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#1 morgansacre

Posted 06 February 2013 - 05:07 PM

Hi,

I have been making some enquiries at the only retirement village, in the town DH and I want to end up in...this is in a tiny country town.

DH and I are selling our home and using what equity we have to buy a caravan and travel around Australia for a few years. This will happen in 2 years when our youngest child has finished YR12. We were going to just live in the self contained caravan at my oldest DDs place when we finally finish travelling. But I thought about checking out retirement homes to see if we could end up there...

The 2 bedroom homes are $185,000,
i just dont know how on earth most retired people can afford them?

This is more than our mortgage now. We need to sell our home as we will not be able to afford our $151,000 mortgage once DH leaves work and we are on the pension and paying all the bills too. We only have around 50% equity so its not that much. With very little super no bank would take us on with a loan even if we had a $50,000+ deposit.

I always assumed that you pay a rent type thing...I knew you pay a yearly or monthly service fee, I just never thought it would involve another mortgage. I understand most retiree's have a lot more equity in there home and/or have a good super...but we don't.

So the reason for coming on here:
Do all retirement homes have to be bought?
Does anyone here have parents etc. in a retirement home?
How do they do it?

Lynn

#2 Dresden

Posted 06 February 2013 - 05:13 PM

Are you talking about the over 50's "gated" community/residential homes, or like nursing residential homes?

#3 YandiGirl

Posted 06 February 2013 - 05:17 PM

Be wary of those retirement places and the conditions associated with them. They often have some very nasty provisions included. You buy in, but there won't necessarily be an asset to be sold once you 'move on'. There are usually sliding scales with the end result being you leave owning nothing.

#4 TillyTake2

Posted 06 February 2013 - 05:21 PM

Not all nursing homes have bonds but most retirement villages etc do.

Fwiw $185,000 is incredibly cheap, around here they start at $500,000!

I know it doesn't help you but I don't think you'll find that there are many people who are about to retire with less than $200,000 in super/cash/equity.

How old are you? I'd be thinking you need to work & save for a few more years. My parents both still work, both in their mid 60's.

#5 Soontobegran

Posted 06 February 2013 - 05:24 PM

Around these parts it will cost at least $400k for a decent home in a decent retirement village so it seems to be only an option for those who have already paid off their mortgage and will have the money made from the sale of their home to get them in.
My mum and dad bought into a retirement village but they are bound by so much red tape when it comes to the sale of the unit when they die that is seems to be a nightmare best done without.

I really know very little about the process other than what I have seen happen to my parents and friend's parents but as I said they were all homeowners free of mortgages.

Good luck, I guess we need to think about this sometime in the next decade. I love the idea of being grey nomads Lynn. I hope someone has more information to help you with.

#6 jojonbeanie

Posted 06 February 2013 - 05:26 PM

QUOTE (morgansacre @ 06/02/2013, 06:07 PM) <{POST_SNAPBACK}>
DH and I are selling our home and using what equity we have to buy a caravan and travel around Australia for a few years. This will happen in 2 years when our youngest child has finished YR12. We were going to just live in the self contained caravan at my oldest DDs place when we finally finish travelling.

Given your financial instability perhaps it is not wise to sell off your only asset and invest the money in something which is only going to depreciate. Aren't you going to need as much money as possible for future medical expenses, accommodation, vehicles and care?

#7 Peppery

Posted 06 February 2013 - 05:27 PM

My grandfather purchased a villa in a retirement village, we he passed away the retirement village gave his estate a sum of money that was agreed upon at time of purchase. It did not reflect the current purchase price for the villa.

I think he used to pay a weekly maintenance fee as well.

#8 morgansacre

Posted 06 February 2013 - 05:30 PM

It's a retirement home where you come and go as you please. If you pay the service fee they will do all maintaince on the house and front yard free. There are no medical services connected with it, so it's not a nursing home.

I will be 51 next month and I can't work, DH will be 68 next month and wants to retire from work at the end of June 2015. So us working longer is not an option.

Lynn

Ok it seems like a retirement home is not really a good thing. Tats ok it was just an idea. DD has offered to pay half for a granny flat on her property, which we are thinking about...I just don't like the idea we may be stuck there.

