The CCRC Entry Fee Is Refundable on Paper. Residents Say the Fine Print Is Where the Money Goes
That six-figure entry fee stamped refundable on your CCRC contract carries conditions buried deep in the fine print, and what actually comes back to your family years later can look nothing like the number you signed for.
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Retirees who sell the house and use the proceeds to move into a continuing care retirement community (CCRC) usually take comfort in one word on the contract: refundable. The label makes a six-figure purchase feel like a recoverable deposit. That gap matters more now, as NBC News reported on September 27 that senior living bankruptcies have “robbed families of their life savings”. The math shows what a refundable entry fee returns in practice and how much additional portfolio income a couple needs.
What a 90% Refund Actually Returns
Refund levels at entrance-fee communities run anywhere from 25% to 100%, and 90% refundable contracts have become common at newer campuses. The same industry analysis notes that a stressed community’s board “has the option of reducing the refund for new residents.”
Timing is where residents can run into trouble. Many contracts pay the refund only after the unit is resold to a new resident. Arizona lawmakers proposed a bill requiring refunds when the unit is re-leased, or within one year, whichever happens first. That bill came after the bankruptcy of Friendship Village of Schaumburg, Illinois’ largest nonprofit retirement community.
A hypothetical $500,000 fee at 90% refundable promises $450,000 back. If the refund comes 15 years later with 3% inflation, it’s worth only about $289,000 in today’s dollars. Meanwhile, that $500,000 isn’t producing roughly $20,000 a year if you draw 4%. The refund belongs in the estate plan, separate from retirement income.
Pricing a Couple’s Life Inside the Contract
Entry fees generally range from $80,000 to $750,000, and monthly fees typically run $2,500 to $5,000 per person. This example assumes a couple pays about $6,000 a month. Fee increases matter more than the starting rate. At 4% a year, $6,000 becomes about $10,800 in 15 years. A life care contract protects against skilled nursing costs, which one community quoted at $11,000 to $17,400 per month.
| Annual line item (couple) | Amount |
|---|---|
| CCRC monthly fees | $72,000 |
| Medicare Part B ($202.90/month each) | $4,870 |
| Medigap and Part D estimate | $7,000 |
| Car, travel, gifts, personal spending | $15,000 |
| Income tax on withdrawals | $10,000 |
| Total | $108,870 |
The SSA’s average for an aged couple both receiving benefits is $3,208 a month, or $38,496 a year. That leaves a $70,374 gap. At a 4.5% withdrawal rate, which fits a couple moving in around 75, the gap requires about $1.56 million. At 4%, it requires $1.76 million. Both figures are on top of the home equity that covers the entry fee. Home prices help on that side: the Case-Shiller national index sits at 337.3, in the 90th percentile of its past year. For couples who haven’t started Social Security yet, delaying the higher earner is one option to consider. The larger check carries over to the survivor, who will still owe a single-occupancy fee.
Refund Feature Quietly Costs a Tax Deduction
Many buyers miss how the refund choice affects taxes. A share of CCRC fees, typically 30% to 45%, counts as prepaid medical care and can be deducted. That applies only to the money the community keeps. Refundable dollars work like a loan and don’t qualify.
Assume a 40% medical share, so on the $500,000 refundable contract, only the $50,000 nonrefundable portion counts, yielding a deduction of $20,000. If the same community offers a nonrefundable plan at $350,000, the deduction in the year of entry is $140,000. Even after the 7.5% of AGI floor, that deduction can offset a large Roth conversion or a big IRA withdrawal at little tax cost, a strategy Kiplinger has highlighted for CCRC entrants. Over the years, the refundable plan protects heirs. The nonrefundable plan cuts lifetime taxes and frees up liquidity.
Number That Makes the Contract Work
A couple can make this scenario work with home equity that covers the entry fee outright, plus about $1.6 million to $1.8 million invested. The scenario assumes withdrawals of 4% to 4.5% from a portfolio built to keep up with fee increases near 4% a year (we made the full case for an income-first alternative to the classic withdrawal rule in a free report). The scenario leaves the refund out of the retirement plan entirely and assumes it shows up late and is worth less.
Before signing, read the reoccupancy clause, the community’s audited financials, and the state’s refund rules. Then price the nonrefundable option against the deduction it brings. Having the unit outright protects you less than a contract with a solvent operator and enough cash to pay rising fees for 20 years.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
