Retirement Village vs. Ageing in Place: A True Cost Comparison
Previously we have looked at the costs that tend to catch people out: deferred management fees, departure entitlements and ongoing. So what are you other options?
Staying in the family home can feel like the no-cost option. The mortgage is paid off and there's no entry price to find. In reality, ageing in place has its own costs. They're simply spread out over time and easier to overlook. A fair comparison puts both options side by side, over the years you're likely to use them.
What staying at home really costs
The day-to-day costs of owning a home don't disappear in retirement. Council rates, water, insurance and energy bills continue, and most tend to rise faster than we expect. Then there's the upkeep: roofing, painting, plumbing, gutters and gardens. Jobs you once handled on a Saturday morning often become costs you pay someone else to do.
As needs change, the home itself may need to change too. Grab rails, ramps, a step-free shower or better lighting can make a real difference to staying at home comfortably. Some of this can be funded through government programs, but larger modifications often involve an out-of-pocket contribution.
The biggest variable is care. For those eligible under the Support at Home program, the government funds a budget for approved services and you contribute a percentage of the cost of some services, based on your income and assets:
Clinical supports, such as nursing and allied health, attract no contribution.
Services such as assistive technology and home modifications attract a contribution fee
Everyday living services, such as cleaning, gardening and meals, attract the highest contributions which differ between those on the pension and self-funded retirees
There's also a cost that rarely appears in a budget: the time family members give. Many adult children quietly absorb hours of driving, shopping and checking in. That's a real cost, that isn't paid in dollars.
What a retirement village really costs
A village asks for more upfront. The entry contribution is usually a large sum, often funded from the sale of the family home. On top of that come ongoing service or maintenance fees, which typically cover shared facilities, grounds and some building costs.
The largest cost usually arrives at the end. The deferred management fee is deducted from your entry contribution when you leave, along with any refurbishment costs and, depending on your contract, a share of any capital gain.
It's easy to underestimate because you don't feel it while you live there.
A retirement village is not Aged Care. Most villages don't include personal or clinical care in their fees. If your needs increase, you would generally access Support at Home services in your village unit, in much the same way as you would at home, with the same contribution rules.
How each option affects the Age Pension
Your family home is exempt from the Age Pension assets test. A village unit can be treated the same way, but it depends on how much you paid to get in.
If you sell your home for more than you paid for your unit in the village, the leftover proceeds become assessable. Depending on the amount, that can reduce your Age Pension, so it's worth modelling before you commit.
Planning for the next move
For many people, neither option is the final stop. If residential Aged Care becomes necessary, how easily you can make that transition also matters.
If you keep the family home, it may continue to be exempt for Age Pension purposes for up to two years after you move into care, and its assessable value is capped for Aged Care fee purposes. That gives families time and choice, including the option to rent it out.
In a village, the timing of your departure entitlement is a key question. If your unit takes time to resell, you may need to fund an accommodation payment for residential care before your village money is released.
Checking this in your contract before you sign can avoid a stressful gap later.
Comparing the two options side by side
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The numbers are only part of the answer
A true cost comparison often shows the gap between the two options is smaller than people expect. That leaves room for the things that matter just as much: being close to family, having people around you, feeling at home, and how your health is likely to change.
What suits you depends on your situation, and it's worth getting the numbers clear before you make a decision that's difficult to reverse. Our team can model both options for you, including the Age Pension and Aged Care implications, so you can decide with confidence.
Talk to our team today to explore how we can help your family. Call 1300 924 644 or book a call with Bill.
