Photo Source: MorningStar Senior Living

The First Email

The first step on my senior living learning journey happened in January of this year. I was surprised to find myself bcc’d on an email from my client, Mrs. Li, to her daughter in law. The email read:

Dear Heather,

I looked in Atria New York City you mentioned now I heard that you will stay in New York after retirement. It starts from the active living then goes to assisted living and then "memory care." It sounds good. I asked for more info. It does not seem to require to put down a million dollars (like the one I just visited, [a community in Maryland], that they say they will return it at the end). It starts with a rental money of the smallest unit for $7,101/month. When I read the info they will send me, I will know more. It must have a catch to reserve.

Coming to me as it did without any context of the conversation that preceded it, this message triggered a flurry of questions in my mind. Is Mrs. Li thinking of moving to a retirement home? Where did this idea come from? Is she going to ask me to come up with a million dollars in cash sometime soon? Is she instead going to need $7,101 per month, plus annual rent increases, for the rest of her life? The biggest question to me, though, was why on earth Mrs. Li was worried about any of this.

I had known Noriko Li for over a decade, since the time her son, a business school classmate of mine, asked me to manage her investments. Now 75, she has been on her own for over twenty years after her husband died from complications following surgery. Originally from Japan, Mrs. Li retired a few years ago from teaching Japanese at an exclusive private high school in the Washington DC area. Since that time she has become one of the most active retirees I know. In addition to regular games of tennis and round of golf at her club, she has both studied and taught adult enrichment courses, traveled extensively around Europe, and in the winter of 2017 she climbed Kilimanjaro. Yes, that Kilimanjaro. After her seventy-third birthday. Petite yet powerful, Mrs. Li soft, precise speech and gentle manners belie a strength and energy of someone decades younger. She seemed about as unlikely a candidate for what I still thought of at the time as the old folks’ home as anyone I could imagine.

The fact that she sent me this email, however, meant that living arrangements in her later years were on her mind. A follow-up conversation revealed that she had a local friend who had recently lost her husband. That friend had put money down to move into an apartment being built near her current home by a company that had other senior living communities in the area. That sounded like a good idea to her, and she wanted me to help her investigate and determine how to fund her potential move.

Hunting in the Dark for Answers

At first, I did not know what to look for. Mrs. Li had provided me with a “Disclosure Statement”, a 28-page document mandated by Maryland state regulations. Inside was a pretty dry description of the facility, its management, some basic financial information that included financing plans to build the expansion into which Mrs. Li was thinking of moving, and descriptions of the types of care provided. Seeing what appeared to be substantial debt being raised, including “short-term fixed rate non-rated tax-exempt bonds” gave me pause. However enthusiastic Mrs. Li might be, if she was seriously considering unlocking $1 million of her net worth, effectively to fund a project backed by short-term bonds, I needed a lot more time to study the situation. In any case, anyone looking both to spend that much money and make that dramatic a life change would be well served to consider their options.

Buying Time with Thoughts of Food

Primarily to buy myself time to research, I asked Mrs. Li to think about the food. In the community she was considering, most meals were being included as part of the monthly service fee. Knowing Mrs. Li to be both an excellent and a meticulous cook of simple yet flavorful meals, I could imagine her frustration with a menu heavy with offerings like fish and chips and prime rib. When I insisted she both ask about and sample the food, she additionally reminded me that she eats only organic food. I did not want to see Mrs. Li find herself stuck paying for unwanted meals being provided by the community, and then paying again for groceries to prepare food she preferred for herself. She agreed to make a follow up appointment at the community she was considering and to get all her food questions answered to her satisfaction before making any commitments.

