By Brad Breeding for myLifeSite
Choosing to move to a Life Plan Community (also known as a Continuing Care Retirement Community or "CCRC") is no doubt a big decision, involving aspects related to housing, lifestyle, healthcare, and certainly finances. For most potential residents of a Life Plan Community, it's nearly impossible to make a final decision without having a certain level of financial confidence about the choice, taking into consideration the short-term budget implications of the decision, but also the long-term financial impact.
Some people want to calculate their senior living options in terms of long-term impact on their estate, i.e., how much may be left over for the adult children and grandkids. Others may want to compare the cost difference over their lifetime between various housing options. For example, if a Life Plan Community offers a lifecare contract and a fee-for-service contract, a potential resident may want to better understand the potential financial difference over their lifetime based on various assumptions and possible scenarios.
Not only are such financial considerations important to most potential Life Plan Community residents, they also should be important to the industry. If a person is confused or uncertain about the long-term impact that moving to a Life Plan Community will have on their wallet, they will almost certainly delay their decision…or choose another senior living path.
The Life Plan Community financial qualification process
If you are a potential new resident of a Life Plan Community, you may find that you need to be approved via the community's financial qualification process. Why? Well, just as you want to feel confident that you can afford to live there, the community also wants reasonable assurance of this fact.
Unlike other types of retirement communities, many Life Plan Communities provide financial support if a resident exhausts their assets on care-related expenses, and sometimes even provide such care at a discounted rate if this occurs. The financial qualification process is an important financial risk-management tool for the community as a whole, helping to ensure that, under average circumstances, a prospective resident will not be at an increased risk for requiring financial support down the road.
Many Life Plan Communities even utilize a software program for financial qualification through actuarial consulting firms such as AV Powell and Associates. Ultimately, this process helps protect current residents because managing financial risk is critical to the overall long-term financial well-being of the community.
>> Related: A Word of Caution on Gifting Your Assets
Understanding your personal financial projections
Although financial qualification is highly important for the Life Plan Community organization from the standpoint of financial risk management, it may not fully answer the other question, as described above.
For example, when I was active in the financial planning business, I had several retired clients who wanted me to prepare financial projections comparing different housing and healthcare scenarios. Financial qualification wasn't necessarily a concern for them, but they wanted to better understand what the long-term picture may look like. This often involved preparing projections using cost data from two different Life Plan Communities, which was further complicated by the fact that each Life Plan Community offered a different type of residency contract.
If not for the fact that I had a good understanding of how various types of Life Plan Community contracts work, this task would have been nearly impossible for me. But the bigger problem was that financial planning software typically doesn't account for the nuances of Life Plan Community contracts, so I had to finagle the inputs to try to create as close of a picture as possible for my clients. This was time-consuming and probably wasn't as accurate as I would have liked.
If you are considering a move to a Life Plan Community and are seeking the services of a financial advisor to help you compare options and/or scenarios, it's crucial that the advisor has an in-depth knowledge of the Life Plan Community industry, how contracts can differ, and how to appropriately project the potential financial impact over your lifetime.
>> Related link: A Primer on Life Plan Community Residency Contracts
Gaining financial clarity
When trying to manipulate the financial planning software to help create those projections for clients, I realized that there was a need for a tool that could specifically account for various Life Plan Community contracts and allow for projections to be prepared much more effectively. So I, along with another myLifeSite founder and CPA, Ken Taylor, created one from scratch.
myLifeSite's financial tool, which is included with a premium myLifeSite subscription, can help you easily calculate these complex projections. Whether you are a prospective Life Plan Community resident or a financial advisor, this highly customized online calculator tool helps you factor in numerous variables and scenarios, which can easily be changed for comparison purposes.
The tool then generates a colorful chart and year-by-year analysis showing the projected impact of moving to a Life Plan Community on savings and asset levels over a lifetime. It's helpful to have all of the necessary information on hand, including pricing for the community or communities being considered, as well as personal information about asset/account values and income sources.
A FREE option
Alternatively, if you are a prospective Life Plan Community resident and would rather not pay for access to the myLifeSite Financial Calculator, there are many Life Plan Communities across the country that have access to the professional version of our tool, which is a bit more robust than the consumer version. Their residency counselors have been trained on using the tool and can sit down with you to prepare projections using whatever assumptions you would like to use, and even create side-by-side comparisons.
Armed with this information, you can feel more confident in your decision about which Life Plan Community is right for you and which contract type you prefer.