![\"\"](\"https:\/\/nestegginvestments.co.nz\/wp-content\/uploads\/2017\/02\/retirement-village-300x197.jpg\")
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Like me, you may have noticed retirement villages popping up everywhere around Auckland \u2013 there are now 3 within about 1km of where I live (yes, it\u2019s a pretty exciting suburb!)<\/span><\/p>\n The surge in retirement villages reflects a couple of things:<\/span><\/p>\n Firstly, the number of people over 65 is increasing, and has been for some time as baby boomers get older.<\/span>\u00a0 <\/span>This will accelerate over coming years; today there are around 800k over 65s, but this will grow to about 1.1m by 2050.<\/span>\u00a0 <\/span><\/p>\n Secondly, retirement village living is proving extremely popular.<\/span>\u00a0 <\/span>There are many advantages of living in retirement villages including:<\/span><\/p>\n Many people living in retirement villages report it\u2019s the best move they ever made, and they wish they had moved in earlier!<\/span><\/p>\n However, from a financial perspective, the decision to move into a retirement village is not trivial.<\/span><\/p>\n The most common financial structure for retirement villages involves:<\/span><\/p>\n (1) An up-front capital cost to purchase a right to occupy a unit (but not a freehold title), some of which is returned upon leaving\/resale of the unit (note this is often when you die).<\/span><\/p>\n (2) An ongoing weekly fee to cover the operating costs of the village. <\/span>\u00a0<\/span>This will include rates and building insurance but some other costs such as telephone\/internet, power and contents insurance are typically not covered by the weekly fee.<\/span><\/p>\n (3) A deferred management\/amenities fee which is usually calculated as a percentage of the up-front capital cost.<\/span>\u00a0 <\/span>It may be as high as 30%, and is deducted from the capital to be returned when you leave (this will be returned to your estate if you die).<\/span><\/p>\n Importantly, residents under the above structure will not get any benefit from the value of their unit increasing during the time they are in the village.<\/span>\u00a0 <\/span>Also, entering a retirement village is often a one-way street \u2013 the costs of changing your mind and leaving can be very high.<\/span><\/p>\n For those looking at retirement villages, there may be other options worth considering.<\/span>\u00a0 <\/span>For example, for people who don\u2019t like the idea of a retirement village but are finding it harder to manage at home, in home care\/assistance could be an option, funded either by a reverse mortgage, or by releasing capital through downsizing to a smaller property.<\/span>\u00a0 <\/span>The advantage of this approach is that you retain full ownership of your property and you (or your estate) will benefit from any future capital gains.<\/span><\/p>\n Retirement villages are a growth success story that shows no sign of abating.<\/span>\u00a0 <\/span>Moving into a retirement village could be a great decision, but it\u2019s important to consider the alternatives, ask lots of \u201cwhat if\u201d questions (you could use <\/span>this checklist<\/span><\/a>), and get good financial and legal advice at the outset.<\/span><\/p>\n \u00a0<\/span><\/p>\n Dean Edwards<\/span><\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Like me, you may have noticed retirement villages popping up everywhere around Auckland \u2013 there are now 3 within about 1km of where I live (yes, it\u2019s a pretty exciting suburb!) 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