Wed, 27 Feb, 2019
Retirement village or stay living at home?
As we, or someone we love gets older, many of us are certain we want to stay living in our own home for as long as possible. But there is often a strong argument from our loved ones that we should consider moving to a retirement village where there are more services to help us and we’ll be less stressed.
It’s one of those big decisions and it’s hard to know which the better choice is. Will staying in your own home end up costing less? Or will moving to a retirement village with assisted living services work out better dollar value? And which accommodation has the most advantages for us in the long run?
These are the questions we want to answer here. Of course, there are so many variables in this scenario, it’s difficult to compare apples with apples. So to make this a bit simpler, let’s look at an example of a retiree who is on say, a part pension, because that’s somewhere in the middle of where most people fall.
COMPARING THE COSTS
Let’s call our retiree, Margaret. She’s been living at home quite well for many years, but since her husband passed away recently, it’s become obvious to her family that she needs to make some changes because she’s just not coping. Her children provide some support but they’re not able to help out on a regular basis. So what are Margaret’s options? Let’s look at the costs of staying at home and getting more services in to help her.
THE COST OF STAYING AT HOME
If you decide to stay living at home, the federal government’s Home Care Packages provides a range of services in the home. There are four levels of packages available, depending on a person’s care needs. To find out which package you’re eligible for you’ll need to have an Aged Care Assessment Team (ACAT or ACAS in Victoria) assessment and they’ll tell you what level of care you qualify for.
Margaret has been assessed by ACAT and they say she is eligible for a Home Care Package at Level 1 (this is the lower level of care). All of the Home Care Packages are heavily subsidised by the government and everyone on them pays a basic fortnightly fee of $137.90 per person, plus an income-tested fee if the recipient receives a part Centrelink/Veterans’ Affairs pension or are self-funded.
In Margaret’s case, she receives a part age pension of $20,807 per annum and receives an annual income of $15,000 from her assets of $250,000 in cash and term deposits. When the government calculates Margaret’s Home Care Package, they consider her part pension and combine this with the deemed income they calculate she receives from her assets. The deemed income is calculated as $7,396 for Margaret. The fact she receives more than this doesn’t matter. For the purpose of calculating her Home Care Package, her combined income comes to $28,203 per annum.
If you put this amount in the Home Care Fee Estimator, the figure Margaret must pay for Home Care is the basic fee of $137.90 per fortnight which everyone pays (or $3,595 per annum) and on top of that, she must also pay an income-tested fee of $724 per annum.
When she pays these amounts, she’s entitled to the full Home Care Package of six hours of services per week, including cleaning, gardening, drivers etc.
So when you add up all of Margaret’s expenses, if she stays at home, she will be paying approximately these amounts:
- Council rates and home insurance: for Margaret, approximately, $220 per month.
- Utilities: Margaret pays utilities including gas, electricity and water at an average of $100 per month.
- Maintenance: She pays for all the maintenance repairs on the home and this comes to approximately $100 per month.
- Meals: Food is a major item in most people's budgets, accounting for up to a third of total monthly expenditures. Margaret can apply for a home care service to deliver the evening meals and this added to the cost of other items she will buy each month will cost on average, $400 per month.
- Household assistance or personal care: As she has been assessed by ACAT as Level 1, Margaret can have up to six hours of cleaning and gardening per week and the cost for this is included in her Home Care Package fee of $360 per month. As she doesn’t drive much these days, she can use some of her hours to hire someone to drive her to appointments, do her shopping and perhaps help pay her bills etc. Later on down the track, if she ends up needing at-home medical care, this will be extra, but at this stage she doesn’t require this.
All up, the total approximate cost of Margaret living at home will be $1,180 per month. (There are additional costs of course such as entertainment, clothes, travel etc but these apply in an assisted living facility as well).
THE COST OF LIVING IN A RETIREMENT VILLAGE WITH ASSISTED LIVING SERVICES
If Margaret decided to move to a retirement village with assisted living services, she will have a wide array of options to choose from. If she chooses an apartment, she might spend anything between $100,00 and $500,000. Of course, this all depends on the size and location of the apartment.
For Margaret, the accommodation payment for the retirement village, is similar to owning an asset such as her own home. But there is something else to keep in mind – when you buy into a retirement village, there is an exit fee called the Deferred Management Fee or DMF. This has to be paid to the retirement village when she leaves or passes on, calculated at between 20 and 30 percent of what she paid.
