In this last of a three-part interview with founder and CEO John Erickson of Erickson Retirement Communities, he discusses the many unique benefits Erickson offers retirees.
How does the financial structure at Erickson compare to the one people live within their homes?
Twenty-five years ago, I was trying to put together a financial structure for Erickson Retirement Communities that would satisfy Middle America.
I wanted to come up with a system in which people could transfer their home equity into [one of our apartments], but still get a 100% refund if they left or died, in which case the money would go back to their estate. And they could live in the community under a cost structure that was within the same cost structure as their own home environment.
The 100% refund meant that I had to come up with an estimated price per apartment that would also include the common facilities and cover the capital costs of the campus. That’s what we started with, and it turned out to be a really good move. Middle America has plenty of home equity. If they transfer a portion of that into an apartment home in a community and the kids still get the inheritance—whether they leave or die, they get that money back—that’s a good safety position for Middle America.
Twenty years ago, the [senior housing] industry had a pooled-risk insurance plan. The problem with this plan is that it means you might have been living for $1,000 a month in your home, but it’s now going to cost you $2,000 a month because you’re going to have to go into the insurance pool for health and all the other things that you might experience.
I went to a fee-for-service program that included the main meal, utilities, taxes, transportation— everything but the telephone bill and the other two meals were in the package. And people found that they could live in one of our communities probably for a couple of hundred dollars cheaper than they were living in their homes.