Comparing Buy-In vs Rental Models for Senior Living
One of the benefits of senior living is that is offers you more financial predictability than you might have at home. Instead of worrying about the next unexpected expense or repair bill, you know what to budget for each month. It’s wonderful peace of mind! However, not all communities have just the monthly fee. Different payment models are available and you’ll find each has its own pros and cons. Here’s what to consider.
Rental Payment Model
In this payment model for senior living you simply pay a monthly fee based on the level of care you receive such as independent living, assisted living or memory care. The cost increases as your care needs increase, however your monthly fee typically includes:
- Home maintenance
- Social activities
- Some utilities
- Emergency call monitoring
The main pro of the rental model is the flexibility of not being locked into a long-term contract yet still having access to multiple levels of care on the same campus as needed.
In a rental model, should you need a higher level of care down the road, the cost you’ll pay is a bit of an unknown. It depends on the rate at that time in the future, although residents do have an idea of what to expect.
Buy-In Payment Model
Continuing care retirement communities (CCRC) which offer at least three levels of care on one campus typically have a buy-in or entry fee payment model. In these senior living communities, you move into independent living initially and pay an upfront fee in addition to your monthly fee. This fee is considered a down payment for your future health expenses should you need assisted living or memory care.
The buy-in model gives you more control in the long term. If and when you need a higher level of care, your buy-in may give you priority access and is a way to set aside money to offset those more expensive care costs. What’s more, the IRS considers the buy-in a prepaid medical expense, so tax deductions may be available. Lastly, in some cases you have the option for up to 90 percent of your buy-in fee to be returned to your estate or designated beneficiary.
The main con is that the buy-in cost can run into six figures. Yes, that’s hundreds of thousands of dollars! This can be funded through the sale of your house, but realistically many seniors simply can’t afford it.
Choosing the Senior Living Payment Model That Works for You
Both the buy-in and rental model are good options. It really comes down to your needs and your budget. In the rental model our senior living community offers, you get many of the same perks of the buy-in model, yet retain complete control of your assets. If having money set aside for potential future care needs is more important to you, the buy-in may give you more peace of mind if you can afford the high fee.