Is a Continuing Care Retirement Community Right for You?

Deciding where to live later in life isn’t an easy task. Many seniors have a strong preference for remaining in their own homes but may eventually need help managing medical issues or taking care of day-to-day tasks. Other people might move in with their adult children or other family members, but that option isn’t always practical or available.

One potential solution to these problems is a continuing care retirement community, or life plan community. A CCRC is a community living facility that allows retirees to access a continuing spectrum of care as they age, with care levels typically encompassing independent living, assisted living, nursing care, and memory care. Most CCRCs also offer a broad range of amenities and activities, such as on-site fitness centers, pools, reading rooms, restaurants, social events, and groups for different hobbies and interest areas.

There’s some evidence that people living in CCRCs enjoy better health outcomes over time, as well as higher levels of social and emotional well-being. It can also be an attractive option for couples because they can continue living in the same vicinity even if one person eventually needs a higher level of care. But moving to a CCRC also involves a substantial financial commitment, as well as the sobering possibility that it might be the last decision about where to live you ever make. Here are some of the key issues to consider.

Types of Contracts and Living Arrangements

People entering a CCRC generally start out in independent living, with their own living quarters that could range from a studio apartment to a more luxurious suite or cottage. In many cases, the cost of admission could be on par with buying a house in the same geographic area. Based on data from US News & World Report, entrance fees average about $400,000 but can range from $100,000 to more than $1 million. Despite the hefty price tag, the entrance fee doesn’t mean you’re buying the property you live in; instead, it’s meant to help cover part of the costs you may incur while living in the facility and may be partially refundable to your estate after death.

In addition to the entrance fee, residents also pay monthly fees, which averaged about $4,200 for independent living as of the end of 2024. Monthly fees, which often increase by about 4% per year to cover inflation, generally cover the cost of housing, meals, housekeeping, maintenance, transportation, and recreational activities. Depending on the type of contract, monthly fees may also cover certain healthcare costs. The specific fees vary depending on the type of contract, as outlined below.

Type A (also known as extensive or Life Care)

Type A contracts are the most costly option, with the steepest entrance fees as well as the highest starting monthly fees. The monthly fees for type A contracts generally cover comprehensive long-term-care services and remain the same (except for annual inflation increases) even if you need a higher level of care, such as assisted living, nursing care, or memory care. While Type A contracts may give residents more peace of mind that their monthly fees won’t significantly change if they need a higher level of care, that reassurance comes with both higher upfront costs and higher monthly fees.

Type B (also known as modified or hybrid contracts)

Type B contracts have lower upfront costs compared with Type A contracts, as well as lower monthly fees when a resident first moves in. Type B contracts include the same access to housing and residential services as Type A contracts, but without the same level of access to healthcare services. If a resident needs a higher level of care, the monthly fee steps up to cover the higher cost of assisted living, nursing care, or memory care. (The facility might provide residents with some of these services at a discounted cost, but generally not for more than 30 to 90 days.) In exchange for paying lower monthly fees when they first move in, people in these contracts take on the risk that their costs could significantly increase.

Type C (also known as fee-for-service)

Type C contracts generally have the lowest upfront costs and may not include any entrance fee. Instead, the monthly fee changes to reflect the market rate for the type of healthcare services needed. The monthly fees start at a lower level when a resident first moves into independent living but can dramatically increase if the resident needs access to assisted living, skilled nursing, or memory care. As with Type B contracts, people in these contracts pay lower monthly fees when they first move in but may end up paying significantly more; unlike in Type B contracts, there is no temporary discount for higher levels of healthcare.

Other Factors to Consider

Entrance Fee Refundability

The upfront payments included in Type A and Type B contracts are often partially refundable after you leave the facility or pass away. However, the portion of the fee that’s refundable varies; some contracts may only offer refund amounts ranging from 30% to 50% of the fee, while others may refund 90% to 100% of the fee. In some cases, the refund percentage depends on how long the resident has lived in the facility, and refunds may not be paid out until the facility has found a new resident to occupy the space.

Another important consideration for entrance fees is that while they could be considered a loan of sorts, they don’t generate any interest income. They also involve an opportunity cost because they won’t benefit from market appreciation during the period between when you first sign a contract and when any refunds are paid out. As a result, even a 100% refundable entrance fee still involves a loss of value for the resident and/or the resident’s estate.

