The $400,000 Entrance Fee: How to Read a CCRC Contract Without Losing Your Life Savings
Before you sign over your home equity to a Continuing Care Retirement Community, you need to know if they are running a luxury resort or a financial house of cards.
Imagine writing a check for $450,000—the entire equity of the home you spent thirty years paying off—and handing it to a company that could go bankrupt next Tuesday. That is the reality of entering a Continuing Care Retirement Community (CCRC). You are not buying real estate; you are prepaying for a promise of future care that may be decades away.
The direct answer
To safely evaluate a CCRC, you must audit three things: their contract type (Type A, B, or C), their refund policy, and their liquid cash reserves. Specifically, look for at least 150 days of cash on hand and a debt-service coverage ratio above 1.2 in their audited financial statements. If they refuse to show you these audited documents before you pay a deposit, walk away immediately.
The Three Contract Types: Decoding the Fine Print
Let’s look at the math. A Type A contract means you pay a higher entrance fee—say, $400,000—and a steady monthly fee of $4,500. If you transition from independent living to a nursing home, your monthly fee stays at $4,500, even though nursing home care normally costs $10,000 a month.
You are essentially prepaying for long-term care insurance. With a Type C contract, your entrance fee might only be $150,000, and your monthly fee starts at $3,000.
But the moment you need memory care or a nursing home, you pay the full market rate of $9,000 to $12,000 a month out of pocket. If you live another five years in that high-care tier, your life savings will vanish faster than you can say 'liquidation.'
Type B sits in the
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