Financing Senior Living in a Life Plan Community: All About Asset Assessment

Many people think that financing senior living in a Life Plan Community (also known as a continuing care retirement community or CCRC) is out of reach. Because of this, they tend to disregard it as an option right away without understanding the finances up front, thinking that it must be more expensive than how they’re living now. 

However, the reality is that Life Plan Communities are a lot more affordable than people realize! And when you consider that many of your current costs and plenty of desirable amenities are covered in your monthly fees and that your assets can help cover these costs, you’ll find that the move can become more affordable. 

Financing Senior Living in a Life Plan Community

You’ve found your ideal Life Plan Community. It has the amenities you’re looking for in the location you desire and feels like a place you can call home. Now, the big question is: How can you finance living there? 

The great news is there’s more than one way to approach financing senior living in a Life Plan Community. There are several options available, including:

Selling Assets

Most people have two types of assets: working assets — such as individual retirement accounts (IRAs), brokerage accounts and savings accounts — and nonworking assets. Many people have a huge nonworking asset: their home. However, while planning for the move to a Life Plan Community, many people tend to overlook the equity they’ve built into their home and haven’t monetized in their heads.

Because a house generates cash that can be leveraged as income, selling one’s home instantly turns a nonworking asset into a working asset. For example, if invested wisely, a $500,000 home sale could conservatively generate an additional $20,000 in income a year.

And that doesn’t even take into account things such as property taxes and maintenance. For many people who own a home, there’s always a major home improvement project every year, such as putting up a fence, painting, plumbing or completing other repairs and projects. 

These projects (and their hefty costs) all go away in a Life Plan Community, where team members handle maintenance and improvement projects. All you need to focus on is how you want to spend your time, whether it’s your hobbies, passion projects or time spent with those you care about.

Your home isn’t the only asset you may have. Many people tend to overlook items such as jewelry, boats and valuable collectibles. Don’t forget to take into consideration other financial assets and investments you hold, such as bonds or certificates of deposit.

Refinancing and Leasing Your Home

Don’t be afraid to think outside the box when financing senior living. Tom and Lydia, residents of Westminster Gardens, a HumanGood Life Plan Community in Duarte, California, financed their move to the community by pulling some of the equity in their home through a refinancing loan and then used the funds to pay their entrance fee and renovate their existing home to lease to others. With their monthly rental income and other forms of retirement income, the O’Neils can live comfortably and feel at peace.

Using Retirement Savings

If you’ve been diligently saving for years in a 401(k), IRA or other savings account, using the money accrued in those accounts is a great option to finance your move to a Life Plan Community. Make sure to review your retirement accounts and consult with a financial adviser to understand any potential impacts that withdrawing funds may have.

Long-Term Care Insurance

Long-term care insurance covers costs associated with receiving assistance with activities of daily living in assisted living. If you’re considering long-term care insurance, it’s important to review policy details, coverage limits, exclusions and waiting periods. This information will help you determine if the policy is a good financial resource for financing senior living. 

It’s important to note that long-term care insurance policies must be purchased before needing help with personal care. For example, the policy could be purchased while living in independent living and then be used to cover costs if higher levels of living are needed.

Life Plan Communities provide all levels of living, so residents can enjoy independent living amenities while healthy and have access to higher levels of living, such as assisted living, as needed.

Life Insurance Cash-Out

Did you know that your life insurance policy can be used to finance your move to a Life Plan Community? In a life insurance cash-out, you would surrender your policy to the company you purchased it from for cash value. By doing this, you would give up ownership of the policy, and your beneficiaries wouldn’t receive any benefits from the policy upon your death.

When Financing for a Life Plan Community, Amenities Are Priceless

No matter how you choose to finance living in a Life Plan Community, it’s essential to consult a financial adviser to make sure you have a full understanding of the impacts of your decision and to determine if it’s the right choice for you. 

Even if you leverage nonworking assets to finance the move to a Life Plan Community, you might worry about the cost of living once you’re there. Although the costs are different when you move from your current residence to a Life Plan Community — for example, you have to budget for a meal plan instead of groceries — they aren’t necessarily higher. 

In fact, the availability of free on-site amenities, such as exercise classes, social clubs, wellness resources and other amenities, means residents often spend less on things such as transportation and entertainment than they would if they lived outside the community.

Life Plan Communities also offer peace of mind with life care contracts, which guarantee access to the full continuum of care available within the community, such as assisted living and other care services. This means that if your care needs change over time, you can continue to stay in the same community.

If you’re considering moving to a Life Plan Community, the best place to get started is by understanding the costs involved. To help kick-start your planning, we recommend exploring The Complete Guide to the Costs of Senior Living.