Understanding the Costs of Senior Living

Last Updated: March 25, 2019

If you, a parent or senior loved one is contemplating a move to a senior living community, affordability factors heavily into the decision-making process. Communities can estimate the overall costs of specific living arrangements by using factors like a senior’s age, assets and monthly payments from Social Security, pensions and more.Understanding the Costs of Senior Living

Learn more about the costs of senior living so that you and your family will be prepared when the time comes to begin your search.

The Top 3 Types of Senior Living Costs

There are three main costs of senior living that your family should be aware of:

1. Entrance fee versus month-to-month costs.

There are a number of senior living options available to older adults, from independent living to skilled nursing. With a wide range of community styles and health care offerings, comes a wide range of payment structures.

Some communities offer a month-to-month residence and service agreement, which means you could rent an apartment and receive amenities for a monthly fee. These agreements are common among communities that offer higher levels of care such as assisted living or memory care.

Continuing care retirement communities, which offer multiple levels of care all on one campus, tend to use an entrance fee-based payment structure. The initial entrance fee is akin to a down payment and must be paid in full before you enter the community. Residents who pay an entrance fee then typically encounter smaller monthly fees than residents who choose the month-to-month option.

Entrance fees are largely based on the type of apartment that’s selected — smaller units carry less of an entrance fee than larger ones — as well as other factors, such as property views and meal plan options. The fees can vary from the price of a mid-size car to $1 million-plus.

There are usually two types of entrance fees:

    • A non-repayable (or fully amortized) entrance fee tends to cost less, but generally, there is no refund given after five years in the event of a resident moving out or passing away
    • A repayable entrance fee typically carries a larger price tag than its counterpart — but offers a 75% repayment
      • That means that if a senior moves out or passes away at any time, his or her estate will get back three-quarters of the entrance fee.

A move to senior living (regardless of the type of community) can often be funded by the sale of a home. Entrance fee-based communities can offer residents more value for their savings than just lower monthly fees — they also tend to contribute to feelings of pride and empowerment among residents who feel a sense of ownership.

2. Health care costs.

Continuing care retirement communities (CCRCs), are a type of senior living community that allows residents to stay in one community, even as health care needs change or increase.

If you move into a CCRC when still in good health and while you are living independently, you can budget for the care you’ll need in the future because the prices remain largely predictable. Many communities with entrance fees guarantee the same monthly rate, with increases based only on inflation, no matter what level of care you advance to. Others keep the same monthly rate for a predetermined amount of time in an assisted living or skilled nursing setting before increasing based on the cost of care.

Communities like these also give residents choices in their health care needs. For example, a resident transitioning to assisted living may be able to receive services while remaining in her current apartment until her choice of accommodations opens up. If a resident experiences an injury and needs help for a short period of time (perhaps getting out of bed or showering), communities may offer temporary care options that residents can receive in their own residences for a smaller fee than what would be assessed at a different community or in a higher level of care.

Many senior living communities — especially nonprofit communities — offer benevolence programs and subsidies to qualifying residents to ensure seniors who legitimately spend through their assets because of the cost of health-related services remain cared for.

3. Monthly and service fees.

In addition to the initial fee, senior living communities charge monthly fees, which encompass day-to-day expenses such as food, household maintenance and transportation, etc. These tend to be lower in cost for entrance fee-based communities than month-to-month communities and they fund the bulk of the offerings that make senior living so rewarding.

Outside of the monthly fees, there may be other fees based on specific services. For example, services at the on-site beauty salon, extra housekeeping and laundry services may be assessed a separate charge.

About the Author

Jim Distasio of HumanGood.org, formerly, be.group, is one of California’s largest nonprofit providers of senior living communities dedicated to helping residents discover new ways to embrace life’s possibilities and new options for exploring their potential.

Senior Advisor's knowledgeable writers blog about senior care services, trends and more.

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