The Deferred Management Fees turns the usual way of buying a property on its head. Instead of paying the entire principal up-front to acquire a property, a percentage of the purchase price is paid as a bond into a trust account. The DMF is calculated when the resident leaves the village, and the balance of the bond is returned to the former resident or beneficiaries once the home is re-sold.
These days, many providers will allow Margaret to share in the capital gains that her retirement apartment has accrued over the time she has been there, so this can offset the DMF to some extent. But from a cost point of view, the DMF can sometimes be seen as a negative factor which must be considered.
If Margaret moves to a retirement village with assisted living services, she will be paying approximately these amounts:
- Monthly Maintenance Levy: Margaret has chosen a two-bedroom apartment and the maintenance levy is calculated according to how many square metres your accommodation is. The levy covers grounds maintenance, use of common facilities, village staff wages, transport, social activities, water bills and Nurse Call. For Margaret, with 140 square metres of space, she will pay approximately $400 per month.
- Utilities: Margaret will still pay for her own utilities including gas and electricity but not water. As she is in smaller accommodation, her utilities will be less. They will be approximately $60 per month.
- Maintenance: She pays for all the maintenance repairs on the accommodation but as her accommodation is smaller and newer, her maintenance costs should be less. They will be approximately $30 per month.
- Meals: Margaret can still have a home care service deliver her evening meals or she can buy meals as part of the retirement villages assisted living services. These meals plus the cost of other items bought each month will add up to on average $400 per month.
- Household assistance or personal care: Margaret is still eligible for Level 1 Home Care so she if she wanted to, she could register to have the full Home Care Package while she is living in a retirement village at $360 per month. However, many people don’t opt for this solution because most of the services they need are covered under the maintenance fee. Margaret may only require some help with cleaning and laundry. Many retirement villages will provide help with these services and this will cost Margaret around $300 per month.
So the total approximate cost of Margaret living in a retirement village with assisted living services will be around $1190 per month.
If we compare this with the total cost if Margaret stays living at home, the costs are very similar. Of course, this will not be the case with everyone because it depends on personal requirements and preferences. But in Margaret’s case, the costs work out to be virtually the same.
THE ADVANTAGES OF STAYING AT HOME
There are many advantages if you stay in your own home. For a start, you’re able to keep your familiar routine and stay near your family and friends. You can keep taking part in your local community and - most importantly – you can retain a lot of your independence.
As well, by keeping your routine, you won’t have to cope with the major stress of packing up and moving to a new residence. You’ll be able to keep seeing your trusted GP and all the other people you have come to know and trust.
Another advantage of staying at home is the fact your home will usually gain in value over time, so you have an asset which will serve you well in the future.
However, it is often cited within the industry that Home Care Packages in the home can be quite disjointed, with some services coming from one provider and others from somewhere else. This is something to bear in mind.
THE ADVANTAGES OF A RETIREMENT VILLAGE WITH ASSISTED LIVING SERVICES
If you move to an assisted living community, you’ll be offered a whole range of new daily opportunities for social interaction. Many studies have found this is extremely important for our mental health. In fact, there are some medical studies which claim social isolation is a key factor in the onset of dementia.
By moving to a retirement village with assisted living services, you’ll be able to take part in exercise classes, games of bowls, golf, tennis etc. All of these physical activities will be much harder to take part in if you remain in your own home because you’ll have to get someone to drive you to the activity and you’ll have to pay for it which adds up to extra time and money. Other advantages of an assisted living community include more ‘you’ time and less stress. If you’re in a facility like this, you won’t need to worry about much shopping or preparing food with the end result - you’ll have more time to enjoy yourself.
Another important point to keep in mind is the fact you are ageing and as you get older, your health will eventually deteriorate, and you may end up requiring nursing care. If you remain in your own home, this type of nursing care will add up to be very expensive. But if you move to a retirement village which is linked with an aged care facility, you’ll be able to transfer to this facility with a minimum of fuss and some increase in costs, but these can be offset by government subsidies as well.
SO WHAT’S THE VERDICT?
Looking at the costs of living at home compared to moving to a retirement village with assisted living services, it’s clear the costs could end up being very similar. But when we look at which is the better choice in the long run, there are advantages on both sides. Ultimately, the choice is yours – you can stay at home and feel comfortable and relaxed but possibly a bit isolated or you can move to a retirement village and enjoy a less stressed lifestyle with more opportunities to interact with people. It’s all up to you.
Would you prefer to stay at home or move to a retirement village? Let us know in the comments below.
Written by Pamela Connellan. Republished with permission of Wyza.com.au.