I was reading an informative New York Times article by Peter Finch regarding some legitimate concerns regarding moving into a retirement home or into a continuing care retirement community (CCRC) and thought I’d share!
What if, after all your careful planning, your retirement community has some kind of financial failure? For example: What if the community you chose, goes bankrupt, and it's managers are put in jail. What would you do? To try to avoid that scenario from even happening, below are some of the items in Peter Finch’s article that he suggests you should focus your due diligence on “BEFORE" moving or signing on the dotted line:
• Occupancy: If 90 percent or more of a home’s rooms are full, and have been for the past few years, that suggests it’s doing something right. This is especially important at CCRCs promising refunds, because you (or your heirs) often don’t get the money until someone has moved into your old unit.1
• Rate increases: Lately, most CCRCs have been increasing their monthly fees by about 3 to 3.5 percent a year. If you see anything above that, or well below, ask for an explanation.1
• Debt rating: Many communities issue bonds to fund improvements, and Fitch Ratings evaluates them. Ratings of AAA to BBB should bring a measure of comfort.1
• Profitability: You want a community that brings in more cash than it spends. Pay attention to cash operating expenses as a percentage of cash operating revenue.1
• Capital improvements: Is your community spending enough on upkeep? Find the line for capital spending on its annual statement and compare this with the line showing depreciation. Combine that information with a visit to the campus: Does it look outdated?1
• Reserves: Find out if the CCRC performs a regular actuarial valuation, which will give you a sense of whether it has the reserves to meet its promise of housing and health care for the rest of your life.1
• Residents’ role: How involved are residents in making major financial decisions? Do they have a couple of seats on the board, or at least an active advisory council?1
1. Source: New York Times article by Peter Finch
http://www.heraldtribune.com/entertainmentlife/20180317/before-that-last-move-do-your-diligence
That original source web link is no longer available.
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