Conversations Begin Revealing Answers

Having bought a bit of time, I wanted to start asking questions of senior communities near me in Austin, just to see if I could begin to better understand the choices out there. A longtime friend knew of a neighbor who had a good experience living at Brookdale Senior Living’s Westlake Hills community, so I decided to start there. I had the good fortune to meet Erin Toepel, sales and marketing director for the community. When I explained what brought me to her office that day, she provided me with just the type of knowledge a beginner needed. I told her that my clients included some Austinites who might one day be in the market for the service offering her community provides, but that there was no sale to be made that day. She shared with me that she had once inherited a prospect that took twelve years before deciding to move in. This put me at ease that there would be no hard sell. The first thing Erin taught me that I have taken pains to remember: we call them senior living communities, not facilities. That choice makes so much sense - a facility sounds like a place one is sent to against one’s will, not a place where one would choose to live.

Buy-in Communities - High Entrance Fee, (Possibly) Never Move Again

When I asked Erin what she knew about the other senior communities in Austin, she asked me if I wanted to know about the buy-in communities or the rental communities. I responded as a newbie would: “What’s a buy-in community?” As Erin explained and I learned in more detail from further research, a buy-in community is one at which a substantial entrance fee, typically hundreds of thousands of dollars but ranging to levels over one million dollars, is paid by the community resident in exchange for an implicit or explicit pledge of lifetime care (explained in the contract you sign, which you should read carefully). Contracts vary, but most buy-in communities offer different entrance fee levels, some of which refund a portion (between 50% and 100%) of the entrance fee when the resident either moves out or passes away (in which case the refund is made to the estate). The community uses income from the investment of entrance fees to pay for building-related expenses in lieu of rent.

Buy-in communities are often, but not always, continuing care retirement communities (CCRCs) or Life Care Communities (LCCs) with multiple levels of care (independent living, assisted living, skilled nursing and memory care), usually on the same campus. In addition to the entrance fee, monthly fees are then assessed to cover expenses for food, services, activities and maintenance in the case of independent living, while costs associated with assisted living, which include services such as medication management; grooming, shower and toilet assistance; and escorts to meals are charged to those residents. These types of needs may be essential but do not strictly fall under the category of healthcare, and are not paid by Medicare. Many buy-in communities are operated by nonprofit foundations. Some foundations were purpose-built to provide senior living communities; many are associated with churches or religious orders.

Rental Communities - No Capital Commitment, Landlord Can Raise Rent

A financial arrangement in a rental community operates more similarly to an that of an apartment complex. A small fee analogous to a security deposit is collected, and a rental agreement will typically cover twelve months. Communities differ with respect to how monthly fees are organized, but often there is a monthly fee that covers the resident’s living space, the included number of meals and inclusion or exclusion of additional costs like utilities, internet and cable television, as well as scheduled transportation services for shopping and some medical appointments. Assisted living services like those described above are offered a la carte in some communities, while others that offer services in bundles based on the number of required hours per month irrespective of the individual assisted activity. I visited one community that arranged with an independent firm to offer personal assistance services to its residents. (I believe the community in question did this in order to avoid state licensing requirements were they to provide these services directly.)

The main drawback of rental communities in my view is the fact that rent increases are based on market rates and can be introduced at the sole discretion of the landlord. A resident who is unwilling or unable to pay increased rent would need to move. Most seniors and their families are probably not looking to move around like college students, so the community really has the upper hand in lease renewal negotiations.

Active Adult Communities, 55+ Communities Are Not the Same

None of the communities I have visited to date include so-called “active adult communities” that may offer additional activities and social opportunities beyond a typical apartment complex or housing development but fall well short of the service and staffing levels provided by an independent living or assisted living community. The way communities are named and described almost seems designed to confuse the consumer, as a story from my family illustrates. A couple of years ago, my father, George, and stepmother, Jeanne, sold their house in an Albany suburb to move into an apartment in a development that called itself an “independent senior community.” They were attracted by an affordable price and amenities like a swimming pool and a men’s social hour.

I was less engaged in this process at the time, and I was told about the move rather than asked for input or advice. Months after the move, they were more upset with the downsizing moving from a house to an apartment than they were happy with the activities and improved access to fitness facilities. Jeanne, fourteen years Dad’s junior and in substantially better health, was especially distressed about having given up her quilting machine to accommodate the move. Dad did not get the assistance he would have needed getting in and out of the swimming pool, and there was no staff facilitation around the men’s happy hour to make newcomers feel welcome. Not only did they move out, buying another house less than a year after selling their previous house, but the whole experience soured them on the idea of considering moving into any type of senior living community again.

