Here on the Blog, we talk frequently about some of the different living options available to seniors. For those who are independent and financially secure, a continuing care retirement community, called a CCRC, can be a worthwhile choice. (We wrote about some of the benefits of life in a CCRC on the Blog last year.)  

In a CCRC, residents can enjoy the freedom of independent living, knowing (or believing) that advanced care will be available to them when they need it. Residents can move from independent living to assisted living to skilled nursing care, often in the same facility, and (depending on their contract) without incurring higher prices. A few years ago, AARP estimated that there were about 1,900 CCRC facilities across the U.S.  Other sources put the total at about 2,000, with the number likely to grow to meet the needs of an aging population. 

Generally, articles about CCRCs focus on the amenities, but in this revealing analysis from Morningstar, Chartered Financial Analyst Amy Arnott takes a look behind the scenes at the costs and risks associated with this housing choice. Her article contains more detail than we have space to include, but our take-away is clear: the choice to move to a CCRC is a major financial commitment. Make sure you know what you’re paying for, today as well as tomorrow. 

Living in a CCRC: Preserving Independence, Enjoying the Perks 

“Deciding where to live later in life isn’t an easy task,” Arnott begins. “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.” 

A continuing care retirement community, also called a CCRC or a life plan community, is one good option. Arnott explains., “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.” 

As we noted above, most CCRCs also sell a lot of “sizzle” in the form of amenities and activities: Arnott lists “on-site fitness centers, pools, reading rooms, restaurants, social events, and groups for different hobbies and interest areas.” These become major selling points, almost akin to resort living, if some of the marketing brochures can be believed. 

Weighing the Obvious Advantages Against “Substantial” Costs 

Arnott acknowledges the benefits of CCRC living, starting with the fact that this lifestyle might actually be healthier for residents than other choices. 

“There’s some evidence that people living in CCRCs enjoy better health outcomes over time,” Arnott writes, “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.” This proximity can considerably ease the burden on a caregiving spouse. 

“But,” she emphasizes, “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.” She then shares some of the key issues to consider. 

Entry Fee Plus Monthly Fee Can Make CCRC Cost-Prohibitive 

As Arnott explains, CCRC living is designed to handle progressively increasing needs. 

“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,” she writes in her Morningstar report. “In many cases, the cost of admission could be on par with buying a house in the same geographic area.” 

She’s right about that. Based on data from US News & World Report, Arnott notes that entrance fees average about $400,000 – but many upscale facilities charge $1 million or more just to move in. Those fees, she adds, are “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.” 

Monthly Fees Cover Most of a Resident’s Living Costs 

After the entry fee, there’s a monthly fee – basically a rent payment. Arnott says these fees average about $4,200 nationwide for independent living as of the end of 2024 and often increase by about 4 percent per year to cover inflation. 

“[Monthly fees] generally cover the cost of housing, meals, housekeeping, maintenance, transportation, and recreational activities,” she writes. “Depending on the type of contract, monthly fees may also cover certain healthcare costs.” Costs vary widely by location and amenities. They also vary based on the type of contract you sign when you move in.  

CCRC Contracts Come in Three Types, with Varying Benefits 

As Arnott writes, most CCRCs offer three different types of residential contracts, each offering different degrees of benefits and cost controls. We’ve shortened her explanation a bit due to space constraints. 

Type A Contracts (also known as extensive or Life Care):  Arnott calls these contracts “the most costly option, with the steepest entrance fees as well as the highest starting monthly fees.” That’s because Type A contracts generally lock in monthly fees which won’t be raised beyond annual inflation even if a resident requires assisted living, nursing care, or memory care. Type A contracts offer greater peace of mind but with higher upfront costs and monthly fees. 

Type B Contracts (also known as modified or hybrid contracts): These contracts cost less, both upfront and per month. Residential services are the same for Type B and Type A contracts. However, says Arnott, “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.” Many facilities offer Type B contract holders a short-term discount (up to 90 days) for higher levels of care. Along with lower fees, residents assume the potential risk of rising costs as needs change. 

