Getting Older Scares Me. But Not Knowing Where To Invest Scares Me More.
I thought retirement villages were the answer, or maybe not.
I hate getting old.
But it’s one of those things I don’t get a say in.
That’s why I like catching up with my retired neighbour from time to time. When I listen to her regrets, it reminds me to do things differently. To prepare for the years ahead, not just hope for the best.
Retirement villages
Last week, I had lunch with Jane, my neighbour who’s in her 70s. She’s divorced, retired for over 10 years, and lives alone in a rental apartment.
I don’t know how, but our conversation went to retirement villages.
“Oh, it was my dream,” she said. “But it’s never going to happen. I don’t have the money.”
At first, I thought she meant a nursing home. But retirement villages are different.
They’re designed for people who can still live independently, but want the comfort of community living. You have your own unit, just like you rent a normal unit/house. There’s no curfew. You can go out, have friends or family over. Some retirement villages offer facilities such as gyms, swimming pools, and mini golf courses.
Not bad.
After a health scare a couple of weeks ago, I found myself thinking…maybe that’s not such a bad option. At least someone would be nearby if anything happened. And maybe I’d meet more people my age too.
But then Jane said, “You can’t rent. You have to buy.”
That’s when it hit me.
She’s living on a pension, with some financial help from her children. Buying into a place in a retirement village is just not possible.
But maybe I can?
So I did some digging.
And what I found surprised me.
Bad financial decision
In Australia, purchasing a unit in a retirement village can be very complicated. Not only is it a big financial commitment, but it can also be a bad one.
According to an article on realestate.com.au, retirement properties range from under $100,000 to over 4 million, with most units priced between $350,000 and $640,000.
Take this luxury residence in Richmond, Melbourne (inner city) for example, it has a cinema, cafe, yoga and Pilates studio, with a price tag of $976,500.
Compared to private residences, that might seem more affordable. But there’s a monthly fee to cover the operating costs of the entire village.
What really shocked me, though, is that you don’t actually own the property; you are only paying for the right to live there.
And when you decide to sell it? You’ll need to pay an exit fee, which can cost over 60% of your purchase price. This could leave retirees with almost no money left to fund aged care when they can no longer live independently.
Retirement villages in Australia are marketed as “lifestyle purchases,” not investments. But even then, who wants to buy into something knowing you might lose over half its value when you leave?
It made me wonder how retirement villages work in other countries.
Retirement homes elsewhere
A few years ago, my dad was adamant about buying into a retirement village (they called it senior homes), and my mum had to talk him out of it.
My parents had a heated argument as my dad believed he had found an opportunity to resell for profit. My mum, on the other hand, wanted to hold on to our family home: “We are living comfortably, why risk this house in exchange for a 2-bedroom unit for a small gain?”
She has a point.
My dad didn’t go through with the purchase in the end, but he was upset.
From what I’ve found so far, senior homes in Canada operate differently. Some may actually offer real ownership and could be treated as investment properties.
In the US, I’ve heard that you can own a retirement unit, rent it out, and even pass it on to your kids.
If that’s true, it could be a very different game.
The safe choice
Sadly, Australia has an entirely different system, which to me doesn’t make sense - how dare they take money out of the elderly?
So maybe Jane didn’t miss out after all. Ironically, she saved herself from a financial mess later in her life.
As for me, thanks to Jane for planting the idea in my head and nudging me to look into it.
Buying into a retirement village is now off the table. My money might be safer sitting in ETFs instead.
Disclaimer: Information shared in this newsletter is not financial advice. Always do your own research before making any financial decisions.
If you think any of your friends will benefit from this post, please help me spread the word by clicking the “share” button below:
Thinking and acting like a rabbit?
Buy some carrots.
That sounds like a total rip-off. Why not, e.g., take your money and move to Thailand? You can afford anything there (just an idea, there are certainly more opportunities for moving abroad).