Number crunching your retirement living options

“Downsizing has frequently been re-labelled  ‘right- sizing’ as our older generation make the move to new lifestyles during their retirement years. It’s definitely a time to get familiar with the often complicated maths involved in the process.

To make things simpler to deal with, the costs of retirement (Village) living options can be divided into three core areas – ingoing costs, ongoing costs, and outgoing costs.

Ingoing costs is of course, the ‘purchase price – you don’t actually purchase a retirement unit, you lease it, or have a licence to occupy it for an indefinite time. On top of the purchase price many operators charge admin fees, or even their lawyers’ fees.

Recently there has developed an option in the industry whereby you pay an additional fee (as a bond, or up-front management fee) that means there is no exit fee at the end. Effectively you pay your exit fee (usually at a substantial discount) up front.

The argument of the retirement industry to justify exit fees is that they sell the unit at a cheap price and get their profit at the end. These up front exit fees move that profit component to the start. The bond or up front management fee is not refundable, but the ingoing price is refundable in full.

Ongoing costs include the general service charge to live in the unit. It represents the ongoing costs of providing the unit, and covers rates, insurance, maintenance of common areas and community facilities. As well one can sometimes choose a support package involving food, cleaning etc. if that suits the person.

Outgoing costs are essentially the exit fee, which is commonly 35% of the incoming fee after 5 years. These percentages, and the time over which they arise do vary from operator to operator. Often there are other fees, such as the operator’s legal fees, and Titles Office fees (in the case of a Lease).

The impact on any pension entitlement is an important consideration so a qualified financial advisor is a very important consideration.

There are a huge variety of different contracts involved and it is vital that you choose specialists in the area of Elder Law to help you through the process – not just a general practice solicitor.

Sunshine Coast Elder Law are experts in most retirement living contracts covering a variety of retirement living options. Contact them on 1800 096 622. Visit www.sunshinecoastelderlaw.com.au or www.brisbaneelderlaw.com.au