Type C Contracts (also known as fee-for-service): These contracts are basically a monthly rental contract, often with no entrance fee required. Residents pay the market rate for the type of healthcare services needed.  “As with Type B contracts,” Arnott explains, “people in these contracts pay lower monthly fees when they first move in but may end up paying significantly more.” But Type C contracts offer no temporary discount for higher levels of care. 

Arnott makes an important statement later in her Morningstar article: the type of contract you have can make a major difference in your monthly fee if you and your spouse require different levels of care. Depending on your contract, you could end up paying two monthly fees. 

Entrance Fees May Be Partially Refundable, but Terms Vary 

The high entrance fee is a tough hurdle for some people considering CCRC living, but, as Arnott writes, some of that money will come back to residents or their heirs. 

“The upfront payments included in Type A and Type B contracts are often partially refundable after you leave the facility or pass away,” she states. But refund amounts vary widely, from as little as 30 percent all the way to 100 percent. “In some cases,” says Arnott, “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.” 

People considering a CCRC should also realize that entrance fees generally do not earn any interest income. Even if 100 percent of the fee is paid back over time, any interest those funds might have earned in an investment account will have been lost. 

Arnott also notes that a portion of the entrance fee paid may be eligible for a one-time tax deduction as a prepaid medical expense. “Each facility will typically provide residents with specifics on the portion of fees that may be deductible each year,” she adds. 

Residents Can Lose Out if CCRC Operator Goes Bankrupt 

“People who buy into a continuing care retirement community are making a major financial commitment,” Arnott says. “And the monetary details involved in building and operating a facility are complex.”  Building a CCRC requires a major capital investment, and fees have to be high enough to cover operating expenses without being too high for the market to bear.  

Because they offer a public benefit, Arnott writes, CCRCs are allowed to issue tax-exempt bonds to finance their operations. “Defaults on bonds issued by CCRCs are relatively rare,” she adds, “but the consequences can be catastrophic.” 

Because the entrance fees paid by residents are considered unsecured debt, Arnott explains, residents may lose part or all of the entrance fee if a CCRC fails. They may 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,” Arnott points out. 

With so much at stake, residents must examine a facility’s financial health before signing any contracts. “About 80 percent of CCRCs are considered nonprofit organizations and are required to make annual Form 990 filings with the IRS,” says Arnott. These forms make public a wealth of information about a facility’s financial health from year to year. Do your research. 

Other Aspects of CCRC Operations Bear Careful Scrutiny 

Again, we’re abbreviating some of Arnott’s additional observations about how to evaluate a CCRC, but they are extremely important. For that reason, we refer you once again to her original Morningstar article. But here’s a summary of her final points. 

For example: when evaluating food and other amenities, look past the glitzy tour. Check out the assisted living, nursing care, and memory care areas. Talk to current residents and sample multiple meals. If the CCRC offers a guest room for an overnight, take advantage of it. 

Make sure recreational activities reflect what you truly want and need. There’s no sense paying for facilities you’ll never use – but you don’t want buyer’s remorse if facility doesn’t offer a recreational feature you might have wanted, like an exercise pool or pickleball court. 

Arnott notes that you should also ask current residents about “whether a facility’s administrators actively seek out feedback from residents and are willing to act on it.”  At a minimum, she says, a CCRC should have a resident advisory council that communicates openly and often with the people in charge. 

Choosing a CCRC is a Big Commitment with Lifelong Implications 

Arnott ends her article with a note of caution. “In the best scenario,” she writes, “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.” 

She recommends that those considering life in a CCRC should visit the website of the National Continuing Care Residents Association. It offers a Consumer Guide, a more detailed Handbook on CCRC Finance, and a Model Bill of Rights for residents of CCRCs. 

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(originally reported at https://morningstar.com)