Picking a retirement community for yourself or a family member can be stressful and overwhelming. Here are tips on how to find a safe and secure home.
You can start to look for retirement home options on the federal government’s online Eldercare Locator or by calling 800-677-1116 for your local Area Agency on Aging. You can also use sites like LeadingAge, Caring.com or SeniorLiving.org.
When you start to tour your top picks, here are some tips to help ensure you aren’t putting yourself at financial risk.
1. Fees and monthly charges
Some continuing care retirement communities, which enable residents to age into different levels of care without having to move homes, require an upfront fee and some don’t. Either way, residents will be required to pay monthly rent so ask how much it will be, what services it includes, how much it has increased in the past five years and if it is likely to increase in the future. The average monthly charge at continuing care communities was $3,555 in late 2021, according to the National Investment Center for Seniors Housing & Care.
2. What’s included
If the community requires an entrance fee, ask what services it includes. For continuing care communities, the average initial payment is about $402,000 but it can range from $40,000 to more than $2 million.
3. Refunds
If a community requires an entrance fee, ask whether any portion of the deposit will be refunded to the resident or their estate if they move out or die.
4. How can that money be used
Ask whether entrance fees are kept in a segregated account and ask whether they will stay in that account or if those funds may be released to the community in the future to use for operating expenses and other costs. In many states, funds are held by an escrow agent until a community reaches a certain level of viability, and then the funds are released to the community, said Margaret Johnson, head of the senior living space at Fitch Ratings.
5. Financials and occupancy
Look at a community’s financial statements, most likely available on the Electronic Municipal Market Access website. If you need help finding a community’s financials, ask management to direct you to the correct page. If the continuing care community is a nonprofit, you can check its annual tax documents on ProPublica’s Nonprofit Explorer. Check occupancy levels to be sure it’s in the 90% to 95% range; check its unrestricted cash and investment reserves to be sure it isn’t declining; and check that its net operating margin — the percentage of revenue a company keeps as operating profit — isn’t decreasing.
6. Credit rating
Check Fitch Ratings to see if it rates the community’s ability to pay back debt. A company that is rated AAA is very high quality with reliable cash flow, while a company rated D has already defaulted.
7. Bankruptcy
Ask what happens to your contract and deposit in the case of bankruptcy and, if the community is controlled by a parent company, ask whether any of its other communities have declared bankruptcy.
AARP has a collection of other resources available here.