Initial Impression of Differences Between Buy-Ins and Rentals

My firsthand experience visiting communities is still too limited for me to dare to generalize too broadly about buy-in versus rental communities, but I will say that I have not yet seen a buy-in community that did not appear luxurious, well-staffed, and pleasant places all around. The buy-in communities I have visited offered multiple levels of care on the same campus. The variability has been wider among rental communities. Some, like Brookdale Westlake Hills, from my observation seemed about as nice in the appearance of the common areas as the buy-ins I visited, although there were fewer options among floor plans than I saw in the buy-in communities. Other rental communities were notably less impressive. My stepfather, Al, and I visited one near Albany that was notable for its foul smell. After that visit, he told me for the first time that this was the type of place my maternal grandfather spent his last months of life. Unsurprisingly, he had refused any type of planning and was placed on an emergency basis.

Pro Tip - When It Comes to Senior Living, Do Not Generalize

Experiences like Dad had personally, and like Al had with my maternal grandfather, leave too many seniors with the wrong impression of what senior living communities have to be. According to the National Center for Assisted Living, there are 30,200 assisted living and other residential care communities in the United States. That figure does not include the large number of active adult communities like the one where Dad and Jeanne had their stressful, unpleasant experience. Assisted living community sizes range from as small as four beds to as many as 499. There really is an enormous range of choices, but homework and advance planning is essential to improve the probability of a happy result.

Other Key Tips - Think About Money, Needs, and Take Your Time If You Can

Thus far along my journey, I find myself generating an overwhelming number of questions about all aspects of senior living. By writing the articles in this series I hope to be able to categorize the types of questions and considerations one might face. Simplification, while a hopeful goal, may not be a realistic possibility.

Questions to keep in mind when considering a buy-in versus a rental community include:

• Are you able to fund the entrance fee for a buy-in community? Often, a buy-in entrance fee is funded by the sale of the resident’s primary home. For that to work though, you must own your primary home and either have it paid off or have a sufficiently small mortgage that what remains after selling will fund the entrance fee. If you cannot meet the bar for a buy-in, there are plenty of excellent rental options available.

• Do you have time to wait or is your need immediate? The best buy-in communities are often full and maintain waiting lists that can extend out for years. If your need is immediate, a buy-in community might not be feasible.

• What is it that you are looking for in a senior living community? Some people have immediate health needs that require skilled nursing or memory care, while others may be looking simply for a greater sense of connectedness and community while possibly wanting to relieve themselves of some of the burdens of daily life such as cooking and driving. Thinking clearly in advance about the problems you are trying to solve will help you evaluate each community’s suitability for your situation.

• Do you, or does your loved one, want to be able to stay in the same place as needs change? Some rental communities, like Brookdale Westlake Hills and the buy-in communities I visited, offer multiple levels of care in the same location. Many rental communities only offer a single level of care, which could necessitate a move when one’s health changes.

• What about cost increases with time? In a rental community, your costs are determined by the terms of the rental agreement. The community can increase rents and service fees upon renewal of the agreement, and these are determined by market forces, just as it would be if you were living in an apartment in your twenties. Moving is stressful at any stage of life, but in your eighties or nineties it seems like one would especially want to avoid this. Buy-in communities can also increase fees for services, but there is at least an implicit agreement in CCRCs that residents will not be put on the street because of inability to pay. About the best thing one can do is to ask the communities about their history of rent and fee increases, keeping in mind that history, while potentially a guide, is not a guarantee.

• Take the time to read any contract, and get any questions you may have answered to your satisfaction, before signing. This can be a highly emotional event, but taking the time to understand clearly the details at your community of choice will help avoid unpleasant surprises once you or your loved one is moved in. Communities have been known in competitive markets to promote lower monthly prices while simultaneously charging additional fees included elsewhere. Caveat emptor.