How Retirement Communities Work

How to Tell Them Apart and What They Cost

Choosing a retirement community is a big decision. Your choice will affect your—or your loved ones'—finances, quality of life, and in many cases, health and longevity. Here’s an overview of the four main types of retirement communities, how they work, and their approximate cost.

Key Takeaways

  • Independent living facilities are for people who do not need specialized medical care or daily living assistance.
  • Assisted living facilities are for those who don't need care as extensive as provided by nursing care facilities but need some assistance with daily activities.
  • Nursing homes are for people who need extensive medical care.
  • Continuing care facilities provide a hybrid of care services, from independent living to nursing home care, to address a full range of needs for residents.

Independent Living

Also called senior apartments, or 55-plus communities, independent living facilities are for older people who don’t need any special medical care or assistance with daily activities. They consist of private apartments that usually include a kitchen or kitchenette and come in sizes ranging from studios to two bedrooms. 

Rent can range from $1,500 to $3,500 a month, according to the senior living website Rent depends on apartment size, geographic region, and amenities. Some independent living communities also have a high buy-in fee. Others have a small entrance fee of perhaps $750 to $1,500, and still others have no buy-in or entrance fees at all. 

Some independent living facilities include utilities, meals, housekeeping, basic maintenance, and scheduled transportation for errands and doctor visits in the monthly rent, while others assess these charges separately. Overall, the costs can be similar to what you’d pay if you continued to live at home, but independent living communities offer a maintenance-free lifestyle and potentially greater opportunities to socialize.

Social activities and outings typically cost extra in independent living communities.

Assisted Living

Assisted living communities are for people who don’t need the high level of care provided by a nursing home, but do need some assistance with activities of daily living. Assistance might include help getting dressed, and bathing and toileting, as well as medication reminders. Assisted living can also be appropriate for patients with early-stage memory loss, dementia, or Alzheimer’s who need extra help, supervision, and security.

The average monthly assisted living rate for a private room, board, housekeeping, and some personal assistance was $4,300 per month in 2020, according to a report on long-term care by Genworth. Genworth estimates that by 2029, the cost will rise to $5,611 a month.

The cost of assisted living can vary depending on where you live. The cost per month in Washington, D.C., for example, is much higher—$6,000—than the national average. An assisted living facility in Arkansas is much less, costing an average of $3,500 a month, according to Genworth.

Assisted living facilities don't have uniform regulatory standards like nursing homes. Instead, states have their own standards, and these vary from state to state.

Nursing Homes

Living in a nursing home is for individuals who need extensive medical care and is the next-closest thing to hospital care. Nursing homes also help with activities of daily living, such as eating, dressing, getting around, and bathing. Some nursing homes are set up to feel more like residences, while others feel more like hospitals.

The annual cost of a private room in a nursing home room averaged $105,850 in 2020, according to Genworth's survey, with a semi-private room coming in not far behind at $93,075. Because nursing homes are so expensive, it’s a good idea to consider purchasing long-term care insurance well before you might need it.

It isn’t always possible to get into the nursing home you want when you need it. Many have waiting lists. Some do not accept Medicaid patients. Also, some facilities are only open to certain categories of patients, such as patients who require acute care. Some nursing homes may expose residents to the risk of elder abuse and other problems.

Consumers can get ratings of nearly 16,000 nursing homes nationwide from U.S. News and World Report, which also offers guides on how to choose a nursing home, how to pay for it, and how to ensure good care.

Continuing Care

Continuing care retirement communities specialize in providing a long-term home for older people. Residents can stay in independent living as long as they're self-sufficient. They have the option to transition into assisted living and nursing care if needed without having to relocate to a new facility. 

Continuing care facilities are the most expensive type of retirement community, according to the AARP. Entrance fees can range from $329,000 to $1 million. Monthly fees on top of that range from $3,000 to $6,000 or more depending on housing type, care level, and other choices. The cost also depends on the type of contract the resident opts for.

A life-care contract, also called an unlimited contract, is the most expensive upfront but locks in a long-term price. A modified contract covers specific services for a certain term, and the price can go up at the end of that term. A fee-for-service contract can be thought of as a pay-as-you-go plan. While it requires no commitment, you will always pay the current market price. 

The Bottom Line

Along with the considerations above, it’s important to evaluate the financial stability of any facility you’re considering, especially if it has a large up-front fee. You should also check the facility’s complaint history. Before committing to a community, see whether you can arrange a short-term stay, perhaps two nights, to get a sense of what it’s like to live there.

Article Sources
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  1. “Selecting an Independent Living Community.”

  2. A Place for Mom. "Senior Housing 101."

  3. “Best Assisted Living Facilities – How To Find The Perfect Community.”


  4. Genworth. “Cost of Care Survey.”

  5. “Senior Housing Options & Retirement Guide.”

  6. U.S. News and World Report. "Best Nursing Homes."

  7. AARP. "How Continuing Care Retirement Communities Work."

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