Retirement village costs in Australia

Retirement village costs in Australia – eight things you need to know

When moving into a retirement community, the big question on everyone’s mind is “how much will it cost?”. Obviously, this is something you need to know before taking this big step. You need to decide whether and how you can afford it, how much money you need to have available up front and how much you need to budget for ongoing costs.

It’s quite common to be confused about retirement community costs, as they can sometimes be complex and involved. There are different types of contracts used by different communities, including:

  • Loan or licence to occupy (you essentially take on an interest-free loan to live in your house)
  • Leasehold (you lease your house)
  • Freehold (you own your house)

Whichever contract you are operating under will determine exactly how much you’ll pay. However, there are certain payments you’ll have to make no matter what type of contract you buy into.

There are different types of payments involved

Rather than one lump sum, you can expect to be liable for a few different types of payments and costs when you move into a retirement community. These costs can be broken up into three basic categories:

  • Before you move in (entry fees)
  • While you live there (recurrent fees)
  • When you leave (exit fees)

You can think of these costs as ingoing, ongoing and outgoing.

You will still pay a monthly cost

It’s a common misconception that once you buy or lease your home, that’s all you’ll have to pay, but that’s not actually the case. You’ll still have to cough up for ongoing service charges for the facilities and services that the village provides, such as:

  • Maintenance, repairs and upkeep
  • Staffing
  • Security
  • Water rates and utility bills for common areas
  • Insurance
  • Facility access
  • Council rates
  • Laundry
  • Rubbish collection
  • Emergency call systems

Generally speaking, the more facilities the community offers, the more ongoing fees you’ll have to pay. It’s essentially like living in a body corporate building, where you would pay levies for such facilities and services – or you would pay for them yourself if you lived in your own home.

Retirement village costs vary widely

There’s no one set cost for life in a retirement village, and you can pay widely varying fees at different villages or communities.

Have a look at one such community here:

You will still need to budget for personal living costs

There are many items that are not covered by the recurrent fee, and that you will still be required to pay for. These include:

  • Phone
  • Electricity
  • Internet
  • Home contents insurance
  • Pay TV or subscription services
  • Food
  • Transport
  • Entertainment
  • Medication and medical costs
  • Household items
  • Travel or holidays

You’ll have to factor all these things into your retirement budget to ensure you are able to adequately cover all your costs.

You’ll also have to pay to leave

It’s not a matter of just selling your home or finishing up your lease or licence agreement. When you leave the village, you’ll be liable to pay what’s known as a deferred management fee (DMF). This ‘exit fee’ or ‘departure fee’ covers the ongoing improvement and expansion of community facilities, so that residents can enjoy them in the future. It also helps keep the regular maintenance costs down, making your ongoing payments lower. Plus, only having to pay this fee when you’re leaving frees up your cashflow when you’re moving into the community, thus making it a more affordable prospect.

The actual amount of the fee will vary between villages, but it is usually calculated as a certain percentage of your entry payment (the average is around30%, but it can be higher or lower).

You’ll get your entry payment back

However, it’s not all fees and costs coming out of your pocket – when you leave the retirement community, you’ll receive your initial entry payment back, minus the deferred management fee (exit fee).

All payments should be specified before you sign your contract

So, there are obviously a number of different payments you’ll need to be able to cover when you move into a retirement community – but they won’t be a surprise. All the different types of payment will be specified in your contract before you sign it, so you’ll know well in advance the amounts you’ll need to come up with, as well as your rights relating to these payments. Make sure you thoroughly understand all the costs before moving into the retirement community, and get legal or financial advice if you don’t.

Don’t forget about all the extra costs you might have to pay

When budgeting for your retirement community lifestyle, don’t forget to include some of the extra costs you may be liable for. These could include:

  • Real estate sale costs on your old home
  • Cleaning cost of your old home
  • Any renovation or repair costs on your old home
  • Moving fees
  • Retirement community deposit to secure your home (not all communities charge this fee, but some do)
  • Waitlist fee to join the waitlist for a retirement community property (again, not all communities will charge this fee)

Go here to find out more specific details of the fees at the Alumuna retirement complex