Continuing Care Retirement Communities, Part 3 – Questions to Ask Before Signing on the Dotted Line

Black and white vintage picture of a stern older woman wagging her finger at a younger man in a suit about continuing care retirement communities.

The takeaway:  Continuing care retirement communities are part of the trilogy of your long-term care options–but these come with waiting lists. Folks are clamoring to get in.  You, savvy Boomer, will not be swayed by fear of missing out. Certain questions about these places still need to be asked.  This post asks those questions so you don’t needlessly spend five, six, or seven figures in nonrefundable cash. 

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Ahoy, Labor Day Boomer.  If you’ve experienced the excitement of reading the long-term care series, you already know these scintillating facts: 

What?  You’re a little behind in your reading list?!

No problem! 

  Let’s cut to the chase and get on down to the real nitty gritty.  

If you’re even mildly contemplating one of these places it’s time to ask community sales staff some tough questions.

Why?  Because…

  1. Sometimes these communities go bankrupt, as happened here, here, and here.  You don’t want to be 93 years young and have to find a new place to live because your community went belly-up.  
  2. You’ll spend between $75,000 and $1 million on generally non-refundable entrance fees .  Also, your monthly fees will likely go up between 4% and 6% a year, according to my own research and  a piece in Kiplinger.. (As we know from the  Rule of 72, this means monthly fees will double every 12 to 18 years.) 
  3. After asking these questions you’ll have a good idea of whether this type of retirement living and long-term care works for you. 

The questions you’ll ask reflect the enormity of your decision. You’ve got five, six, or seven figures in non-refundable cash riding on this thing.”

Here are recommended questions to ask.  If staff are dismissive of your questions, that’s a red flag. I’ve road-tested these questions with sales staff and residents alike. 

There was universal agreement that every single one of these questions was entirely reasonable for a prospective resident to ask. 

These questions start soft. They end hard.

In fact, Boomer, toward the end of the interview, you may notice the oxygen being sucked out of the room. 😳

Here’s the thing:  You…Don’t…Care!   Let other people treat their money like it grows on trees.  You didn’t come this far to throw it all away.

Let other people treat their money like it grows on trees.  You didn’t come this far to throw it all away.”

When asking these questions, remember my road tested 3-P approach. 

  1. Be Patient. 
  2. Be Polite.
  3. Take no Prisoners.

Onward!

Questions to be answered before signing up for a continuing care retirement community  

