust income and, of course, Social Security.
Even if residents meet these financial requirements initially, they could still deplete their assets early for many reasons like a severe decline in the stock market or a family misfortune. In these cases, CCRCs might be willing to draw from the resident’s entry fee to cover a portion of the monthly service fee. If, during the application process, the CCRC’s finance department thinks this might happen, they might insist that a family member sign a guarantee that they’ll make up the shortfall. Not all CCRCs offer this option and not all family members would be able to provide such a guarantee.
In my next article, I will provide a concrete example of how to determine if you meet a CCRC’s asset and income requirements.
Rick Fine is a Principal and CERTIFIED FINANCIAL PLANNERTM at Sensible Financial. Have a question for Rick about Continuing Care Retirement Communities? Ask in the comments section below. To speak with someone from our dedicated team about how we can help you plan for your financial future, click here!