Many people are confused about the difference between a retirement community and an aged care facility, and I would certainly agree that the lines appear to be blurring between the two.

So what is a retirement village?

A retirement village is basically whatever is defined as a retirement village in your state or territory’s retirement village legislation. Typically, the legislative definition describes it as a property where retired or older people reside, and they purchase a right to occupy (usually via a lease or licence to occupy) and may purchase additional services for a fee. A village needs to be registered under the state retirement villages act in order for it to charge all of those weird and wonderful fees like deferred management or exit fees.

However, you may have heard of other retirement living facilities such as an Over 50′s or Over 55′s village, or a lifestyle resort. These complexes typically sell you the freehold title to the built structure (the house) and then lease you the portion of land it sits on. These developments come under the state or territory’s manufactured homes legislation, usually the same legislation that covers caravan parks and the like.

Other retirement-style facilities include freehold complexes, where you own the freehold title to the unit. These facilities may or may not be registered retirement villages and may or may not charge all of the same fees (such as deferred management or exit fees) that you will find in a village operated under the retirement villages legislation.

There are around five different types of purchase and occupancy arrangements for retirement villages and each one has its own framework of fees, charges and complexity. Generally speaking, the occupant pays an upfront fee similar to the freehold value of the property, then a small regular fee during their occupancy, and a larger deferred fee upon exit.

Retirement villages are typically targeted to retirees who can live independently, although many villages now offer some care services as well.

Aged Care on the other hand, comes under the one Commonwealth Aged Care Act 1997, which dictates how the charges and occupancy is arranged. There is still a fair bit of discretion on the operators behalf as to the quantum of charges, and you should be sure to get good advice from a financial planner skilled in the aged care area before you sign anything. As with retirement communities, certain aspects can be negotiated and you should never rely on the company sales agent to give you the right advice.

Under the aged care model a resident may be charged for the care and services provided, as follows:

• Basic daily fee – as a contribution toward accommodation and costs of daily living.
• Income tested fee – as a contribution towards the costs of care.
• Accommodation payment – as a contribution towards capital accommodation costs.
• Extra services charge – applies to residents occupying extra service places (both permanent and respite) for the provision of a significantly higher standard of accommodation services and food.
• Additional service fee – where the resident requests or agrees to additional services (such as newspapers and hairdressing).

Aged Care facilities are targeted to seniors who need an element of nursing support in their day-to-day lives. This can range from a little assistance through to full palliative care. You can find out more on the Australian Government’s aged care website.

I think the confusion arises where you have retirement villages which offer an aged care facility within the same complex as the independent living units. These villages are called “integrated villages” and seek to offer a complete spectrum of care to alleviate the need for its resident’s to ever move again. Well-planned complexes will have the aged care area well separated from the independent living area so that able-bodied residents don’t mix with those who are requiring care.

Integrated facilities typically offer aged care as an incentive to potential purchasers interested in the independent living units, because this is where operators make their money. It is worth noting however that there is usually no guarantee to an existing resident of the village that there will be a place for them in the aged care facility, and they may still have to go onto a waiting list for a place. You may also have to sell your existing unit to fund your aged care place, and the fees associated with a sale of your residence can seriously deplete your capital base.

The aged care facilities within a retirement village may operate under the Aged Care Act 1997 and charge the purchase and occupation fees accordingly, or they may simply charge a weekly/monthly rental, or they may operate under the same deferred management fee schemes as the independent living units within the retirement village.

The whole area of aged care and retirement communities can be a real minefield. I strongly suggest that you find a good financial advisor who can guide you through the process and make sure you get the best deal you can.

If you would like to know more about Aged Care, Noel Whittaker and Rachel Lane recently published a book called “Aged Care – Who Cares?”. To promote the book they are running a series of aged care seminars in Brisbane, Sunshine Coast and the Gold Coast. The seminars are free and I would strongly encourage you to attend if you are interested in learning more about aged care.

The details for the general public seminar are attached here: WM Invitation – Aged Care Public Sessions 2011. Make sure you call to book your seat – previous seminars have booked out.

The details of the seminar aimed at aged care operators and industry is attached here: WM Invitation – Aged Care Industry Conferences 2011.

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The following list is a combination of wisdom from Kim Snider, financial advisor, financial radio talk show host, financial mentor and CEO of Snider Advisors and an “Advisor Perspectives” article by Paul Merriman entitled “Ten Retirement Lessons from the Smartest People I Know”.

Lesson One

Happiness in later life is not a direct function of how much money somebody has. Successful execution of a financial plan, in and of itself, will not make you happy. Successful execution of a life plan, of which a financial plan is only one part, might.

Action: If you haven’t already, create a life plan. There are as many ways to do this as there are people.

Lesson Two

Wealth comes from choices people make, not chances they take. The key to financial success is in balancing what you want today with what you need tomorrow. Our brains are inherently flawed when it comes to understanding risk. Hope and luck are lousy financial strategies.

Action: I find it is far easier to make good choices when I can see the long-term consequences of the choices I am making. That means an interactive tool that extends your financial situation out into the future so you can do what-ifs.

