Downsizing: how to finance the move into a retirement village

Selling up the family home and moving into a retirement village is a big decision.

For many it should signify a shift to an easier lifestyle but increasingly retirees are finding themselves cornered by a rising tide of fees and charges they never expected.

While there are many benefits to downsizing into a more supportive community, there are traps to look out for.

Research is key and should be part of your retirement strategy from the outset even if you don’t plan to make the move immediately.

The costs of retirement living differ vastly depending on the level of independence and the quality of the village.

The Department of Consumer Affairs offers advice on its website starting with the sale of your home to finance the move.

When it comes to selling your property it recommends retirees seek marketing plans and appraisals from two separate estate agents and choose an independent legal representative to prepare a vendor’s statement (section 32).

All this before you’ve even pored over the fine print of the retirement village contract.

Council on the Ageing Australia spokesman Ian Yates urged people to do their research.

“It is a complex form of housing that has never been fully understood,” he says.

“Do not make a rushed decision. Shop around.

“Get advice and make sure you understand the law and the contracts.

“Then talk to a financial advisor that understands the industry – not all of them do.”

Mr Yates says re-occurring charges, exit or ongoing maintenance fees could leave plenty of retirees in the lurch.

“You are not buying a house,” he says. “You are buying the right to occupy. That means the financial arrangements are very different.”

He said the most common trap for tenants or their families was often the deferred fees on departure, whether a tenant was relocating, shifting to aged care or had died.

Land lease communities – where tenants own the building but not the land it sits on – was proving an increasingly popular alternative, he said.

“They are cheaper and usually available at a higher density,” Mr Yates says.

“Often a person can sell in the city and buy in a rural or regional area and end up with leftover money to live off.”

Consumer Affairs Victoria spokeswoman Anna Basil-Jones urged retirees to discuss the decision with family and friends.

“It is important that residents shop around prior to deciding on a retirement village to make sure they are fully aware of their options,” she says.

“Retirement village operators are also required to comply with an interested retiree’s request for a factsheet on their village.”

She said the factsheets must include a range of information about the village being looked at.

Ms Basil-Jones reinforced the key message to be as informed as possible.

“Prior to signing a retirement village contract, residents are encouraged to seek assistance from a financial adviser or lawyer who understands the legal and financial implications of retirement village contracts.”

For more information see consumer.vic.gov.au/housing/retirement-village