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Kendal at Oberlin Blog

Top 5 Financial Questions to Ask a Prospective Life Plan Community

Posted by Molly Kavanaugh on Aug 16, 2018 9:00:00 AM

Older adult woman asking a question at Kendal at Oberlin Retirement CommunityFor many of us, buying a starter house years ago meant taking a crash course in homebuying  101. Mortgage points? PMI? Title insurance? Closing costs? We had a lot to learn, but most of us passed the test and made a sound financial decision.

Fast forward 40 or 50 years, and now many of us are ready to take another test and we have new terms to learn. Moving to a life plan or continuing care retirement community is a major financial decision, and with nearly 2,000 continuing care retirement communities in the United States, financial stability can vary greatly.

Here are 5 key financial points to consider when choosing a life plan community.

1. Occupancy Trends

Occupancy rates fluctuate within a community, but the main goal is to stay full. Occupancy at retirement communities is affected by the economy and house sales, both of which are currently strong.

That’s translated into good news for CCRCs (life plan communities), which have a healthier occupancy rate than senior housing that does not offer a full continuum of care. And non-profit CCRCs are doing even better than their for-profit counterparts, according to National Investment Center data.

“We know that, while the not-for-profits slowed down post-recession with developing new community locations, they spent a good bit of time reinvesting in their current campuses,” says Lisa McCracken, senior vice president of senior living research and development at Chicago-based investment bank Ziegler.  “I think that is why we’ve seen occupancy rebound, and we know that not-for-profit CCRC occupancy is 5% above the for-profit owned and managed CCRCs.”

The current committed occupancy rate of the nonprofit Kendal at Oberlin is 95%.


You might also like: 5 Questions to Ask Before Joining a Life Plan Retirement Community


2. Quality Improvement Accreditation

More than 800 standards, with one section specifically focused on finances, are measured before gaining voluntary accreditation by CARF™ International. Of the almost 2,000 continuing care retirement communities in the United States, only about 200 are accredited.

“CARF accreditation signals a service provider's commitment to continually improving services, encouraging feedback, and serving the community,” according to the independent, nonprofit accrediting organization.

Kendal at Oberlin was re-accredited for a 5-year term, through June 2022. This is its fifth accreditation in 24 years. The community was recognized as having exemplary performance in its financial management, which operates at or above the 75th percentile for “days cash on hand” and “cash to debt ratio.”

Here is a current list of accredited life plan communities.

3. Balance Sheet

The balance sheet shows how much cash and investments are available. It’s important to see what funds have been set aside for specific purposes.

For example, Kendal at Oberlin has a strong balance of $43.5 million in unrestricted  cash and investments. The Residents Assistance Fund has a current balance of $6 million. Kendal has made a promise to its residents that it will continue to support them if, through no fault of their own, they outlive their financial resources.

Another item to review on the balance sheet is the community’s debt. The “cash and investments to debt” ratio is usually determined by the age of the community, days of cash on hand and debt service. A ratio of more than 50% is desirable. Kendal’s ratio is 174.55%.

4. Actuarial Report

A retirement community should conduct periodic financial evaluations through an actuarial report to ensure pricing is appropriate so that future needs of residents are met.

For instance, Kendal at Oberlin’s actuary:

  • Assesses the sufficiency of current entrance and monthly fees;
  • Evaluates the sufficiency of current cash reserves;
  • Quantifies the overall actuarial health of the organization;
  • Provides consultation prior to adjusting entrance fees.

One of the most important indicators is the actuarial funded status. This status represents the portion of liabilities (future expenses) covered by assets (future monthly fees and reserves). A funded status greater than 110-115 % is preferable.

5. Decision Makers

Brad Breeding, president and co-founder of myLifeSite, a company that provides resources about life plan communities, says it’s important that members of the management team and board have experiences in a variety of business backgrounds, including healthcare, insurance, real estate and accounting.

An active resident council that has a voice in the annual budgeting process is also a plus.

“By giving residents a voice in the budget process it not only helps provide another layer of financial oversight but also gives the residents a sense of inclusion, which is ultimately important to the overall culture and well-being of the community,” he says.

To learn more about making this important financial decision, myLifeSite has put together a free consumer booklet entitled “Guide to Evaluating the Financial Viability of a CCRC,” which you can download here.

Choosing a Retirement Community: Other Factors to Consider

Of course, financial health is only one piece of the puzzle when it comes to choosing a retirement community. Once you’ve determined a community is financially stable, it’s time to explore the lifestyle, amenities and services. To help, we’ve compiled 10 tips for choosing the best retirement community for you.

Managing Your Retirement Finances button

Molly-KIn the past, Molly Kavanaugh frequently wrote about Kendal at Oberlin for the Cleveland Plain Dealer, where she was a reporter for 16 years. Now we are happy to have her writing for the Kendal at Oberlin Community.

Topics: Retirement Community

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