Edited by morgansacre, 06 February 2013 - 05:35 PM.


#9 TillyTake2

Posted 06 February 2013 - 05:37 PM

If I was in your position I wouldn't be selling my only asset & spending the only money I had left to live off forever on a holiday... Just saying...

#10 Mumsyto2

Posted 06 February 2013 - 05:40 PM

[quote name='morgansacre' date='06/02/2013, 05:07 PM' post='15306384']
The 2 bedroom homes are $185,000,
i just dont know how on earth most retired people can afford them?
/quote]
You are obviously not looking in Sydney - I have eyeballed them for the future & you would struggle to get a 2 bedder for under 650/700 in any half decent area. I would think 185K is a steal  biggrin.gif

#11 morgansacre

Posted 06 February 2013 - 05:51 PM

QUOTE (TillyTake2 @ 06/02/2013, 06:37 PM) <{POST_SNAPBACK}>
If I was in your position I wouldn't be selling my only asset & spending the only money I had left to live off forever on a holiday... Just saying...


Unfortunately once DH retires we can't live here, it would take one of our pensions to pay the mortgage and the other we couldn't live on. So we have no other choice.

#12 sandgropergirl

Posted 06 February 2013 - 05:52 PM

Thats pretty depressing - that for a lifetime of work you guys have ended up in such a crappy financial situation

#13 janeway

Posted 06 February 2013 - 06:13 PM

It seems like it would be a good idea to hold onto your home? Have you looked at refinancing to get the payments lower?

My FIL has recently remortgaged his home for a 25 year term. He is in his 70s and has been retired for years due to ill health. Apparently the bank is not allowed to discriminate based on age. He has been with his bank for years & they were really helpful.






#14 TillyTake2

Posted 06 February 2013 - 06:26 PM

QUOTE (morgansacre @ 06/02/2013, 06:51 PM) <{POST_SNAPBACK}>
Unfortunately once DH retires we can't live here, it would take one of our pensions to pay the mortgage and the other we couldn't live on. So we have no other choice.


But there would be more sensible financial solutions that selling up & going on a holiday!!

How much equity will you have after you sell? How much super & savings do you have?

Even on a pension I can't see why you couldn't fund a $100,000 mortgage. That's about $120-140 a week!

Eta: you'd be receiving at least $1160 per fortnight in pensions between you (assuming full aged pension given you have no assets). If you spent $260 on housing that leaves $900 on other expenses. Whilst tight it is doable. This assumes you have zero savings, zero super & zero equity in your home which would seem highly unlikely.

I find it hard to imagine how somone could end up in their 60's in that situation. We are in our 20's & have almost $100,000 in super plus around $100,000 equity in our home & have in no way been big earners or savers.

Edited by TillyTake2, 06 February 2013 - 06:31 PM.


#15 tenar

Posted 06 February 2013 - 06:45 PM

I suggest you get advice from a financial planner, OP, before selling your house.  Agreed that selling up, putting the money into something that will depreciate pretty fast, and then being unable to fund your retirement doesn't sound very sensible to me.  

Maybe you could sell your house and buy a smaller one?  Or look into retirement villages that have 1br apartments?

#16 emnut

Posted 06 February 2013 - 09:42 PM

QUOTE (TillyTake2 @ 06/02/2013, 06:21 PM) <{POST_SNAPBACK}>
I know it doesn't help you but I don't think you'll find that there are many people who are about to retire with less than $200,000 in super/cash/equity.


You would be surprised how high the figures are for people who have far less than this when they retire - many people who are retiring now haven't had super for long enough to make any real impact


QUOTE (TillyTake2 @ 06/02/2013, 06:37 PM) <{POST_SNAPBACK}>
If I was in your position I wouldn't be selling my only asset & spending the only money I had left to live off forever on a holiday... Just saying...


Agree with this - my parents made this mistake & now in their late 60s are struggling to find someone to rent them a home with little income.  They had planned to either live in their caravan (went completely pear shaped trying to do it & nearly cost them a 40+ year marriage) or sell  it to have cash but a year on still haven't been able to sell a top of the line caravan in excellent condition.

