Feds Study Retirement Community Risks

My wife and I have no children so when we started planning for our retirement CCRCs seemed like a sensible decision. I investigated many thoroughly and I kept coming up with two problems that have deterred us from buying into any of them.

1- None of them guarantee that the monthly fee will remain fixed. This is a huge issue and I really wonder if many of the residents have truly considered the risk that they are under. Personally I would prefer knowing up front that the fee is scheduled to rise at a given rate ( say 2% per year) to keep up with inflation. At least that way I could calculate my future costs. But the promises made by CCRC salespeople are ridiculous. Typically you hear "Our company is so strong it would never go under." Yeah, right like Lehman Brothers for example. Or you hear other vague promises that they want to care for you and would never raise your monthly fee. But contractually they could literally do whatever they want with no boundaries whatsoever. Do these companies think we are dumb?

2- None of these companies have arranged for any type of financing to be available to new residents. They all expect you to pay the initial payment in full. That might mean you are plunking down your entire savings to pay the entrance fee. All of the companies seem much more concerned with what will be left for your heirs. If they are going to give back 90% of the fee, at some point in the not too distant future, aren't there banks out there that would be interested in loaning new residents money in return for a contract that guarantees them that 90%? (Or some appropriate portion of it?) Seems like there would be numerous ways for a bank to structure a loan that would make them a lot of money. It would be a mortgage of sorts.

If the CCRC industry addressed these loop holes there would probably be a lot more buyers.

David Lee of NY 4:55PM February 03, 2011