With Christmas just around the corner, family gatherings often spark important chats — like whether it’s time for older loved ones to start thinking about downsizing into a retirement village.
Retirement villages come with costs at every step: when you move in, while you’re living there, and when you leave. Exit fees can be particularly confusing, as they might include a share of your original purchase price or the future sale price, potential capital gains or losses, renovation costs, sales commissions, and guaranteed buybacks if your unit doesn’t sell quickly. It can get even trickier when you’re comparing different payment options or villages.
On top of the fees, the price you pay for your home in a village can also affect your age pension. Many retirees look at downsizing as a way to free up money from their current home, but taking cashing out too much can reduce your pension. The assets test allows single homeowners to have up to $314,000 in assets before their pension starts to reduce, while couples can have $470,000 combined. For every $100,000 over these limits, your pension will drop by $7,800 a year, which can leave a big gap in your income.
For some people, moving to a retirement village can make them eligible for rent assistance for the first time. This is an extra payment on top of your pension that can be worth up to $5,491 a year for singles and $5,174 each for couples. However, whether you can get rent assistance depends on the type of village and your contract. In land lease communities, rent assistance is based on the site fees you pay (the rent for the land your home sits on). In traditional retirement villages, the cost of your unit needs to be under $252,000 to qualify for rent assistance on ongoing village fees.
Your pension and rent assistance are just one part of your income in retirement. The rest usually comes from superannuation or other investments.
It’s also important to think about how moving might affect any aged care support you’re receiving. If you’re on a home care package or planning to get one, moving could change how much you need to contribute.
Get a Village Guru Report
To make sense of all this, tools like the Village Guru software, created by Rachel Lane, can really help. This tool gives you a detailed breakdown of the upfront, ongoing, and exit costs for the village you’re looking at. It also estimates your age pension and rent assistance entitlements and how much you might pay for a home care package. You can even compare up to three different options side-by-side — whether it’s different payment plans, units, or villages. When you’re looking at a village, ask them for a Village Guru Report to see how it all adds up for your situation.
Moving to a retirement village is a big decision, and it’s worth taking the time to understand all the costs and options before, as it can have profound financial and personal implications. With some research and advice from experts to help navigate complex contracts and options, you can make a choice that works for your lifestyle and future plans.
