Senior Living Entrance Fees Explained
The entrance fee required to move into a senior living community may be one of the biggest inquiries seniors have when considering making the move. Senior living advisers are constantly working to educate prospective residents on the value of a senior living community and how entrance fees for retirement communities work. Before you let the entrance fee keep you from enjoying the unmatched lifestyle found at a senior living community, let us tell you why it’s beneficial to you, and ease your mind by explaining how you’ll get that money back.
What Is an Entrance Fee at a Retirement Community?
Most communities require you to pay a senior living entrance fee when you move to the community. The cost of the fee depends on which contract option you choose, but the average is $329,000, according to the AARP.
What Exactly Do Retirement Community Entrance Fees Pay For?
Your entrance fee pays for admission to the community, but it primarily prepays for medical care you may need while you live there. The terms of this agreement depend on which contract option you choose.
But Where Will You Get That Kind of Money?
Many seniors use the money from the sale of their current house to put toward their retirement community entrance fee. Of course, everyone’s situation is different, so that’s not the case for all seniors.
Potential Tax Benefits
Several IRS rulings have determined that the entrance fee for a continuing care retirement community is tax deductible because it’s considered a prepaid medical cost. Consult with your financial or tax adviser to see if you qualify for this
You Get Your Money Back
Most senior living communities refund a portion of your entrance fee to you or your estate when you leave the community. Timber Ridge at Talus’ Return-of-Capital® Plan refunds at least 80% of your continuing care retirement community entrance fee.
Your Satisfaction Is Guaranteed
Timber Ridge at Talus’ Return-of-Capital® Plan promises a 100% satisfaction guarantee if you don’t love living at Timber Ridge within the first four months of living here.
How Your Contract Determines Your Entrance Fee
There are three types of contract options.
- In a Type A contract, also called a LifeCare® contract, you’ll pay the highest entrance fee of all contract options, but you’re guaranteed priority access to on-site medical care at no cost to you at the time of care — you’ve already paid for it with your entrance fee. This is desirable because the market rate for medical care is ever-rising. You won’t have to worry about that with this contract model. You and your spouse or partner can easily move to different levels of care as needed. Communities offering this type of contract are also referred to as continuing care retirement communities or CCRCs.
- In a Type B contract, also called a “modified plan” contract, there may be a lower entrance fee and monthly service fee than with a Type A contract. You pay an additional cost if a higher level of care, like assisted living or memory care, is required. Health care services are typically provided one of two ways: 1) a limited number of free days included as part of the entrance fee, with additional care billed at per diem rates, or 2) an ongoing, minimally discounted rate. Health care services may be provided on- or off-site, and two monthly fees may be incurred if couples require different levels of care.
- In a Type C contract, also called a “fee-for-service contract,” you pay the lowest entrance fee and monthly service fee, but you pay market rates for medical care if and when you ever need it.
While it can sound daunting at first, all it takes is a bit of digging to discover that the entrance fee paid to move into a senior living community has tremendous value, and it can actually save you money and instill peace of mind about the future for you and your family. If you’re curious whether a senior living community with an entrance fee is right for you, try using the MoneyGauge™Calculator as a starting point to get an idea of a financial ballpark to work within. Then, schedule an appointment with one of our senior living advisers, and we’ll work with you to figure out if Timber Ridge is a good fit for you.