Hear from a typical resident about the financial aspects of retirement village living

A retirement village resident has calculated that the savings he has made over nearly 11 years living independently in a retirement village outweigh the amount he originally paid for his Occupation Rights Agreement (ORA).

With rates, power bills, maintenance and buildings insurance all covered in his annual village fee, he estimates he has saved more than $200,000 which is “money in the bank, now earning six per cent”.

“I think those who have not had a ‘lived experience’ of a retirement village often misunderstand the facts,” says the resident, who previously co-owned a large modern house.

“The cost of rates for my former home would cover my annual village fee.

“I live in an independent living apartment and my power is included so, as an alternate example, deducting what was my average annual power cost of around $4,800 from my annual fee, then I’m really only paying $1700 annually. Residents in the villas in our village pay a lesser fee and are on a metered connection.

“I don't bother with contents insurance as the main content costs such as fridge, washing machine, dryer microwave and stove are covered by the operator. I haven’t included whiteware in my savings assessment but I have just had a $990 dryer replacement, which is another saving.

“The amount I have saved leaves me with much more than I paid to get in here, even with the eventual deferred management fee deduction. It makes me wonder why I stayed in my house for so long!”

Then there are all the ‘free’ services residents enjoy in the village.

“These include a large media room with the latest large screen TV and touch controls for Sky and Netflix and an internet connection, a library with the latest books, a billiard room, croquet, bowls, pétanque, a spa, gym and a heated swimming pool, where I swims every morning, and a variety of exercise classes and entertainment.”

The resident decided to move to the village at the age of 77.

“A friend was already living here and he told me about it. I like the security, the ease of getting around, and the good facilities - with excellent bus services, shops, a market and a GP practice nearby. We have a reasonably-priced cafeteria here and are right opposite a café too.

“You could get overwhelmed with all the social events here but you can make as many friends or as few friends as you want. Most of us have a good circle of village friends and I also have a busy social life outside of the village. There is a bar on Friday nights and Saturday evening BYO drinks and nibbles where you can sit and chat.”

The resident is also happy with the financial model and doesn’t think complaints about it generally reflect the ‘lived experience”.

“I say that I am asset poor but cash rich. I see that some retirement village residents complain they are not getting a good deal and they want the conditions changed.

“Moving to a retirement village is about the security, comfort and lifestyle. An ORA is not an investment and I think the problem arises when people look at it that way. If you want an investment, then don’t go into a retirement village, stay in your property, have an asset and pay all the extras.

“Based on recent sales here, my apartment would sell for about $600,000 now. I’ve worked out that to live in a comparable home outside of the village, my home and contents insurance for would be around $4,500 annually ($45,000 over 10 years), rates $6,500 annually ($65,000), electricity $4,800 annually ($48,000) and maintenance at least $2,000 ($20,000) and all those costs are rising.

“According to BRANZ’s 2015 calculations, the cost of annual maintenance required to keep a house in good condition is around 0.5–2.0% of the value of the house - excluding the land. So, for a home valued at around $1million, such as my former home, I would be expecting to spend around $5,000 to $20,000 annually on maintenance and repairs, which would have worked out between $50,000 and $200,000 over ten years.”

The resident sees one of the factors that may lead to dissatisfaction with the retirement village model is that people often don’t move into villages until they are already very elderly.

“I feel I moved here at just the right age for me. Many residents have moved in too late in life and so never get to reap all the potential benefits socially and financially, from village life.

“I have worked out that the return of my ORA funds, less the deferred management fee, would carry me through at least five years in care if needed. My estate would be largely untouched.” 

He does think some changes need to be made, in particular to ensure timely returns of ORA outlay, minus deferred management costs, to residents, especially if they need to move from their independent home in a village, for instance, to go into care.

“That can be rather ‘tortoise-like’ and does need to be addressed.”

He also says it is critical for anyone considering moving into a retirement village to do plenty of research, above and beyond the legal advice they must seek as part of the process of purchasing an ORA.

“A lot of people who move into a village are widowed and they may not be the partner who has taken responsibility for managing finances. So undertaking such transactions may be very new to them and it’s really important to know the right questions to ask.”

The resident has drawn up a list of suggestions for questions to ask to help when calculating what your living costs will be if you move into a retirement village or to help decide which village to choose.

“Villages vary in what they provide, so it’s important to ask what ‘extras’ are included for free. For instance, does the village have free Netflix and Sky and what are your costs going to be for internet/phone. I use Skinny Jump and Skinny Mobile which are designed for older persons and cost about $200 annually.

“Find out what activities are provided for free, such as gymnasium, swimming pool or spa? What community events are laid on?  Is there a library and free newspapers? Does it have a Men’s Shed? Are shopping trips provided to local supermarkets - and if so, which ones? Is there a café on site and what are the costs like? What options are there for housekeeping and delivered meals, and what are the costs of those?

“Is all gardening, maintenance and window cleaning included, does the village owner replace whiteware, is there car or motorhome parking - and any charge for that and is rubbish collected at your door as part of the ORA?

“What is the distance from shops and services, such as dentist, doctor, hospital, library or pharmacist, churches, parks or farmers’ markets? What are the local transport options like and are there any local services like Probus, SeniorNet or U3A?

“These are all things you may think of once you have ‘lived experience’ of a retirement village.  Asking all those questions at the outset will help you to make the best decision.”