Moving into a retirement village is a big step, and there are a lot of considerations to take into account. Probably one of the biggest ones for most people is the nagging question of money. How much will it cost upfront? How will you pay for it? Will there be any ongoing costs? Will the costs change over time? What happens when it’s time to move out?
It’s common to feel concerned and a bit confused about retirement living costs, so it helps to know what to expect so you can prepare and plan adequately.
It’s quite different to the cost you’d be used to as a homeowner, and to make it even more confusing, each state operates under different rules and regulations. But here’s a basic guide to the kind of costs and fees you can expect when you move into a retirement village.
Buying a unit in a retirement village involves an entry payment – a sum you pay to secure the unit or property for the desired time. The type of contract you enter into will have a big role to play in the amount you’ll have to pay. The most common types of contracts used by retirement villages in Australia include:
- Loan or Licence to Occupy – essentially an interest-free loan where you pay a fee to live in the village but don’t own your unit. This is the most widely used contract in Australian retirement villages.
- Leasehold – where you essentially sign a long-term lease for the use of the property.
- Freehold title – where you buy your apartment or unit in the village, just as you would any other house.
This fee is likely to be the biggest fee you’ll have to pay, particularly if you’re buying a freehold title, as you’ll have to pay the market price on the unit. It’s usually an upfront payment, but Leasehold and Loan or Licence to Occupy payments will often by partly refunded when you leave the village.
However, buying into a retirement village will cost you significantly less than a purchase in the local housing market.
Ongoing service charges
Most retirement village charge regular fees (usually each month) to cover the ongoing costs of running and maintaining the entire village complex. While costs will vary from village to village, typical services you’ll pay for might include:
- Facility maintenance and upkeep
- Facility repairs
- Insurance for common areas plus building insurance, as well as public liability and workers compensation
- Water rates for common areas, such as garden beds
- Utility bills for common areas
- Council rates
- Access to all village facilities
- Rubbish collection
- Emergency call systems
- Personal care
This fee will vary greatly from facility to facility, but the national average is around $500 plus for a unit in Australia. Generally speaking, the more facilities the retirement community offers, the more you are likely to have to pay. If you’re seeking cheaper fees, look for communities with fewer services or ‘extras’ (such as gyms, pools etc.) on offer.
Personal living costs
While it seems obvious, it bears mentioning that you’ll also have to pay your usual day-to-day living costs, for things such as:
- Communication and technology
- Household items
- Personal home insurance
- Medication and medical costs
You’ll also have to factor in moving fees, and any cleaning or repair fees on your old property.
Exit fees can be tricky, and you may be required to pay significant fees and charges, called deferred management fees, when you move out of the property. You’ll usually receive an exit entitlement, which is the purchase price minus the deferred management fee.
Charging this fee at exit frees up your cashflow when you are moving into the village, making it a more affordable step. Exit fees are usually calculated as a percentage of the entry payment (on average, around 30% of the incoming contribution), although the calculation method will vary between facilities.
Some retirement villages may also impose extra fees on top of these, such as a waiting list fee to join the waitlist for a property, or a deposit to secure your home.
Keep in mind that all payments should be outlined and specified in your entry agreement contract, so make sure you thoroughly understand all the costs before moving into the retirement living facility. Get advice from a financial advisor or lawyer if there’s anything you’re unsure about, before you sign the contract.
Have a look here to find out more specific details of the fees at Alumuna retirement complex https://www.alumuna.net.au/faq/