Living it up in retirement (cont.)

The CCRC has a vested interest in your being able to foot the bill years down the road, especially if it's a nonprofit that promises not to kick out residents who run out of money. So you can expect the staff will run your numbers. Generally, they want to see one to two times the entrance fee in assets and one to two times the initial monthly payment in monthly income, says Ziegler's Brod. Even so, have a financial adviser (look for one at napfa.org) help you decide if a CCRC in general, and what plan in specific, makes sense for you. One important note: If you have a long-term-care insurance policy, it may be redundant with some contracts. Ask the CCRC how such a policy would change your payment, if at all.

Most residents sell their houses to pay the entrance fee. But sluggish home sales mean fewer people have been able to come up with the money, particularly in hard-hit real estate markets such as Tampa and Sacramento. Result: Existing CCRCs now have an average 10% vacancy rate, down from 6% in early 2007, according to NIC.

That means that you likely won't have to spend much (or any) time on a waiting list - and some places are even discounting fees, says Michael Hargrave, a vice president of NIC. Try to negotiate these. It also means that if you can't sell your house, they might let you pay the entrance charge in installments, or only when you succeed in selling. You may also be able to get reimbursed for interest and fees for a bridge loan.

If your parents hate the place and decide to bolt, they'll usually get only a portion of their entrance fee back - if they get any at all. (An exception: Erickson returns 100%, as soon as the apartment is reoccupied.) Some return only a certain percentage, which declines every month. Others will give refunds only if your parents hand over a larger-than-usual entry fee. For example, a community might charge $450,000 for a contract providing no refund, $600,000 for a contract that returns 50%, or $800,000 for 90%.

Since they'll lose money by leaving, your parents should do plenty of research to make sure they'll be happy. Have Mom and Dad eat meals there; stay overnight. Ask current residents what they do and don't like. Closely read the contract for rules, which can range from when dinner is served to whether they can hang Christmas lights. Ask how decisions are made. At some facilities the provider can require a move to a higher care level even if the resident disagrees, says Linda Nelms, a management professor at UNC-Asheville who studies CCRCs.

Unfortunately, the same refund policies typically hold when residents die. So those thinking of moving in should be sure this jibes with their estate plans and desires to leave an inheritance.

Some continuing-care communities offer great care; some don't. And price is not an indicator. You should:

Verify licenses: Go to snapforseniors.com and click on License Types Reference to see if your state issues a license for CCRCs. If it does, the community you're considering should have it. If not, the community should have both an assisted-living license and a skilled-nursing license, says Eve Stern of snapforseniors.com. You can verify both on the site.

Check nursing home ratings at medicare.gov: About 90% of facilities are rated here. Not everyone agrees with the ratings, but generally, the more stars the better (five is highest). Use the site to compare homes near you on such factors as quality, staffing and inspection reports.

Call your local long-term care ombudsman: This state-employed consumer advocate - whom you can find via ltcombudsman.org - investigates complaints on CCRCs and can tell you what's been filed on the ones you're considering.

Look for accreditation: The Continuing Care Accreditation Commission reviews CCRCs for quality of care and financial stability. Facilities that get the stamp are listed at carf.org/aging. Scrutiny is voluntary, however (CCRCs have to pay for it). So while a lack of accreditation doesn't necessarily indicate poor quality, says Elinor Ginzler, senior v.p. for livable communities at AARP, having it is a good sign.

Visit the higher-level care facilities: "I've had clients who moved out of CCRCs because although they were fine in independent living, their families weren't satisfied with the quality of care in assisted-living or nursing," warns Barbara Steinberg, a financial planner in Lincoln Park, N.J. Ask about staff turnover, too - keeping more than 80% of employees is one of the best indicators of quality care, says Lauren Shaham of the American Association of Homes and Services for the Aging.

Before your parents hand over a big wad of dough, be sure you feel confident about the company's financial solvency. The chances of Mom ending up homeless are small: Only a handful of CCRCs have filed for bankruptcy in the past decade, and in most cases the facilities restructured debt or were acquired by another provider, says Ziegler's Brod. But even that could cause stress and a change of services.

Accreditation is a good sign, as it means the community has met certain financial standards. Regardless of accreditation, ask about the history of rate increases. Jumps well above cost of living and medical inflation could indicate cash-flow problems. Also ask about occupancy rates over the past few years. Steady or increasing rates are a sign of a healthy organization, says Brod. Ask your planner to dig into public documents such as debt ratings and tax forms. It's worth the effort to make sure your parents will be secure and happy for the rest of their years.

Veronica Crews contributed to this article.

Need help with a financial dilemma? In an upcoming issue, Money magazine will be answering reader questions. Email money_letters@moneymail.com. 

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