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Comparing Rental Retirement Communities and Life Plan Communities: What is the Best Financial Option?

As the baby boomer generation transitions into retirement, the demand for senior living options has surged, presenting a complex landscape of choices for retirees and their families. Rental Retirement Communities and Life Plan Communities (also known as Continuing Care Retirement Communities or CCRCs) stand out as prominent options. Each offers a distinct approach to retirement living, with varying services, amenities, and financial models. This article delves into the differences between these two types of communities, their services, costs, and, ultimately, which might be the best financial option for retirees.

Understanding the Landscape

Rental Retirement Communities

Rental Retirement Communities offer housing to seniors on a rental basis without requiring a large entrance fee. These communities often provide a range of amenities such as dining services, housekeeping, maintenance, and some level of assistance with daily living activities. The flexibility of not being tied down by a long-term financial commitment is a significant advantage, allowing residents to preserve their capital for other uses. However, it's important to note that while monthly costs might initially seem lower, they can increase over time, especially if additional care services are needed.

Life Plan Communities

Life Plan Communities, on the other hand, typically require a substantial entrance fee in addition to monthly charges. These fees guarantee housing for life and access to increasing levels of care, from independent living to assisted living and even skilled nursing care, all within the same community. This model offers peace of mind regarding future healthcare needs and potential costs. According to a 2020 report by the National Investment Center for Seniors Housing & Care, the average entrance fee for a Life Plan Community (CLC) in California ranges from $100,000 to $1 million, with 2022 seeing an average of $402,000 (with higher averages reported in the major metropolitan cities like San Francisco, Los Angeles, and San Diego).

Comparing Services and Costs

The choice between a Rental Retirement Community and a Life Plan Community often boils down to the services offered and the associated costs. Rental communities provide flexibility and lower upfront costs, appealing to those who are healthy and wish to maintain a more liquid financial portfolio. In contrast, Life Plan Communities offer a continuum of care that can be particularly valuable for those with chronic health conditions or concerns about future healthcare needs.

From a financial perspective, the predictability of costs in a Life Plan Community can be a significant advantage. A study by the American Seniors Housing Association highlights that while the upfront costs are higher, long-term predictability can offer better financial stability, especially considering rising healthcare costs. Conversely, the costs in a Rental Retirement Community can be more unpredictable, particularly if one's health care needs increase significantly.

Making the Best Financial Choice

The decision between these two options is not purely financial; it also involves considering one's health, lifestyle preferences, and the desire for predictability in costs. A Life Plan Community might offer a more secure option for those with significant savings and concerns about future healthcare needs. However, a Rental Retirement Community could be more appealing for individuals who are healthier, prefer flexibility, or have concerns about tying up a large portion of their assets.

Conducting a thorough financial analysis, considering current costs and potential future expenses is crucial. Consulting with a financial advisor specializing in retirement planning can provide valuable insights tailored to one's financial situation and goals.


Retirement living options are diverse and include Rental Retirement Communities and Life Plan Communities, each with its own advantages and considerations. Choosing between them requires considering a complex interplay of financial, health, and lifestyle factors. Retirees can make an informed decision by understanding the differences in services, costs, and financial implications of each. 

It is important to stay informed and seek professional advice as the retirement living industry continues to evolve. Ultimately, the best financial option will depend on individual circumstances and priorities, so making a well-informed decision is crucial for achieving one's long-term retirement goals.

What steps do you plan to take to ensure a comfortable and financially secure retirement?

If you're looking for professional retirement and tax planning assistance, Rachel Scott, MBA, EA, from VSA Accounting Services, can provide expert advice and help you navigate the complexities involved in making this crucial decision. As you consider your retirement living situation, weighing each option based on how it aligns with your financial goals and lifestyle aspirations is essential. 
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult a qualified financial advisor and tax advisor to discuss your financial situation and goals.

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