Achieving the best bang for your buck
Worry-free living with good friends and fabulous amenities – there’s a lot to love about moving to a retirement village. There are also a lot of concerns – some people have the unshakeable feeling that a retirement village isn’t a great financial decision and that it will erode any inheritance you’re leaving for your kids.
Anyone who’s moved into a village will tell you that while costs seem higher on the surface, you can often achieve better value than you might do living in your own home. In a village, large expenses like rates and exterior maintenance are already included – and that’s not even considering all the extras you get in the way of amenities and great companionship.
How costs at retirement villages work
There are a few different costs associated with moving into your new retirement village. While most villages structure these costs in similar ways, there are notable differences between them that could mean you end up paying more overall.
Ongoing cost – village fee
Think about this as your maintenance and entertainment fund. The weekly fee covers the day-to-day running of your village. It keeps the pool in top shape, the grounds looking gorgeous, and the fun activities flowing. It also covers exterior maintenance on your home, including inside and outside window cleaning. So, if your gutters back up or a ball goes through your window, you can sit back and let someone else take care of it. For lots of people, those surprise costs can be very distressing, and a weekly fee that covers everything feels a lot more manageable.
Some villages also lock you into paying fees for a fixed term, so you’ll pay some or all of your fee, even if you move. Others, like Ryman Healthcare villages, will stop charging you fees the day you vacate your home.
While it’s a good idea to compare the weekly fees of different villages, you should also read the fine print. Most villages will put their fees up regularly, sometimes to match inflation, or to cover other rising costs. If you’re on a fixed income those increases may be hard to meet. Ryman villages, by contrast, offer a fixed base weekly fee for life – so unless you move into a different part of the village or you add care options, what you pay per week when you move in is what you’ll always pay.
What you get for that village fee is also worth carefully reviewing. Most villages will cover the basics of grounds and building maintenance, while others, like Ryman villages, will also include nice extras like activities, morning and afternoon tea and outings in the village van.
Buying into the village and deferred management fee
The vast majority of retirement villages operate using a right-to-occupy model. The purchase price you pay essentially buys you the right to live in a dwelling, but you don’t actually own it. There will be rules around what you can and can’t do to the interior, and you won’t be able to borrow money against it, but it’s in all other respects exactly like owning your own home. When it’s time to leave your home in the village, you and your heirs will get a fair chunk of money back. Your village will sell your dwelling on, take a deferred management fee, and hand over the remainder.
Again, the way different villages approach this transaction can impact on how much you or your descendants end up with. There are a few things to consider:
- What is the deferred management fee capped at?
This varies from village to village but tends to be capped at 20-30% of the purchase price.
- How are the management fees calculated?
Many villages will charge their management fees in stages. At Ryman for example, if you leave after one year at the village, you’ll pay only 4%. 4% is added each year for 5 years until you reach the cap of 20%. That money, of course, isn’t collected until they on-sell your dwelling.
- Are there extra costs for selling your home?
On top of the deferred management fee, many villages will charge to refurbish your home or to cover the sales process. At others, like Ryman villages, all of that is covered within the deferred management fee.
- How long could it take to sell your home?
When you leave a retirement village, many providers don’t repay your money until your home is sold, so it’s important to ask how long the average sale takes. Some villages will keep charging you village fees and will continue calculating your deferred management fee until your home is sold. At Ryman, the base weekly fee and the deferred management fee will stop from the day you move out. Added to that, no one in Ryman’s 35-year history has waited longer than 6 months to be repaid.
Cost of extra care
You may be considering retirement village living in case you or your spouse need extra care in the future. In villages with an on-site care facility, you’ll always be able to get the support you need while staying in your community and near to your spouse. While it’s not nice to think about, it’s always worth looking at the care options available and the costs associated with them. Depending on your financial circumstances, you may have your aged care funded by the government, but that money really only covers the basics. Many care facilities offer a better standard of living – think private rooms with ensuites, more meal choices and more staff around to help. That all costs money, so you’ll pay a premium on top of what the government contributes. What you get for the premium varies, so make sure you check out the rooms, the meals on offer and the feel of the space. Even little things can make a huge difference to the hominess of the space, such as carpet instead of vinyl in all the corridors, like they have in Ryman villages.
Choose wisely and live well
There are a lot of great reasons to choose retirement village living, but to find one where you’ll get the best value for money takes a bit of careful research. Have your questions ready before you start vetting possible villages and be sure to read the fine print of those right-to-occupy agreements. Ask whether village fees are capped, find out how the deferred management fee is calculated and if there are extra costs around selling your village home. Then check if there is an on-site care facility should you or your partner need it and the costs around that.
Thinking about retirement village living? Click here to see what more you could get at a Ryman village.