Moving to a retirement village can be an exciting and daunting experience.
For many people there are two big obstacles, “what am I going to do with all my stuff?” and “how do I work out if I can afford it?”
When it comes to the finances, without a doubt, the greatest cause of confusion is the exit fee, which most people view as a “rip off”.
However, the good news is that more retirement villages are offering payment options than ever before, including options not involving exit fees.
Working out which is best for you depends on a number of factors, including;
- Your ability to afford the purchase price
- How much money you want to invest or buy lifestyle assets like a new caravan or boat
- The impact on your pension and eligibility for rent assistance (people who pay less than $216,500 can qualify for rent assistance)
- Your anticipated future need for capital — perhaps to fund a move to aged care
- How long you think you will live in the village.
When you are crunching the numbers important elements can include the extent to which you will share in capital gain or capital loss, whether you need to pay to renovate your home after you leave, selling and marketing costs and whether you need to wait for your home to sell to get your money back or if there is a guaranteed buyback (and what the time period is for that).
If you are looking at different villages you will find a wide range of options.
In not-for-profit retirement villages you can often find a “donation” option, which put simply means the amount you pay for your unit is taken as a donation either immediately or over a period of time, put simply the exit fee is 100%.
At the other extreme you can find options of a refundable contribution – which, as it sounds, has no exit fee.
Unlike the donation option, this option can be found in both not-for-profit and for-profit villages.
In between no exit fee and 100% exit fee there are a wide range of payment options, the important thing is to look at your contract as a whole not just compare percentages.
In general, the exit fee is directly related to the purchase price - typically the less you pay upfront the more you pay at the end, and vice versa.
Not every retirement village will give you payment options: some will routinely and others will (but only if you ask).
Where there is only one price it makes crunching the numbers easier but the odds of that being the best option for you is less likely.
Crunching all the numbers to work out which option is best for you is complicated.
And that’s before you start factoring in things like your superannuation, tax and estate planning.
Some providers, including Aveo and Bolton Clarke, provide consumers with reports from Village Guru showing what the different payment options may mean for the pension, rent assistance and other issues.
However, even with this report, it is also important to seek specialist advice before downsizing.
Rachel Lane is a long-standing aged care and retirement living expert who recently launched the Village Guru software
FIND OUT MORE:
- Download this case study to see how a Village Guru report helped one customer to move into an Aveo retirement village
- Learn about Village Guru and its Essentials Report which can help you crunch the numbers on village costs, age pension, rent assistance and home care package fees
- Learn about the different downsizing options on offer, and insider tips on making the move, in our just-released Ultimate Guide to Downsizing 2022.
- Revealed: How retirement village residents can now avoid exit fees
- Retirement village deferred management fees: your questions answered
DISCLAIMER
The information contained in this article and in the Village Essentials Report is general in nature and does not take into account any person’s individual objectives, financial situation or needs. It is not intended to imply any recommendation, opinion or advice. You should seek advice from a qualified professional about your particular financial situation, needs and objectives.
