Evaluating Options When Choosing Care Facilities

In this week’s retirement blog series, we revisit a discussion with Anna Rappaport and an article she wrote called “Improving Retirement by Integrating Family, Friends, Housing and Support.” In these segments, Anna discusses choosing care options for seniors from both a personal and professional perspective. On the personal side, she had found it frustrating finding information on choosing the right care option when she was trying to find information for family and friends. On the professional side, Anna is an actuary and the Chairperson of the Society of Actuaries’ Committee on Post-Retirement Needs and Risks – and brings her skills to the table when researching and evaluating care options.

Help Clients Choose A Continuing Care Retirement Community

In the first video, “Before Choosing a CCRC (Continuing Care Retirement Community),” Anna focuses on some of the hidden concerns to examine before an individual decides to make what can be a lifetime commitment to a continuing care retirement community. With most CCRC contracts, the resident pays a substantial up-front fee and an ongoing monthly fee. In many cases, part or all of the up-front fee will be forfeited if the retiree chooses to leave. Making that financial commitment poses risk to the retiree. A facility that looks good now may not be as attractive later for a number of reasons including: monthly fees go up faster than expected, management changes, residents decide that they want to be closer to family, or residents face medical conditions that the facility is not well suited to address.

As an actuary, Anna is also concerned that certain conditions could make it difficult for the institution to keep its promises. For example, an institution could underestimate the number of residents needing long-term care or the average length of care. In addition, financial models often are based on a certain level of occupancy and those targets might not be met. A third example would be a facility with debt could face problems if interest rates rise and financing the debt becomes more expensive.

Anna has some very good advice for retirees considering this option. First, carefully read the contract. Sales representations do not always match contract language. For example, many facilities have a charity fund to help those who can no longer pay the fees. That feature may be touted, but few facilities actually promise lifetime care for those who run out of resources. Second, a good rule of thumb is that retirees should not enter into a CCRC contract that could result in a financial loss unless they have the financial means to absorb that loss if they later decide to move to a more acceptable living arrangement.

Choosing The Right Retirement Care Facility

In the second video, “Choosing the Right Care Facility,” Anna discusses choosing between independent living, assisted living facilities, and nursing homes. She puts a face to this discussion by talking about the series of decisions her mother faced over time as she continued to need more care. Her mother’s situation is one that many individuals and families face. When her mother began to look for a supportive community, she was still capable of independent living. Like many facing this decision, location was key, and choosing an independent living facility close to her prior life was important so she could retain friendships and activities.

When choosing a facility, Anna points out that it is important to choose one with the right personality and that has accommodations for current and future needs. She also points out the importance of choosing the right contract. Her mother first picked an independent living facility close to home that offered higher levels of care if she later needed it, but also chose a contract that did not require an up-front fee to retain flexibility. This turned out to be important when her mother’s health made it difficult to continue old activities and she needed more care. At that point, she made a geographic change to an assisted living facility to be closer to her children. To learn more about this interesting case and to get Anna’s excellent insights in choosing the right care facility, watch the video!

This blog is part of a series by Professor David Littell, Director of the RICP^® program and Co-director of The American College New York Life Center for Retirement Income. Each post in this series features a video or videos from the Center offering valuable retirement income planning tips for advisors and their clients. Many of the experts in these videos are featured in the RICP^® program curriculum.