Ask Terry Questions Long Term Care & Retirement Community

Long Term Care & Retirement Community

By Terry Savage on January 12, 2024 | Financial Planning / Retirement

My wife and I are considering a move to a retirement community, I am 76 and my wife is 74. It’s a community offering continuation of care (independent, assisted, memory) as needed. We also have long term care insurance. One of the units we are considering has an entrance fee of $527,000 @70% refundable to our estate or $346,000 @ 0% refundable. We would sell our present home (Zillow estimate $381.00) and have assets that we could use to pay the $527,000.

If we kept the $181,000 difference in entrance fee in our investments, is there a formula (or software) to estimate how long we would need to live so that our estate would realize growth to match the $368,000 (70% of $527,000)?

Thank you,

Terry Says

So I don’t think you’ve taken into account some other issues regarding this plan. In recent months, we’ve seen several of these communities file for bankruptcy. If you read the fine print, the money isn’t held in escrow for you. It is put into the general funds of the community and used for improvements, staffing etc. The fine print of these contracts typically says the money will be refunded IF AND WHEN they can find someone to move into your apartment and make a new deposit!

That formula worked for a long time — but during the pandemic, no one wanted to move into a community setting. People who died, or moved out, couldn’t get their money back. And one or two communities even filed for bankruptcy to escape these payback obligations!!

I wrote a problem about how these communities might structure their options. Please read it here.
I’m not sure you need this type of maximum care situation since you already have Long Term Care Insurance.

And let me say this is such a multi-dimensional calculation that I cant even give you an answer, assuming you do make this choice.
First, you have to assume your investment returns in the future for the money you DON’T tie up in this situation. That involves calculating your risk tolerance. And choosing those investments. If you don’t take risk, you’ll buy T-bills and likely keep up with inflation. If you buy stocks, it all depends on what the market does in the next 10 years — and you could be subject to losses, if you need to take the money out to live on.

You seem to be worried about leaving money to your heirs. But the real concern is “running out” of money in retirement. That depends a lot on your other income, and how well it will keep up with inflation re the things you must still buy even if in a community — some food, healthcare, auto, etc.

And liquidity is also a concern. Just on principle, I hate to see people tie all their money up in an “investment” that can only be reached after their death (and in this case, after someone else takes their place).

In other words, you need some sophisticated –and trusted — overall financial planning.
My I suggest the fee-only advisors found at — They can do the sophisticated calculations, and bring up the other issues involved in making this decision.

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