Is a retirement village a good financial investment?

Understanding the costs involved in moving to a retirement community

Having been a financial planner for over 20 years, Brad Monk is a huge advocate for the retirement village lifestyle. As the director of LifePath Financial Planning, Brad specialises in helping people in the over-50 age group make decisions around retirement communities and aged care.

The Renaissance team sat down with Brad to hear what he meant by “A retirement village is a bad financial investment, but a good investment in yourself and your lifestyle. “ Here’s Brad…

Investing in your retirement lifestyle

People are often taken aback when I tell them they should not count moving into a retirement village or retirement community as a good financial investment. I recommend they keep their financial investments for things like shares, property, lifetime pensions or annuities or downsizing contributions to superannuation.

What I want people to know is that a move into a retirement village is one of the best investments they can make – in themselves! It will pay massive dividends in their social life, security, lifestyle, and peace of mind, and quite possibly their health and longevity! Let me explain.

I find it interesting that people spend years planning for their retirement, but once they reach that milestone, they stop planning! It’s the same with establishing a will. I see people put their will in place but not think about the events leading up to it.

It’s clear – no-one wants to plan to age. For most of us, it’s just too painful to face that reality. But rest assured, ageing is inevitable, so you may as well plan for it… and plan to have the best time you can along the way.

As a financial planner working with people who are planning their retirement, or those who have already retired, the big fear for most is affordability. Nobody wants to run out of money before they run out of life! You want to be able to afford a comfortable, happy, stress-free life that enables you to care for yourself and enjoy life while preparing for the unexpected such as if you or your partner needs to go into aged care before the other.

Costs to consider when moving to a retirement village

When you’re looking at moving into a retirement village, there are three basic costs to consider:

• The cost to get in,
• The cost while you’re there, and
• The cost to get out.

There are not a lot of costs involved with getting into a retirement village; the cost is mostly in getting out of your family home. There will be costs such as sales commissions and buying new furniture to suit your new home. Your grandfather’s old couch just may not fit or suit the décor!

As for the ongoing costs while you’re living there, the general services charge varies from retirement village to retirement village. Many people don’t know this, but retirement village owners are – by law – not allowed to make a profit on the general service charge. It’s there purely to cover the operating costs of the village. It depends on the facilities and the maintenance required on the property.

That’s another enormous benefit of retirement villages. There is no ongoing maintenance cost! No lawns to mow, pool to clean, hedges to trim, leaking roof to fix. It’s all taken care of for you. That’s a big plus, not only in cost savings but in time savings as well. Better to have someone else up the ladder cleaning out the gutters, so that you can relax by the pool with friends!

Finally, there’s the cost to get out: the Deferred Management Fee. I’ve found that this is the one that often stops people in their tracks. I hear clients say, “I’m not moving into a retirement village because they take this big fee at the end.” Yes, they do!

It’s true, the last cost is the big cost, but as I explain to my clients, it’s a reasonable fee for the environment you’re in and the wonderful lifestyle you get to enjoy while you’re there. I say, don’t wait until you’re 90 to get in when you might only have a few healthy years to use the facilities. Get in early and make the most of everything you’re paying for. Remember, this is an investment in you!

Deciding whether to move into a retirement village

Retirement villages don’t take all your money. Once you know what you’re paying to get in, to live there and to leave, that provides a good foundation to create a financial plan that will give you more certainty.

If you want to leave money for your kids, work that into your financial plan. If you want to tuck away some money in case you need to move into aged care, that’s great – you can plan for that. If you want to take a long holiday every year, it can happen. Talk to a financial planner who can help you achieve all your financial goals and plan from your first day of retirement until your last breath. You’ve worked hard all your life. This is your time. Plan to have all the money you need to do all the things you want.

I say to people, retirement villages aren’t for everyone. I may sound harsh, but if you’re worried about the costs and it all sounds too expensive, you can always get free accommodation by moving in with your kids. Fortunately, most of them laugh at that idea!

Certainty is wonderful, but too much hesitancy while you wait for the ‘right’ time to decide, or to move can steal precious time away from enjoying your retirement lifestyle. You might be asking yourself, “Is this a good time to be moving into a retirement village based on the current property market? If not now, then how about in two years, or five years, or ten years’ time?

The real question is “Do you have that much time?” Sadly, none of us knows the answer to that. One of the most common quotes I hear from retirement village residents once they’re settling into their home and the community is, “I should have done this years ago.” That’s something to ponder.

Before you think about the financial implications of living in a retirement village, you might consider some of the things this lifestyle can bring you that you can’t put a monetary value on. Community support when you need it, neighbours that look out for you (or your home when you’re not there) being surrounded by people of a similar age and at a similar stage in life and living somewhere that feels more like a resort than a retirement village.

So, if you feel a retirement village may be right for you, when is the right time to make the move? Make sure you seek advice from a financial planner who can discuss the best investment to suit your situation.

Are you ready to invest in yourself?

We invite you to visit Renaissance Retirement Living, Victoria Point and see why many of our residents wish they had made the move sooner. We hold regular Information Days where you can tour our wonderful village, discover our impressive range of facilities and even chat with some of our residents over a cuppa. We’re here to answer all your questions and help make a decision that is right for you.

Call us today on (07) 3820 7700 or contact us online to find out more about what makes Renaissance a place you’ll love coming home to.

This information is of a general nature only and has been prepared without taking into account particular financial needs, circumstances, and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.

Brad Monk is a Financial Planner with LifePath Financial Solutions Pty Ltd who is an authorised representative of LifePath Financial Planning Pty Ltd ABN 54 166 826 884, AFSL 518221.