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How to Judge the Financial Health of a Retirement Community

Full service retirement communities are growing in popularity. Commonly known as continuing care retirement communities, or C.C.R.C., these communities promise that its residents can stay for their entire life. Entrance fees can range from a few hundred thousand dollars to more than a million. But what happens if after you have lived there for 10 or 20 years and the owner goes bankrupt or has to raise it fees or reduce services? A recent N.Y. Times article: “7 Ways to Judge a Retirement Community’s Financial Health” offers several keys to consider when looking into the finances of a C.C.R.C. These include:

  1. Occupancy – 90% is a good indication that it is well managed.

  2. Rate increases – A rate increase above 3% or more can be a red flag.

  3. Debt rating - A Fitch Rating of below investment grade is a red flag.

  4. Profitability – Beware if its operating expenses exceed its revenue.

  5. Capital Improvements – Look at its financial statement and also look around the facility.

  6. Reserves – check the facility’s actuarial valuation to determine if it can meet its promises for lifetime resident care.

  7. Residents’ role - See if the residents have any role in the management of the facility?

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