How best to model a future move to a Continue Care Retirement Community to make sure that such a move is financially feasible? I.e. to compute current spending level assuming such a move is desirable in the future. Involves: Sale of home, payment of entrance fee, payment of monthly fee (in lieu of other spending on housing, food, etc. Also involves: satisfying financial requirements for admission (typically, some level of assets and income.


I suggest selling your home with $0 rent, $0 market value and $0 expenses for the replacement home. Create a special expense representing the buy-in. Your discretionary income will be large, relative to owning a home, but includes your housing costs.

Alternatively, record the monthly fee as rent, in which case your discretionary spending will be low but a lot of what is normally included in that is part of the monthly fee. The latter approach may, in fact, be more representative, because the monthly fees are not discretionary.

The total income and net worth reports will reflect assets and income required to meet a means test, after paying your buy-in fee.

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dan royer's picture

Thanks Chris. I agree.

I'm trying to do the same thing as Chris except I've already sold my home; we currently rent. I've created a Special expense for the entry fee at a future date and am using Rent to pay the monthly fees, at that date. Is there a better way to model this?

dan royer's picture

The Chris approach seems right to me. As Chris points out, it's really up to you what you want to consider "discretionary" vs off-the-top. If you want it to be an off the top like housing, put the expense in Special Expenditures. If you want it to instead show in your discretionary, just don't report it as a special expenditure but then you have to look at a large discretionary spending number and remind yourself what expenses must come out of there.

Thanks, Dan. Looks like the Special expense approach will work for planning purposes and it gives me a more realistic look at Discretionary Spending.

I expect that this works well enough except for the tax aspects. Substantial portions of both the substantial entry fee and annual fee are considered prepaid medical expenses and hence are deductible (if over the threshold). The magnitude of the fees and the medical expense portion of the fees varies with each CCRC but, as a rough guide, think 70% of the $300,000-$500,000 entry fee and 30% of the $60,000-$70,000 annual fee. What is the best way to treat this tax benefit?

dan royer's picture

If the use of Special Expenses is working, you can designate a special expense as a non-tax event or as a tax-deductible expense. So I guess you'd have to break those out.


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