Our no-nonsense financial planner Maurice Patane answers Marty’s question about choosing the right kind of retirement village.
Could you please tell me which type of retirement village is the best? It is very confusing, with so many agreements such as lease, freehold and a number of others. I am 61, a widower with some disability, but I look after myself. I just need to know more about this type of living, and about deferred management fees and departure fees. Also, I have been told that some villages have Centrelink rental assistance. This sounds helpful, as I don’t want to spend all my hard-earned money and leave nothing for my children.
A. “A man’s home is his castle.” Darryl Kerrigan summed it up with this one line in the movie The Castle. For me, this statement encapsulates the importance of a home and its effect on our health and happiness.
Generally, Australians have a love affair with property and, for the majority, their home will be the single largest investment in their lives. It’s normal to have some concerns when considering the purchase of any home, including one in a retirement village.
Personally, I have always felt the important issue is to find the appropriate accommodation for your needs. You should look at:
- social life
- distance from family
- lower home maintenance
- care services
There are many legal structures and so it’s a very complicated area. Nonetheless, let’s consider some of the options:
- self-care accommodation – look after yourself
- independent living – low level of care
- assisted living – higher level of care
- nursing care – only offered by some villages and typically includes qualified nursing staff available ‘around the clock’
As a rule of thumb, those aged mid-to-late 70s or beyond should consider villages which offer increased care services. Those between the ages of 55 and 75, in pretty good health, can afford to be more flexible in their choices.
My tip is to remain in the one location for as long as possible. However, there are downsides to this; some contracts force you to exit and re-purchase when you move into the higher care option, which has financial implications.
Generally, all retirement villages offer a right to occupy the premises, which may be for life or for an extended period of time – for example 99 years. Some, in addition, may also provide a legal title to the property in much the same way as you would be given legal ownership of a residential property.
Similar to the costs associated with the purchase of your home, you can expect to pay the following when moving into a retirement village:
- entry contribution – paid upon entry into the retirement village (similar to paying stamp duty when purchasing your home)
- ongoing service charges – for recurring service charges (similar to maintenance of your home)
- departure fees – when you leave the retirement village, these are also known as deferred management fees (similar to selling costs)
There are many variations on how these can be offered which is something about which I would encourage you to seek independent advice.
My belief is that most issues arise from the lack of understanding of how the contract works, which results in unpleasant surprises when you consider moving.
My view is to look ahead. Ask a friend to sit across the table, assume your position, explain the benefits and costs, and then you critique the outcome based on the stated needs. If you don’t like it for them, then you will most likely not like it for yourself either.
Remember, there’s no place like home.
Maurice Patane has been a financial planner for over 25 years. His experience has shown him that many Australians are not living the lives they dream of or wish for, which is often due to poor financial decision-making. Maurice is dedicated to helping everyday Australians take control of their financial future, so that they no longer have to worry about money.
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