Should resident be able to buy now, pay later?
In retirement villages, choice needs to be at the heart of the experience; choice of community, choice of lifestyle and care. But when it comes to how residents pay, many villages still offer only one option.
Operators are increasingly realizing that this is not good enough. Many organizations, large and small, for-profit and non-profit, now offer residents a choice: pay the management fee upfront or pay it off at the end. The question is; Should this choice be mandatory?
Elderly care can be difficult to afford, so it’s important to offer retirees as many options as possible.Credit: Andrew Quilty
The logic is simple. If you buy something today and pay for it tomorrow (or in 10 years), it will cost more. Sometimes much more. Not giving people the option to pay upfront is starting to feel a bit like forced financing.
It’s the retirement life equivalent of being told you can only buy a new car if you get a financing agreement with the manufacturer. You may be happy about it, but you don’t have to.
Let’s put some numbers around it. Consider a retirement village unit priced at $850,000 with a 30 percent deferred management fee. Under this model, you pay $850,000 when you move in, and when you leave — whether in five years or 15 years — the operator cuts 30 percent of the entry price. That’s $255,000.
Now imagine you’re given a choice: instead of paying a 30 percent deferred management fee at the end, you can pay a 20 percent management fee up front. That means paying an additional $170,000 on day one. For some people, this down payment is too high. For others, it represents certainty, value and potentially significant savings.
Payment flexibility is not a must-have; This is a must.
From where? Because how you pay for your retirement village unit doesn’t just affect how much you pay into the village; It also affects what you get from the government.
Paying the fee upfront may reduce your assessable assets. For people receiving age pensions, this may mean higher pension payments. For every $100,000 your assets exceed the threshold, your pension is reduced by $7800 per year. Then paying $170,000 upfront instead of $255,000 could mean you’ll get $13,260 more per year in pension.
