Moving to a CCRC or Life Plan Community is an exciting time!  As you prepare to make the move, you are likely evaluating how best to pay for your Entry Fee or monthly service fees.  While this page is not tax or financial advice, it is meant to give you a starting point for a conversation with qualified financial professionals who specialize in tax and retirement account management.

There are many different types of retirement accounts, such as traditional IRAs, Roth IRAs, 401ks, and more. You may own more than one type of retirement account.

Large withdrawals from most IRAs (with the exception of Roth) will typically trigger a large income tax bill- potentially at a higher tax rate, and may also trigger a Medicare surcharge. A few hours of time with a tax professional could save you a lot of money in unexpected tax consequences.

Please be sure to read the important disclaimer at the bottom of this page.

Step 1: Take inventory of your retirement accounts

The tax impact and potential withdrawal penalties vary by the type of retirement account. The first step in determining your options for potential withdrawals is to understand which types of accounts you have. Make a list or organize in a printout all of your accounts as a starting point for your conversation with your financial advisor or accountant.  The table below lists the various types of retirement accounts you may have.

Step 2: Before you make withdrawals, review your tax impact with a licensed advisor

When considering a withdrawal from a retirement account to fund your Entry Fee in a Continuing Care Retirement Community (CCRC) or Life Plan Community, we strongly recommend a review of your options with a tax accountant or financial advisor before making any decisions and before making any withdrawals.

Step 3: Eight Questions to ask as you review the tax impact of withdrawing from your retirement accounts to pay for your Entry Fee in a CCRC or Life Plan Community:

Typically you may be withdrawing a set amount annually from your retirement accounts. As you look to move into a CCRC or a Life Plan Community, you may be considering a one-time larger withdrawal for the year you are moving so you can pay for your Entry Fee.

You and your financial or tax advisors together will determine the best course of action for you. As you review, here are a few basic questions to review:

1. Will a withdrawal from a retirement account take me into a higher tax bracket?

2. If it does take me into a higher tax bracket, how much in additional income taxes am I likely to encounter?

3. If I am in this higher tax bracket, do I face higher capital gains taxes if I sell securities during the year?

4. Will more of my social security income also be taxable if I am in this higher tax bracket?

5. Will additional Medicare taxes apply to me with this higher income bracket?

6. Are there better ways to pay for my Entry Fee in my Life Plan Community or CCRC, than selling securities or withdrawing from retirement accounts?

7. What penalties does the IRS levy when withdrawing from retirement accounts, or not withdrawing from retirement accounts?

8. Can some of these taxes be offset by a deduction for the portion of my Entry Fee that may be tax deductible as a medical expense? Have I confirmed with my community what amount is tax deductible in the year I pay my Entry Fee?

Step 4: Which accounts do you own? Let’s review each one.

You will find answers as a starting point to many of these questions, by reviewing the information in the table below and the pages that follow broadly describing each retirement account. Simply click on the blue underlined text and you will be taken to a full page of information on each account.  Once again please note: While this information, and the information you will be taken to, is not financial or tax advice, it is here to give you a good starting point for a conversation with your tax and financial advisors on how to best manage your hard-earned retirement assets!

The table below provides a link to a page of helpful items to consider with your financial or tax advisor, for each type of retirement account:

A Bridge Loan from Second Act could be another financing option for your Entry Fee if withdrawals from retirement accounts are not recommended by your financial advisors.

If after consulting with your tax or financial advisor withdrawing from retirement accounts or selling your securities is not something you want to do, there are other funding options. Second Act provides a Home Equity Line of Credit that can act as a bridge loan to help you fund your CCRC or Life Plan Community Entry Fees. It enables you to gain financial flexibility. You can move into your community first and have the time you need to list and sell your home for the best possible price.  Learn more about senior living bridge loans here.

With fast approval, competitive rates, and a special focus on serving seniors, we could help because we understand. Contact us today to learn more about how we can help you navigate your journey to a rewarding retirement.

Other ways to pay for your Entry Fee in a CCRC or Life Plan Community also exist. These include:

1. Selling Securities:

Be mindful of Capital Gains taxes, additional income taxes, possible additional taxes on your Social Security Income, or Medicare surcharges

2. Borrowing Against your Securities:

Many investment banks that hold or broker the securities you own offer an option to obtain a line of credit against a portion of your securities they may hold for you.  These are often called “margin loans”, “portfolio loan”, or “securities-backed-line-of-credit.” Learn more here.

3. Sale of your Life Insurance Policy (Life Settlement):

You may not realize that your life insurance is considered an Asset. Just like any asset, it could be sold for cash.  If you no longer need your life insurance policy, and the policy has a value of over $100,000 you may have options to sell it.  Learn more here about Life Settlements.

Important Disclaimer

The information in this page is not meant to serve as financial, tax, or personal financial planning advice.  No decisions should be made from reading the information on this page.  Decisions should be made after careful analysis and consultation with your financial, tax, accounting, or other professional advisor licensed to provide retirement advice.

Retirement Banking, Understood.