Demystifying the finances of retirement village life
Getting your finances in order is a great way to prepare for retirement village living
Like many of life’s major milestones, the decision to move into a retirement village is one that needs both your heart and your head to be involved.
While your heart will lead you in discussions about whether it’s the right move for your emotional well-being, there’s a lot to get your head around when it comes to financial planning, and working out how much money you’ll need for a secure future.
That means it’s never too soon to start thinking about the kind of living situation that would suit you best as you get older, and how your financial needs and resources may change.
Discussing your personal income is sometimes viewed as a taboo subject, but it’s important to be open and honest about the costs involved when you’re considering a major lifestyle change. That’s why Metlifecare has extensive impartial information for people considering moving into a retirement village.
They encourage potential residents to discuss the costs involved with their families, and to make sure they get independent legal and financial advice.
There are three major areas to be aware of when understanding the financials behind moving into a retirement village: what you’ll pay upfront; what the ongoing living costs will be; and what you will get back.
Like buying a house, your upfront entry costs will be your biggest outlay. You’ll pay a capital sum to secure your Occupation Right Agreement (ORA), which is a contract between you and your retirement village operator that guarantees your right to occupy the unit you have chosen. The capital sum will vary depending on the size of the unit and the village location.
While your capital sum is a one-off
payment, there will be a weekly village fee that covers things such as council rates, building insurance, maintaining the sports and recreation facilities, gardening, and most of the great activities on offer.
Metlifecare villages have guaranteed fixed village fees for life, so you have peace of mind around your payment, regardless of any changes in superannuation or inflation. And many residents say this fee is well less than the cost of running their previous home, with the added benefit of someone else doing the gardening and maintenance! And the certainty of a fixed fee allows you to plan other expenses such as holidays and hobbies.
Whilst you don’t own your unit and so won’t realise any capital gains on the property’s value, you also won’t have to pay for any refurbishment fees at Metlifecare. When you move out and your unit is relicensed, you’ll be refunded your capital sum minus a management fee.
At Metlifecare, your management fee is capped at 30 percent of the original sum you paid to secure your ORA, with that 30 percent accruing at 10 percent per year for the first three years. And Metlifecare understand that moving out is a stressful time, so you can apply for early repayment of up to $20,000 to help with moving costs.
While retirement village life frees you from many of the stresses associated from running a property and gives you more time for the things you really enjoy, it’s important to make sure you are aware of the financial considerations. An experienced lawyer will help you and your family understand the ORA and make sure you’re ready to take the next step towards a more relaxing and enjoyable retirement.