David Ammons - HeadshotDavid Ammons

David Ammons is president of Retirement Living Associates, Inc. (RLA), a company which provides planning, development, marketing, and management services for new and existing retirement communities. He has worked in and with Senior Living Communities since his graduation from Wake Forest University in 1985.

As consumers, we all develop certain techniques and processes to shop for the things we need. Over time we gain more and more confidence in our process, and we trust that it will result in the “right” decision. Often the purchasing techniques we use are based on a scientific method of quantitative measures. “Shopping” for a retirement community will stretch those time-proven techniques.

I believe that the quantitative process is only one step in decision-making; many emotional factors are critical to your final choice of a retirement community. This article is predominantly about understanding the categories of financial arrangements available to you; it outlines the upfront “purchase” decision that you must make before moving into a community.

Below are brief descriptions of the financial options for Continuing Care Communities. The options are slightly different for communities that do not offer continuing care. A final qualifier: There are variations on the three models I describe, and some communities offer more than one choice.

The three financial options are:

Entrance Fee Model: Entrance fees are sometimes called equity fees, residence and care fees, or endowment fees. These fees vary regarding how much of your initial deposit may be contractually refundable. The entrance fee model is the most common model in North Carolina. The fee is generally for the provision of housing; the resident then pays a monthly fee for recurring services.

Equity Model: Equity model communities offer more of a traditional real estate purchase situation. At an equity model community, members own their unit. The member then pays a monthly fee for the contracted services.

Rental Model: As the senior community market has evolved, the choices regarding the financial arrangement for entry have broadened. A community may have always fallen into the rental model category, or it may have begun to offer a rental option in recent years. In a rental contract, the resident agrees to pay a monthly fee that provides for housing as well as services.

A short note about the monthly fees: Regardless of which of the options listed above is most appealing to you, it is important to be fully aware of what is included in the regular or basic monthly package of services. Communities tend to range from all-inclusive to what is termed “fee-for-service.” The package of services typically includes food, utilities, housekeeping, transportation, and (often the most expensive item) long-term care, including assisted or skilled care.

Armed with the information above, the bigger question is: How do you decide which contract is best for you? In consultation with those you trust, you should consider your timeframe, finances, preferences regarding flexibility, and possibly estate planning. For many, your age and the length of time you envision living in the community will also affect your decision.

The purpose of this article is to inform you of the financial options, not to suggest that one model is better than another. A non-refundable entrance fee may be more costly if you anticipate living only a few years in a community. Purchasing a property (the equity model) may not be the best choice if the real estate market is unfavorable. The decision is personal, and you must explore many factors, both quantitative and emotional, when anticipating a move to a retirement community.

Of the almost 60 CCRC’s in North Carolina:

  • 41 of them are entrance fee model
  • 5 offer an equity model
  • 12 provide a rental option, which may be the only option or a second alternative available to prospective residents