Your parents might be thinking about downsizing or moving somewhere to get a bit of support. One of the options they might be considering is a retirement village. Before they move in head first, it is worth understanding what retirement villages are all about. Here’s a high level overview.
Retirement villages have many advantages – many of them are like resorts and have lovely surroundings with a pool, recreation hall and gym. They are often staffed 24 hours-a-day with someone who can respond to an emergency. Meals and cleaning and other services might be provided or organised. The residents will be living in a close knit community where social events and outings are common and they can participate or not as they wish. The last of these advantages is important because, as we age, there is a high likelihood of social isolation and loneliness.
Retirement villages can be fabulous and I know of many people who are truly happy in the village.
A few things to consider first
- Retirement villages are a lifestyle decisions not a financial one. It is highly likely that the residents will receive less back than they paid for the unit, villa or apartment no matter how long they stay in the unit – mainly because of the deferred management fee which is explained in more detail below.
- Retirement villages are generally owned and operated privately so they have their own rules and what the residents get and don’t get in the retirement village can vary tremendously. Make sure you know exactly what your parent is getting and not getting in the chosen village.
- There has been a history of unsuccessful retirement villages (which means that they may not be able to continue to supply what they said they would when you moved into the village). Go with someone established and reputable.
- A very important part of moving into a retirement village is social connection and activity so it is important that the residents are the kind of people that your parents will get along with. Many retirement villages allow you and your parent to attend a function (a happy hour for example) so that incoming residents can meet the residents who are already there. Take advantage of that opportunity. Social connection can be a bit of a risk if the retirement village is brand new or in the process of being constructed.
- Unless the village has ageing in place (ie onsite residential accommodation that your parent can move into when the need arises), your parent might have to move twice and it can be difficult to free up the money paid for the retirement village to fund the cost of residential care.
- They are an expensive option. Usually, your parent will pay an entry fee, buy a lease or the unit. Your parent will also pay service fees and maintenance costs which are generally more than body corporate fees for a standard apartment (this is to pay for the resort like conditions, the 24 hour personnel, the social activities and the maintenance). These fees often need to be paid for a period of time after your parent has vacated the village. They very commonly include a deferred management fee when your parent sells or leaves the village which is often around 20-30% of the sale price of the unit. Many villages also require you to completely refurbish the property before it is on sold.
Your parent should seek independent advice before they enter into a retirement village to understand exactly what it will cost and what they will get.
What is a retirement village?
A retirement village is a community where:
- most residents are aged 55 years or over or are retired from full-time employment (or are spouses/partners of such people). Residents are provided with accommodation and services (different to the services provided in a residential care or aged care facility); and
- at least one of the residents, as a contractual condition of entering the retirement village, paid an ingoing contribution that was not rent. It does not matter who made that payment, or whether it was a lump sum or by instalments.
A retirement village provides people with independent accommodation – they are sometimes called independent living units – and might include shared facilities, such as meeting rooms, a library or pool. It might also provide lifestyle services and social activities, such as organised outings, joint meals, craft, visiting doctors and allied health professionals. Although staff in some villages have healthcare backgrounds, services in retirement villages generally do not include health care.
Retirement villages are regulated under state laws. If you do not know if a place is a retirement village or regulated under the relevant retirement village legislation, ask the owner.
What if your parent needs help with daily tasks?
Most retirement villages offer some kind of assistance but they do not usually provide care or, if they do, you pay for that on top of other expenses. If your parent needs assistance with daily tasks such as taking medication or showering, or is likely to need that in the near future, a retirement village might not be the best option for them. If they do need additional care, the residents of a retirement village can still access care services either privately or subsidised by the government (provided they qualify for subsidised services).
There are currently three options:
- A federally subsidised program which requires being assessed for eligibility.
- Services might be available through the retirement village (eg commonly cleaning and some meals). Usually such services are provided on a user pays basis. Some may be included in the retirement village agreement and it is worth checking if that is the case.
- Engaging a private service and self funding the costs. For many people, particularly self funded retirees with basic or lower level care needs, the cost of a federally funded package can be more expensive than paying the costs directly (it is worthwhile looking at the numbers carefully to work this out). Engaging a private service might also be more cost effective than the services provided by the retirement village.