QUOTE (TillyTake2 @ 06/02/2013, 07:26 PM) <{POST_SNAPBACK}>
I find it hard to imagine how somone could end up in their 60's in that situation. We are in our 20's & have almost $100,000 in super plus around $100,000 equity in our home & have in no way been big earners or savers.


It is very easy for this to happen - many people retiring now haven't had super for that long & grew up in an age where you retired to get the aged pension with not a lot of understanding or time to be able to invest in aggressive super strategies.  Illness, job losses, going through the recession in the 80s, the recent GFC wiping out their funds etc.  A whole heap of life circumstances.  I highly doubt that you are not high income earners or savers with that much equity in your home & super at your age - I know that in my circle of friends & acquaintances in early 30s to late 40s there would be many average income earners that have any chance of achieving that

ETA - agree with Tenar - you should definitely seek the advice of a financial planner

Edited by emnut, 06 February 2013 - 09:42 PM.


#17 sandgropergirl

Posted 06 February 2013 - 09:49 PM

QUOTE (emnut @ 06/02/2013, 10:42 PM) <{POST_SNAPBACK}>
You would be surprised how high the figures are for people who have far less than this when they retire - many people who are retiring now haven't had super for long enough to make any real impact




Agree with this - my parents made this mistake & now in their late 60s are struggling to find someone to rent them a home with little income.  They had planned to either live in their caravan (went completely pear shaped trying to do it & nearly cost them a 40+ year marriage) or sell  it to have cash but a year on still haven't been able to sell a top of the line caravan in excellent condition.



It is very easy for this to happen - many people retiring now haven't had super for that long & grew up in an age where you retired to get the aged pension with not a lot of understanding or time to be able to invest in aggressive super strategies.  Illness, job losses, going through the recession in the 80s, the recent GFC wiping out their funds etc.  A whole heap of life circumstances.  I highly doubt that you are not high income earners or savers with that much equity in your home & super at your age - I know that in my circle of friends & acquaintances in early 30s to late 40s there would be many average income earners that have any chance of achieving that

ETA - agree with Tenar - you should definitely seek the advice of a financial planner


I would disagree with some of this. I agree about super. But disagree that most 60/70 year olds don't have their own house at least or enough equity to sell and buy something smaller. Going off in a caravan and coming back to no house, having to rent with just a pension is financially stupid. Or frankly irresponsible.


#18 mumto4boys

Posted 06 February 2013 - 09:56 PM

OP - I am really sorry that you are in this situation.

This is exactly what always worries me when people get into the rent Vs buy debate. Paying the mortgage and moreso the interest on that amounts is a real pain in the bum but at least at the end of the day you have equity in something to assist you in your retirement years.

Until recently I had always put the absolute minimum into my super but having worked full time for 28 years, it has certainly added up. Hopefully DH and I will also have the mortgage all paid a number of years before we both retire.

Luckily we live in a country that won't see the elderly completely on the street but the pension certainly doesn't cover much. I'd hate to be hitting 70 with no assets and relying on the pension.


OP, none of that helps you right now but hopefully through your thread some of the younger EB members will pause to think over their futures.

I think you really should try to get some professional financial advice. If your DH is going to work for a couple more years, there is still time to put some strategies to help you in place. Can he salary sacrifice his super from now on? I do this and it actually gives me slightly more money in the hand each week. Put any difference you get into the mortgage. Whilst he is still working, can you find some ways to pay down some more of the mortgage? Then, when he is about to retire, refinance the mortgage and see if you can get the payments to a manageable level. As much as you might desire the travelling life, selling up and spending what you have may not be the best idea. If you spend the nest egg and live with your daughter for a few years that's fine but what happens if you live long enough to require an actual nursing home? Could you travel without selling up? Perhaps rent out your home so that you still have it when you eventually return?

I don't have the answers but I'm sure professional advice would help. See if the bank where you currently have your mortgage offers free financial planning.


#19 emnut

Posted 06 February 2013 - 10:43 PM

QUOTE (sandgropergirl @ 06/02/2013, 10:49 PM) <{POST_SNAPBACK}>
I would disagree with some of this. I agree about super. But disagree that most 60/70 year olds don't have their own house at least or enough equity to sell and buy something smaller. Going off in a caravan and coming back to no house, having to rent with just a pension is financially stupid. Or frankly irresponsible.


