Retirement Communities Can be a Risky Investment, Select Wisely
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Retirement Communities Can be a Risky Investment


As the Baby Boomer generation continues to age, more Americans are entering continued-care retirement communities. In response to this trend, the Government Accountability Office recently issued a report saying that these facilities, dubbed CCRCs, can pose “considerable” financial risks.

These retirement facilities have become a multi-billion-dollar industry, as more and more senior citizens are drawn to their security, comfort, and lavish amenities.

According to the American Association of Homes and Services for the Aging, at least 745,000 seniors live in CCRCs, and the number is expected to rise as Baby Boomers reach their golden years.

Despite CCRCs’ relative popularity, the GAO report warns that consumers need to treat them as major investments, rather than just a living place. In fact, its recent report says that state regulators, which typically have oversight over CCRCs, need to be more “vigilant in their efforts to help insure adequate consumer protection for residents.”

Potential Problems Include The Company Filing for Bankruptcy

Some recent high-profile bankruptcy filings of major CCRCs show that the economic downturn has trimmed the number of potential residents. Most entering residents have to pay a substantial deposit when they move into a CCRC. Sources indicate that the average entrance fee last year was a whopping $240,587.

While this deposit is usually returned to the seniors’ family once he or she dies or leaves the facility, it poses a significant barrier to entry, and comes on top of monthly fees. Fees vary depending on the level of service required by each individual, but they often amount to substantial costs, as well.

These monthly fees, especially from seniors who live in the independent sections of CCRCs, help subsidize the treatment of residents who require full-time care. When the residential numbers take a dip, and the collected fees drop, CCRCs can face enormous financial pressures.

If a CCRC fails, residents and their families may lose their large initial deposits, or they may face higher fees than they expected.

Before You Choose a Retirement Home

While CCRCs can be a risky investment, they are still extremely popular among aging Americans.

Before you choose a retirement community for yourself or a loved one, do some basic research on potential facilities. CARF International, a group that accredits retirement communities, has a handy consumer guide at its website. In addition, the American Association of Homes and Services for the Aging has a valuable guidebook at

In addition to researching the proper questions to ask, you should also check out the potential facility’s financial statements. Make sure that the facility has at least 300 days of cash on hand, which, according to CARF International, is the industry average.

Further, facilities that depend on investment income, entry fees, or donations may have an unsteady cash flow.

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