As much as I really feel keen on the concept of Retirement Village living, I am struggling with whether I can afford it. It is the fees that worry me, they seem to add up to more than what I put away each month to pay my bills. And, is this a wise move financially if I do need to move into Aged Care in future - I would have more from the sale of my home than a Retirement Village home? FYI, I own my home, currently worth $350-365,000, approx $50,000 in super (keeping for a future car and white goods) and I live on the aged pension and a small UK pension which will never go up.
Linda from Cygnet in Tas
Top answer provided by:
Bob Nixon
Hi Linda and thanks for your very pertinent question. I’m not fully aware of your total personal circumstances so I will have to provide some either/or advice at times. Your fear of the cost/benefit deal of going into a retirement village is shared by many people and with your longer term concerns about the ‘what if’ of entering permanent aged care it becomes a major issue.
As you have identified going to live in a retirement village has ongoing service costs and an exit fee in most cases. If you are struggling to make ends meet at the moment, there is no guarantee that moving to a retirement village will solve that. Selling your home might allow you to liberate some free cash which you could set aside to add to your ability to cover costs in a retirement village lifestyle though. You say that you have some money still in superannuation which you have earmarked to buy a car and some whitegoods at some time. My comment here is this, a new car is a guaranteed loss of capital from the minute you buy it, especially if brand new. If your current car is still reliable and gets you from A-B every time you need to then keep it, my thoughts are similar when it comes to replacing white-goods. Only switch things if absolutely essential, having a cash buffer is very important, more so than a new car.
However, I would like to focus more on the longer term issue, the possible need to enter permanent aged care at some point.
Your question does not tell me if you have a spouse/partner and if you do then I would more strongly favour retaining your home and not moving into a retirement village.
If you have a spouse/partner and you need to enter permanent aged care you will have the opportunity to enter as a Low Means Client with significantly reduced costs. The cost of accommodation usually paid as a Refundable Accommodation Deposit (RAD) will be adjusted by way of a set formula to give a more affordable figure known as the Refundable Accommodation Contribution (RAC). This would happen if your partner/spouse continues to live in your home while you are in permanent care and the value of your home, normally set at $166,707, would be considered to be valued at zero. Of course this could happen if you “owned” a place in a retirement village too, the same rule would apply.
Only yesterday I helped a lady arrange the financing of the entry of her husband into aged care and they have a unit in a retirement village in the NW suburbs of Melbourne. He will enter care as a Low Means Client and the RAD asked for his accommodation $365,000 was recalculated at $177,860 as a RAC. The family have limited means and so after advice they have paid $30,000 towards the RAC and asked for the interest on the $335,000 not paid as a Daily Accommodation Contribution (DAC) to be taken from the RAC. This would cost 5.96% of the $335,000 ($19,966 in year 1 and deducted from the $30,000) and in addition he will not have to pay any Means Tested Fee, only the Basic Daily care Fee of $50.66 per day.
However, if you are already single and need to enter permanent aged care and you still own your own home you have a number of added opportunities. Given that you have no partner to live on in your home the house will be valued at $166,707 and you will not qualify to be classed as a Low Means Client so normal RAD costs will apply in addition to the Basic Daily Care Fee and probably a Means Tested Fee.
The big difference is that you still have your house as an asset to pass on to family, to rent to help pay your aged care costs, or to sell if required, you have choices. One more thing, selling your own home usually costs a lot less than selling a unit in a retirement village and often times it is a lot quicker to sell your home.
I hope these thoughts help, personal financial advice from some-one who knows all of your circumstances would be a good idea right now.”
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Comments2
"Thank you so much Bob for your response. I am single with no living family, so i think thst makes things a little easier for my decision making. More food for thought! Thanks again. Linda Foster"
Linda Foster 15:45 on 23 Nov 18
"This is great Bob! Seems very complicated"
no thanks 14:50 on 23 Nov 18