I didn't say most I said many - I know the area I live in, it would be close to 50% of people in that demographic are in the situation without the equity in their home to downsize largely due to the price of properties now - they sell their older houses but then have to pay a similar amount to what they could sell for a downsized property.  I believe I pretty much agreed with the caravaning etc being a financially stupid idea if only based on my parents decisions.

#20 TillyTake2

Posted 07 February 2013 - 06:51 AM

QUOTE
I highly doubt that you are not high income earners or savers with that much equity in your home & super at your age - I know that in my circle of friends & acquaintances in early 30s to late 40s there would be many average income earners that have any chance of achieving that


Just on this point... Everyone has had super for at least the last 10 years. A couple earning $45,000 each a year (below the average in Australia) would have acquired around $90,000 in super (not including returns) in this time. A couple with one partner on $70,000 & one on $50,000 (again, not high income but doing reasonably well) would have over $120,000.

In reality, compulsory super has been in place since 1992. Even in the ops case where there is only one person working, les say earning $55,000 they should still have in excess of $110,000! Even at minimum wage & only one working partner they would still have around $65,000.

I do find it hard to believe that many people in their 60's have worked for minimum wage their ENTIRE life. If that is the case I would suggest they have made some rather poor decisions. Having $100,000-200,000 in super for most people retiring in their 60's today is a bare minimum & very realistic. They have had compulsory super for 21 years!!

#21 Lifesgood

Posted 07 February 2013 - 07:01 AM

There are retirement villages and then there are nursing homes/ hostels.

The former you have to buy into (and in Sydney you are looking at $500k and up) but the latter you can get into by just paying a bond or if you can't afford a bond it is waived. They then take 85% of your pension and cover all expenses - meals, laundry, cleaning, maintenance, bills etc - and you just use the remainder for social expenses.

#22 sandgropergirl

Posted 07 February 2013 - 09:55 AM

QUOTE (TillyTake2 @ 07/02/2013, 07:51 AM) <{POST_SNAPBACK}>
Just on this point... Everyone has had super for at least the last 10 years. A couple earning $45,000 each a year (below the average in Australia) would have acquired around $90,000 in super (not including returns) in this time. A couple with one partner on $70,000 & one on $50,000 (again, not high income but doing reasonably well) would have over $120,000.

In reality, compulsory super has been in place since 1992. Even in the ops case where there is only one person working, les say earning $55,000 they should still have in excess of $110,000! Even at minimum wage & only one working partner they would still have around $65,000.

I do find it hard to believe that many people in their 60's have worked for minimum wage their ENTIRE life. If that is the case I would suggest they have made some rather poor decisions. Having $100,000-200,000 in super for most people retiring in their 60's today is a bare minimum & very realistic. They have had compulsory super for 21 years!!



This

#23 emnut

Posted 07 February 2013 - 10:14 AM

that is the case on today's wages but only 10-12 years ago the average wage was a lot lower - around $35K therefore super was a lot lower and there was a large chunk of time where super has not performed well.  In any case, particularly in rural and semi rural areas where incomes are lower I stand by my comments that there are many people in similar situations.  Yes bad financial decisions come into it, but so do other life circumstances - it doesn't necessarily take living on minimum wage to mean that you don't have the financial resources to plan for or cope with retirement.

#24 TillyTake2

Posted 07 February 2013 - 10:19 AM

That is true re changing wages BUT my calculations don't include the return on investment, which would balance it out.

Super funds have returned 6.6% as a 20 year average with 17 out of 20 of the last 20 years showing positive returns.

There are very few people who would not have been able to acquire $100,000 in super over the last 21 years.

Edited by TillyTake2, 07 February 2013 - 10:20 AM.


#25 TillyTake2

Posted 07 February 2013 - 10:27 AM

To calculate it out using your theory of the average wage from 20 years ago, indexed at 4% a year & assuming an average earning of 6.6% (which is what the funds have averaged over the last 20 years) then you would have a single person with over $170,000 in super!! Above average earners & couples would obviously have considerable more.

See stats http://www.ato.gov.au/superfunds/content.a...page=37&H37

Edited by TillyTake2, 07 February 2013 - 10:29 AM.





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