The price of retirement village living

Buying into a retirement village is not an investment, it’s an expense. You tie up your capital for a length of time and end up with less money when you leave than you put in. To ensure a smooth transition and a financially secure future, it helps to understand all the types of costs involved and how they can affect you in the long run. In most cases, you’ll need to consider selling your home or using your other savings to enter a retirement village. It’s crucial that you have enough savings left to enjoy your new lifestyle.

“My daughter, she helped me work out the numbers between selling and what we would have to carry us over for perhaps 10, hopefully 20 years.”

“Balancing the cost of moving in was quite tricky. You had to have savings, not just what you’d make out of the sale of your property, which we did, we saved.”

“I’ve tried to work out how my money will last. There’s inflation to think about, costs going up.”

Doing thorough research is key. It’s important to understand the costs of entry, the ongoing costs while you’re there, and the costs if you decide to move within or leave the village. It’s also important to know how it all works when you terminate your contract. Often, you or your family won’t receive any money until the unit is relicensed, which can take anywhere from six to nine months, or even longer. During this period, you may still be required to pay weekly fees.

Independent financial advice from a financial planner or accountant with experience in retirement villages is invaluable. They can help you determine if you have sufficient funds for your future.

“We spoke to the accountants, and we worked out the numbers.”

We suggest asking the retirement village and your lawyer the following questions about costs:

• How much do I pay on entry?
• What are the ongoing fees? Are those fees fixed, or can they increase each year?
• Will I share in any capital gains when I leave?
• Are there substantial fees if I move from one type of accommodation to another?

Consider how retirement village costs will affect your future choices. For example, do you want to travel overseas or help with your grandchildren’s education? These important goals take money. You also need to ask about the financial implications of transferring to a rest home.

“We had enough, if we had to go into care, to last 15 years, and that’s all we were worried about.”

“Because I knew what my outgoings were going to be, with the care required, I would be able to continue living at a reasonable standard.”

Does the rest home offer standard rooms fully funded by the government if your asset levels fall below a certain threshold, or will you need to pay extra for premium rooms or care suites? Premium rooms often have an ensuite, and care suites usually come with additional amenities, like a kitchenette, living area and ensuite. These options require an additional charge, either as a daily fee or a capital sum with a deferred management fee attached. Check with your lawyer if moving into a premium room or care suite requires terminating your current occupation right agreement and signing a new one. This may involve paying an additional capital sum and deferred management fee. Finally, make sure to investigate the financial implications if your partner needs to transfer to rest home care while you continue to live independently, or vice versa.

“My husband was very ill, and I was taking care of him, and I knew that one day I would be left on my own.”

“Yeah, it was a lot of soul searching. There were some other villages that offered what we wanted but not that transition to a care apartment.”

Here are five tips to help you navigate the costs of retirement village living:

1. Get detailed information about entry costs, ongoing fees and exit fees.
2. Consult with a financial adviser experienced in retirement villages.
3. Ask about the relicensing process and potential delays.
4. Understand the financial implications of moving within the village.
5. Plan for future needs, including potential rest home care.

By asking the right questions and planning ahead, you can ensure a comfortable and financially secure retirement in your chosen retirement village.

For more information, see Sorted’s guide on retirement villages at sorted.org.nz.