  1. How old do I have to be to live here?
  2. What are the mobility and health requirements for moving in here?
    1. Can I be in a wheelchair?
    2. Can I be living with cancer, Parkinson’s, or other diseases?
    3. Are they any physical problems or terminal illnesses that would prevent me getting nursing home care?
  3. What kinds of general medical and health care services (pharmacy, walk-in medical clinic, etc.) are provided on-site to those in:
    1. Independent living?
    2. Assisted living?
    3. Nursing home care?  
  4. How long can I hold onto my independent living unit if I’m temporarily placed in assisted living or a nursing home?
  5. How is it determined what level of care I might eventually require?
    1. Is my doctor involved?  (Note:  You want your doctor involved.  Get it in the contract.  You don’t want to be transferred from one level of care to another simply because the community hasn’t properly budgeted the beds and staff for the level of care you might require.)
    2. How often is this reassessed?
    3. Are there written policies for how this whole process works? Can I get a copy? (Don’t necessarily take information at face value.  Trust, but verify.   Ask up front for written copies of policies, but tell the salesperson you’ll get them at the end of the interview.  This gets them to commit to giving you written information without making you wait while they search for it.)  
  6. If I need long-term care while I’m here, will I be able to use the insurance I’ve already bought?  
  7. Does this community provide a written guarantee that on-site assisted living and/or nursing home care will be available when and if I need it?
    1. Is this in my contract? (Get copy at end of interview and verify.)
  8. Is the onsite nursing home a) MediCAID-certified and b) MediCARE-certified? (Under certain conditions, MediCARE will pay the first 100 nights of nursing home care.)
    1. Neither, both, one or the other? 
    2. Which?
  9. Can I use Medicaid and/or Medicare while I’m living here?
    1. Which?
  10. Under what conditions might a person be
    1. Involuntarily transferred from one level of care to another?
    2. Involuntarily required to leave the community as a whole?
    3. Get copy of how this works–at end of interview..
  11. Are there any financing options for the entrance fee?
  12. Under what conditions, if any, is my entrance fee refundable—in whole or in part?
    1. Which?  This information might be in the contract or in a policy.  Determine which and get a copy–-at end of interview.
  13. What kind of contract will I be signing:  Fee-for-Service (a la carte services) or Life-Care Contract  (all-in-one pricing).
  14. What’s the current occupancy rate?  (Should be over 90%, according to a piece in USA Today.) 
  15. What has been the average rate of turnover in your independent living units? (A turnover rate of 20% or more increases the chance of units sitting vacant for an extended period, which strains the community’s cash flow, according to a piece in USA Today.)
  16. How long is the waiting list, from the time I apply until the time I get in?  (The longer the better. It means they’re doing something right.
  17. I need to plan.  For the last five years, may I get copies of
    1. .Monthly rate increases?
    2.  Entrance fee increases?  If they won’t give you this information,  for these two items, then get them to tell you the average percentage increase for each.
  18. What happens if my finances are depleted while I’m living here?
    1. If there are benevolent funds, under what conditions are they provided and for how long? Benevolent funds are provided to those who eventually run out of money while living in the community.  Applicants usually have to provide an array of personal financial data so the community avoids this problem.  But before you get comfortable that they’ll never throw you out, remember this:  bad financial management or a community bankruptcy may wipe out any benevolent guarantees.
    2. Can I get a copy of the benevolent fund’s policy?
    3. If no, will this policy be explained in my contract? Make sure you know what guarantees you have going in.
  19. In terms of community governance,
    1. Are there rules and regulations residents must abide by? 
    2. Can I have a pet?
    3. Do I have to be related to whomever I might choose to live with while I’m here?
    4. Can I get a copy of these rules and regulations?  (If relevant to you, make sure these policies include regulations about pets and unmarried couples, i.e., same sex vs. opposite sex.  You don’t want to acquire a pet or a partner and then find out the rules forbid your choices.)
  20. Is there a council that manages the community and allows residents to voice concerns?
  21. What government entity regulates your assisted living and nursing home care?
    1. Are copies of inspections reports for the assisted living units available for me to see?  (Get copies.)
    2. Are copies of inspections reports for the nursing homes available for me to see? (Get copies.) 
  22. How old is this community?
  23. How many times has this community been sold?  (Gets at how stable and financially secure the community is and has been.)
  24. What’s the ownership structure of this community?  Is it owned by a:
    1. private company,
    2. publicly held company, or 
    3. non-profit.  (Nonprofit is the most common and desirable.  Private or publicly held companies may be more interested in their profit margins than in you and your needs.)
  25. Is the company operating this community rated by Moody’s, Fitch, or Standard & Poor’s? (Gets at if the community’s ability to borrow money via bonds.)
    1. What is your debt rating? (Should be B+ or above. Gets at credit worthiness, i.e., how likely the credit rating company believes debt will be repaid.)
    2. Do you have a copy of the debt rating received?  Can I get a copy?
  26. Has an independent certified actuary performed an actuarial analysis on your community within the past two years? (This question is only relevant for life-contract communities to determine if they can make good on paying your assisted living and nursing home care.)
    1. Did the actuary’s report show that the community had sufficient assets to pay its liabilities?
    2. Do you know what the assets to liabilities ratio (called the funding ratio) for this community was? (Gets at if community has set aside sufficient cash to pay for any liabilities that will come due.)  (Get a copy.)
  27. Can I get a copy of your most recent audited financial statement?
    1. Note 1.  After the interview, thumb through the report. Make sure there is a statement that says the auditor is issuing “an unqualified opinion” and that the company’s financials are “fairly represented in accordance with Generally Accepted Accounting Principles (GAAP).”   This is a more-or-less a sign-off on the company’s solvency.  There shouldn’t be a list of any “accounting exceptions.”
    2. Note 2.  Take the report to an accountant who’s skilled at evaluating businesses like this one and have him or her evaluate the profitability of the Continuing Care Retirement Community . Ask for the CPA’s assessment of the profitability, liquidity, and debt ratios.   Ask if there are any red flags you should be aware of?

Remind the sales person that these were the documents you requested — and get them before you leave! 

Question 5:  Written policies for how level of care (i.e., independent living vs.assisted living vs. nursing home) is assessed and determined. 

Question 7.  Written assurances that nursing homes and assisted living will be available when I need it. 

Question 10.  Policies on transfer from one level of care to another or involuntary dismissal from the community. 

Question 12.  Conditions for which my entrance fee might be refunded, in whole or in part.  

Question 17. Copies of monthly and entrance fee increases for the past five years.

Question 18.  Copy of the benevolent fund policy.

Question 19.  Copy of community rules and regulations (e.g., pet policy, unmarried couples living together, etc.)

Question 21. Copies of inspection reports for assisted living and nursing homes.

Question 25.  Fitch, Moody’s, or Standard & Poor’s debt rating. 

Question 26.  Copy of actuary report (for life-care contract only).

Question 27.  Copy of the most recent audited financial statement. 

…

P.S.  You got this.

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