This is not your father’s wall calendar.

Mr. January, a hirsute fireman, smiles confidently above his open yellow jacket that shows his bare chest. November, a famed NFL star, leans on bleachers, holding a football. July is running a marathon, April sits astride a motorcycle, and February’s enormous biceps are working to lift barbells.

They are hunks by anybody’s standards. Four are retired military. They range in age from 57 to 70, and they look vigorous, muscular, and alert. The title of the retirement community’s full-color calendar is “Aged Beef: Men in Their Prime,” and each “beefcake” pinup guy is a demonstration that people who live in retirement communities can exemplify the very peak of health.

But what about the communities themselves—how healthy are they, financially speaking? Can you tell just by looking?

Beyond appearances

Greg Gates, president of The Mahoney Group, a Phoenix-based insurance company, found out the hard way that some retirement homes and communities promise more than they deliver. His wife’s grandmother and members of her family invested in an apartment complex for ambulatory senior citizens, buying bonds that were supposed to pay small quarterly interest rates until they were redeemed at maturity.

“First, the interest rates stopped because the project manager didn’t have sufficient cash flow,” says Gates. “Then when the bonds came due, the project went into bankruptcy and made all the bonds worthless … what I think they did was over-promise to get the upfront money and then couldn’t make the deal work. It didn’t generate the occupancy or cash flow they planned on, and since they had long-term rent agreements with the elderly, they couldn’t raise rents to an adequate level.”

Gates’ family members panicked when they needed money, so he bought the bonds at face value and paid some interest in advance.

“Guess who got stuck when the bonds defaulted?” Gates asks.

His experience is not the norm. In fact, it’s the rare exception. Fortunately, most retirement homes and communities are financially stable and deliver what they promise. But horror stories still influence people’s decisions. The fear of making a serious financial mistake—at a time when such an error is unrecoverable—keeps many people from making changes at all.

Ask the right questions

It doesn’t have to be that way. If you ask the right questions before investing in a retirement facility or community, you significantly minimize your risk. Here are some questions to ask.

Exactly what kinds of facilities and services does the community offer, and what part of the fees is refundable?

First, make sure you’re comparing apples to apples when you examine a community and its relative risks.

Some, like the facility Gates’ family invested in, are little more than specialized apartment complexes. A retirement community, strictly speaking, often is a mini-city for senior adults with housing, amenities, and services that include on-site health clubs, restaurants, and recreational activities.

In contrast, a continuing care retirement community (CCRC) often offers a full range of the same type of residential services but also will provide assisted living or skilled nursing services. Perhaps the best way to view investing in a CCRC would be as a long-term contract for housing, services, and nursing care at one location.

Almost without exception, both types of communities charge an up-front entrance fee or “endowment” that ranges from $20,000 up to $100,000. The fee can be two to three times that amount if it is to cover a lifetime of future skilled nursing care in a CCRC.

Most “active adult” retirement communities’ entrance fees are lower and cover the use of the home or condominium where you will live. Some are rentals, with even smaller move-in fees.

In either case, higher entrance fees usually mean lower monthly fees—the “pay me now or pay me later” philosophy. Generally, the higher the entrance fee, the greater the percent that is refundable to you if you leave the community (or to your estate when you die). Many communities specify refundable amounts and percentages in literature or contracts; if not, ask for it in writing before signing anything.

What kind of contracts are available for CCRC service?

Three types of contracts are common, according to the organization that accredits CCRCs, the Continuing Care Accreditation Commission (CCAC) of the international accrediting organization, Commission on Accreditation of Rehabilitation Facilities (CARF):

• Extensive contract: This offers unlimited long-term nursing care for little or no substantial increase in your usual monthly payments.
• Modified contract: This includes a specified amount of long-term nursing care, beyond which you are responsible for payment.
• Fee-for-service contract: You pay full daily rates for all long-term nursing care required.

Of course, if you are skeptical as to whether a community will be financially stable in the long haul, the “pay as you go” option makes the most sense. However, it also carries the greatest risk of cost if you suffer a catastrophic illness for which you cannot pay out-of-pocket.

What documentation can the institution provide to assure you of its financial stability?

For someone with no background in finances, investigating the financial health of a retirement community can be daunting, says Susanne Matthiesen, a business development executive for CARF-CCAC. This organization’s Web site, www.ccaconline.org, provides a list of accredited retirement communities, including several military ones.

“Since accreditation is a voluntary process,” says Matthiesen, “pursuit of accreditation demonstrates an organization’s commitment to continuous quality improvement as well as credibility and accountability to the persons they serve.”

Lack of accreditation doesn’t always mean the organization is unsound. But if the retirement community itself is not willing to share information with you directly, “that is a red flag,” says Doug Pace, director of Assisted Living and Continuing Care for the American Association of Homes and Services for the Aging (AAHSA), a Washington, D.C.-based organization that represents 5,600 not-for-profit nursing homes, CCRCs, assisted living and senior housing facilities, and home- and community-based service organizations.

“Ask for a copy of the community’s most recent audited financial statement,” says Pace, who adds that retirement communities are required by law to post a “states survey” conducted to examine the nursing and assisted living areas of a community.

What are other warning signs of a financially troubled retirement community?

“There is not a simple list of signs, because many subtle things may happen together over time to signal potential long-term financial difficulty,” says Matthiesen. “Consumers should obtain information about an organization’s regulatory compliance status [and] accreditation status, as well as obtaining a copy of the organization’s financial information, [and review it] with a financial advisor prior to making any commitment to an organization.”

Pace says additional signs of trouble could include a shortage of staffing, a reduction in services
offered, and changes in the meal program.

Don’t depend just on documents. Sometimes the best place to get information is from goods and services suppliers, housekeeping and maintenance staff, residents, and other visitors.

What other resources are available to help with decision making?

AAHSA publishes the book The Continuing Care Retirement Community — A Guidebook for Consumers, available on its Web site, www.aahsa.org.

CARF-CCAC’s Web site has lists of approved communities and the downloadable standards used to assess them; the organization will mail this information to consumers without Internet access. CARF-CCAC also offers a free consumer information packet that includes a list of types of resident agreements typically offered by retirement communities, a free copy of the standards, and a list of accredited providers. Call (202) 587-5001 to have one mailed to you.

What should you do if you already have invested in a retirement community and suspect trouble?

Pace suggests you approach the administrator with your concerns. Matthiesen agrees, adding that you must ensure the information you’re operating from is “current, complete, and accurate.”

“Accredited organizations have processes in place to regularly share information with residents regarding the financial status of the organization and to address resident and/or family concerns,” says Matthiesen. Additionally, if CARF-CCAC accredited the organization, a consumer can file a complaint stating how he or she thinks the community has violated its standards.

Depending on the nature of their concern, consumers also can speak with state regulatory agencies. And private financial advisors and legal counsel can provide direction and resources.

You might not be able to run a marathon or fight fires like the pinup guys in the retirement community calendar, but flex your mental muscles, ask the right questions, and you’ll be better equipped to choose a retirement community that will stay healthy even if you’re not.