Comparing Rental Retirement Communities and Life Plan Communities

By Brad Breeding of MyLifeSite

Life care contracts, ADLs, age-restricted, independent living, CCRC… You may have noticed that there is a LOT of lingo to be learned when you begin considering various senior living options. It is understandable if you even feel a little overwhelmed by it all.

Partly because of all the terminology and partly because the different options often look quite similar at a glance, consumers may not always have a thorough understanding of the distinguishing characteristics between various types of senior living options.

One area of confusion, in particular, is understanding the difference between a rental retirement community and a life plan community, aka, CCRC or "continuing care retirement community." In this post I want to provide some clarity about the key differences between these two senior living options.

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Rental retirement communities

Rental retirement communities are usually apartment-style planned developments for older adults who live fully or mostly independently, without the need for advanced levels of assisted living or daily healthcare services.

Yet, most rental retirement communities do provide at least a basic level of support for residents. Historically, this has come in the form of daily assistance offered in the resident's apartment when needed. These services are often provided by a contracted third-party caregiving service. Increasingly, however, rental retirement communities are adding separate assisted living and/or memory care apartments. Most stop short of offering an on-site healthcare center for skilled nursing and rehab, although there are some that do.

Additionally, with a rental retirement community there is no long-term commitment, financial or otherwise, on behalf of the resident or the organization. If a resident chooses to leave the community, they may do so without much of a financial sacrifice.

Likewise, the retirement community can ask the resident to leave at any time. Examples may be if a resident can no longer make the monthly rental payment, or if the resident has certain care needs that are beyond what the rental community can sufficiently and safely provide.

Finally, to the extent that care services are available and necessary, residents of a rental retirement community will pay the market rate for those services. If the necessary level of services are not available, then the resident would be faced with moving to another facility that can provide those services. Residents of a rental retirement community generally do not have any form of guaranteed or priority access to care services beyond those coming in from outside of the community.

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Life plan communities

Like rental retirement communities, life plan communities (again, also referred to as continuing care retirement communities, or CCRCs) almost always offer apartment-style residences, but many also make available free-standing cottages, villas, or townhomes. Therefore, life plan communities generally offer a wider range of housing options in terms of floor plans and square footage.

And while it does not hold true in every case, life plan communities are often thought to offer a wider variety of services and amenities in general than what may be found at a rental retirement community. Many life plan communities fall in the category of what many might call "high-end," although this isn't true in every case. In fact, a small percentage of life plan communities actually fall in the "affordable housing" category.

Unlike most rental retirement communities, life plan communities/CCRCs almost always offer a full continuum of care on-site, ranging from independent living all the way to rehab services and 24-hour skilled nursing care. (In rare cases, these services may be offered off-campus at a nearby location.)

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But the key distinguishing feature of a life plan community is not just that it offers a full continuum of care, but that it does so on a contractual basis with the resident. The contract specifications can vary from one community to another, but a continuing care contract stipulates that residents have priority access to the various care services over an extended period—often for life—and it describes what the resident will pay for those services when needed, which may be a discounted rate. Furthermore, many continuing care contracts also cover financial support if a resident exhausts their assets through no fault of their own.

Finally, most life plan communities require an entry fee, which can be rather sizable in many cases. The purpose of the entry fee is twofold:

  • First, since life plan communities tend to offer more comprehensive services and amenities, the entry fee helps keep the monthly fees lower. Without an entry fee, it is highly likely that the life plan community would need to charge more on a monthly basis to help cover the cost of services and amenities.
  • Second, some portion of the entry fee may be set aside in reserves to help offset the cost residents pay for assisted living and healthcare services. The degree to which this part applies depends on the type of continuing care contract.
Related Resource: A Primer on CCRC Residency Contracts

Non-profit versus for-profit communities

One final difference worth noting between rental retirement communities and life plan communities is that around 80 percent of life plan communities operate as not-for-profit organizations. This is part of the reason why so many of these communities offer financial support when residents deplete their assets. Life plan communities may be independently owned or part of a larger organization. Rental retirement communities, on the other hand, usually operate as for-profit entities and are almost always part of a larger parent company.

Average age of entry

On average, the age of entry at rental retirement communities tends to be a few years higher than at life plan communities. Since rental communities are month-to-month and usually provide personal support services, they are sometimes viewed in a similar light as assisted living facilities, even though they may not be regulated as such. (If a rental community offers separate assisted living apartments, then that part of the community would likely be regulated as assisted living.) New residents of rental retirement communities may wait until they are at the point of needing such support services before moving to the community.

When it comes to entry fee life plan communities, it makes sense that residents would move in a bit sooner/younger. To begin with, many life plan communities do a health evaluation as part of the application process, so new residents must be healthy enough to qualify for a continuing care contract. Naturally, this contributes to a lower age of entry compared to rental communities.

Furthermore, residents of life plan communities usually want to get their money's worth. In other words, many potential residents of a life plan community feel that if they are going to pay an entry fee, they want to do so early enough that they can live independently for the foreseeable future, allowing time to develop relationships with other residents, get involved in the various activities and committees, benefit from the wellness and preventative health programs, and more.

Is one right for you?

As you can see, there are important differences between rental retirement communities and life plan communities. If you are considering one or both of these senior living options, I encourage you to learn as much as you can about each so you are an informed consumer and know what you are getting for your money.

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