Taxes

For Type A and Type B contracts, a portion of the entrance fee may be eligible for a one-time tax deduction as a prepaid medical expense. A portion of the monthly fees may also be eligible for annual deductions if they’re considered a prepaid medical expense. (In both cases, deductions are only allowed if the costs are more than 7.5% of adjusted gross income.) Each facility will typically provide residents with specifics on the portion of fees that may be deductible each year.

Financial Strength and Risk of Bankruptcy

People who buy into a continuing care retirement community are making a major financial commitment. And the monetary details involved in building and operating a facility are complex. Not only does building a new facility require a major capital investment, but the facility must set fees high enough to cover an unknown level of costs for each resident over an uncertain period of time. But if fees are too high, the facility may not attract enough occupants to operate efficiently.

Like other senior-care facilities, continuing care retirement communities can issue tax-exempt bonds to finance their operations because they offer a public benefit. Such bonds often carry below-investment-grade ratings. That’s because of CCRCs’ capital intensity and upfront costs, complex business models, exposure to an unknown level of future healthcare obligations, and susceptibility to downturns in the housing market or overall economy.

Defaults on bonds issued by CCRCs are relatively rare, but the consequences can be catastrophic. In the event of a bankruptcy, bondholders are first in line to be repaid as secured creditors, while the entrance fees paid by residents are considered unsecured debt. If a facility goes bankrupt, residents may not only lose part or all of the entrance fee but could also be left without a place to live. According to a July 2025 article in The Wall Street Journal, at least 16 CCRCs have filed for bankruptcy since March 2020.

Because the stakes are so high, it’s crucial to check up on a facility’s financial health before signing any contracts. About 80% of CCRCs are considered nonprofit organizations and are required to make annual Form 990 filings with the IRS. Key items to look for in this filing include: Has operating income been high enough to cover expenses? Are assets greater than liabilities? And are compensation levels for administrators reasonable or excessive? In addition, be sure to ask about the facility’s occupancy rate, which should generally be 90% or higher. It’s also helpful to get detailed numbers showing trends in monthly fee increases over the past few years.

In addition, many states require CCRCs to maintain a minimum level of financial reserves, but the amount varies by state.

Monthly Fees for Spouses in Different Levels of Care

Depending on the type of contract, a couple may end up paying significantly higher monthly fees if one spouse eventually needs a higher level of care. In Type A contracts, total monthly fees generally don’t change dramatically if one spouse moves to assisted living, nursing care, or memory care while the other spouse remains in independent living. For Type B contracts, additional care may be provided for one spouse with no extra cost over a limited period (such as 60 to 90 days). After that, the couple may end up paying two separate monthly fees. And for Type C contracts, each member of the couple would pay full market rates for the level of care they need.

Quality of Facilities, Food, and Amenities

If you take a tour, you’ll likely be shown the most attractive and appealing features, such as well-furnished lobby areas, on-site restaurants, pools, spas, and fitness facilities. But it’s also worth checking out the less glamorous areas dedicated to assisted living: nursing care and memory care. Because moving to a CCRC is such a big decision, it can also be helpful to talk to as many current residents as possible and arrange to sit down for sample meals at breakfast, lunch, and dinner. Some communities even have guest rooms available for prospective residents who want to get a feel for the community.

Recreational activities are another consideration: If you can’t imagine a day without pickleball, bridge, yoga, or canasta, it’s worth finding a facility that offers exactly what you need. The size of the community is a related issue when evaluating lifestyle preferences. Some facilities have a large campus with multiple buildings and many different options for recreational activities, while others are much smaller.

Governance and Accessibility Issues

As people age and become less independent, they often struggle with a loss of autonomy in daily life. Living in a CCRC can help seniors continue living independently longer than they’d otherwise be able to, but some aspects of this arrangement can be restrictive. Contracts for CCRCs typically state that residents don’t have formal decision-making authority over the operations of the facility; instead, facility administrators are responsible for most or all of the operating decisions that impact day-to-day life.

Thus, it’s worth asking other residents about whether a facility’s administrators actively seek out feedback from residents and are willing to act on it. It’s considered a best practice for the facility’s board of directors to include members who are residents, but at a minimum, there should be a resident advisory council that has open and productive communication with the people in charge.

Final Thoughts

In the best scenario, a continuing care retirement community can help seniors maintain a happy, healthy, and rewarding life with a seamless transition between different levels of care they may eventually need. But it’s imperative to conduct enough due diligence to make sure the facility is both financially strong and a good fit for your individual needs. The National Continuing Care Residents Association offers some excellent resources, including a Consumer Guide, a more detailed Handbook on CCRC Finance, and a Model Bill of Rights for residents of CCRCs.