Personal Finance

The Retirement Community Wanted $400,000 Up Front, ‘90% Refundable.’ Families Learn What That Really Means When They Ask for It Back

The brochure says 90% refundable, and families believe it until they ask for the money back. What the contract actually promises lives on a very different page.

By Jake Fitzgerald
Published September 3, 2026, 8:04pm ET · 4 min read

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Three people are seated at a wooden table in a bright, modern room. On the left, a woman in a white top and glasses gestures with a pen towards a clipboard, presenting documents. To her right, an older Asian woman with long grey hair and a striped shirt looks worried, resting her chin on her hand. Next to her, an older Caucasian man with a beard, glasses, and a brown sweater covers his forehead with his hand, looking deeply stressed. Papers, a laptop, and an envelope are scattered on the table.
A couple expresses distress and confusion while reviewing complex financial documents with a representative, likely discussing the nuances of retirement community entrance fees and contracts. © Inside Creative House / iStock via Getty Images

Here is the sentence buried on page 34 of the contract that families miss: the 90% refund on a continuing care retirement community entrance fee is typically not paid when the resident dies or moves out. It is paid only after the unit is re-occupied by a new resident who has paid their own entrance fee. In a slow market, that wait can stretch for years.

That is the gap between the brochure and the closing documents at a continuing care retirement community, or CCRC, also sold under the friendlier label “life plan community.” The $400,000 check writes fast. The refund check writes on someone else’s schedule.

What the $400,000 Actually Buys

A CCRC bundles independent living, assisted living, and skilled nursing on one campus, with the promise that a resident can age in place. The entrance fee buys the right to live there and, depending on the contract, some level of prepaid future care. It does not buy the apartment. Residents also pay a monthly service fee for meals, maintenance, and services, and that fee continues for life and rises over time.

Three contract types drive almost all of the financial risk:

  • Type A (life care): highest entrance fee, but the monthly fee stays relatively stable even if the resident moves to assisted living or skilled nursing. This is genuine insurance against catastrophic care costs.
  • Type B (modified): a set number of covered care days, then the resident pays market rates.
  • Type C (fee-for-service): lowest entrance fee, resident pays full market rate for care when they need it.

A Type C contract with a “90% refundable” entrance fee looks cheap on the front end and can be brutal on the back end if a spouse needs memory care for five years.

What “90% Refundable” Really Means

Read the refund clause with a pen in hand. Four things trip families up:

  • Re-occupancy trigger. The refund usually is not owed until the unit is re-sold. Estates wait.
  • Original dollars, not appreciated. The refundable percentage is calculated on the original entrance fee, not on an appreciated figure, so inflation erodes it. A refund promised on a $400,000 fee paid in 2026 pays back in 2040 dollars.
  • Front-loaded amortization. Many contracts amortize the non-refundable portion over the first months of residency, so a resident who leaves in year one can lose far more than 10%.
  • Queue position. Ask how many refunds are currently outstanding and how long the current wait is.

Solvency Questions Nobody Wants to Ask

The refund is an unsecured obligation of the community. If the operator enters bankruptcy, residents and estates are general unsecured creditors, standing behind bondholders and secured lenders. Residents have lost substantial entrance fees in CCRC bankruptcies. State regulation of CCRCs is uneven, and not all states require meaningful reserves or disclosure. Pennsylvania, Florida, and California police the sector more actively than most; a handful of states barely touch it. Ask which agency regulates the community and what it files publicly.

Where Medicaid Enters the Picture

Medicaid is the state-federal program that pays for custodial nursing home care after a resident spends down. Medicare, the federal health program for those 65 and older, does not. A refundable entrance fee can be treated as an available asset for Medicaid eligibility purposes, and paying one can raise transfer and lookback questions under the 5-year rule.

A $400,000 refundable deposit can sit on the Medicaid asset ledger even though the family cannot access the money. What happens if a resident outlives their savings? Some communities maintain benevolent or charitable funds, but these are discretionary and not a guarantee. They are a hope, and families should not rely on them.

Due Diligence Before the Check Clears

Before signing, families that avoid surprises tend to ask for:

  • Audited financial statements for the last three years.
  • The current occupancy rate and the current wait time on refund payouts.
  • How many refunds are currently outstanding, in dollars.
  • The reserve ratio and any debt covenants.
  • Whether the state regulates CCRCs and what disclosures it requires.
  • An elder law attorney reading the contract before signing.

Clark Howard points out that there are continuing care retirement communities that do not charge an entry fee at all, and while they lack the fancy facilities, families avoid writing the six-figure check up front. That is a legitimate alternative worth pricing against the refundable-deposit model.

Type A life care contracts at well-reserved communities can be a rational hedge against a decade in memory care. The phrase “90% refundable” does work the contract never promised.

Contact [email protected] for any questions or corrections.

Jake Fitzgerald
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