Lesson Three

Those who plan also prosper. Have this one tattooed on your forearm so you can look at it every day. A plan is a way of bringing the future into the present so you can act on it in a meaningful way. Without a plan, you are just a leaf, drifting in the current, content to let circumstances dictate your course and fate. A plan is your paddle. With it, you can affect course, speed and destination.

Action: If you know you will never create a plan without a little nudge, register today for a course in financial planning or retirement planning.

Lesson Four

Don’t wait to start saving. Albert Einstein is commonly quoted as saying compounding interest is “the most powerful force in the universe.” While he didn’t really say that – it is an urban legend – the legend likely persists because compounding is so simple and so powerful, we can easily imagine he might have. When it comes to money, time can either be your biggest ally or your biggest enemy. When you pay interest, it is the enemy; When you earn interest, time is your best friend.

Action: The easiest and most effective way to save is in a superannuation plan.

Lesson Five

Retirement belongs to those who are still with us. The point here is that your health is an important asset. Being unhealthy is expensive and no fun – especially as you get older. If you view retirement as a period of time in which to really enjoy life, you don’t want your health to be a limitation. I once read something from sociologist who said, if we conducted every aspect of our life as if we knew for absolute certain we would live to be 105, no matter how long we actually live, our quality of life would be much improved as a result.

Action: What mental and physical health items you have been neglecting? Get them checked out or checked off your list.

Lesson Six

Insure the risks you can’t afford to take. Never insure the others. I am constantly amazed at the crazy decisions people make regarding insurance. I recently watched a millionaire buy trip insurance on an $8000 vacation. I know for a fact that same person has a history of debilitating illness in his family and does not have long-term care insurance. I, myself, made one of the classic mistakes when it comes to insurance. Years ago, I was struggling financially and fell prey to the “It’ll never happen to me syndrome.” Well… it did happen to me. That is when I learned a valuable lesson about insurance – when you think you can least afford it is when you need it most!

The smartest people I know are completely rational about the insurance they buy, how much and for how long. They understand insurance is not a luxury. It is one of the four legs on which any solid financial plan must rest.

Action: If you cannot be dispassionate about your insurance needs, find a trusted advisor who can be.

Lesson Seven

Only use debt to buy appreciating assets. Smart people understand there are two kinds of debt: bad debt and better debt. Better debt is debt used to buy an asset that is expected to appreciate over time. This includes your primary residence, business and other investments. Everything else is bad debt. Better debt contributes to your financial well-being. Bad debt slowly sucks it away. Smart people only incur better debt.

Action: If you have bad debt, make a plan for getting it taken care of.

Lesson Eight

Don’t pay off your house. Yes. You read that right. Don’t pay off your house. Unless you have no other constructive use for your money. I used to be a believer in a paid-off house. Over the years, I became convinced that idea was outdated. The smartest people I know make their money work hard. Money tied up in your house is lazy money. Your house may appreciate over time, but historically, in most parts of the country, you are lucky if your house goes up by 3% – 4% per year. That is not enough.

Money tied up in your house is not liquid. When you need it most is when it is going to be hardest to get out. I have a friend who is in financial trouble. He has $500,000 of equity in his house. He can’t get a home equity line of credit because he is in financial trouble and he can’t declare bankruptcy because he has too much equity in his house!

Money tied up in your house produces no cash flow. I am all about cash flow. It makes the problem of markets and economies that go up and down over time much more manageable.

Money tied up in your house is not diversified. For most of us, the value of our home represents too much of our net worth to be tied up in a low return, illiquid, non-cash flow producing asset.

Finally, people cling to the quaint idea of a paid for house as security. No one can force me out. At least I’ll have a place to live. It’s mine. I own it. It’s paid for.

It’s also wrong.

The smartest people I know don’t pay off their house or even make extra payments on their mortgage unless they have more than enough money to meet all other financial objectives.

Action: If you are making extra payments on your primary residence, find a better use for that money.

What about you? If you were going to write an article entitled, “Retirement Lessons Learned From the Smartest People I Know”, what would be on your list?

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I found a great article this morning by Karen Maley on the Business Spectator website, which talks about how the ageing population will affect house, stock and bond prices. Essentially, the group of asset buyers (GenX, Gen Y, etc) is shrinking while the group of asset sellers (baby boomers, retirees, etc) is growing – you don’t have to be a trained economist to know that increasing supply and falling demand equals lower prices.

I dont blog about financial stuff as a rule as there are plenty of people out there doing it and hey, my specialty is retirement housing, not finances! I will post interesting stuff when I find it though.

What do you think? Will the ageing population lead to lower asset prices or will immigration keep us in perpetual growth?

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I came across this great article today on how to choose a financial advisor. It is written by Hank Coleman (yes, he’s American!) on his blog called “Own the Dollar”. Although it is aimed at a US audience, the tips contained in the article would be appropriate to anyone wanting some tips on how to choose a financial advisor.

In summary, the tips are:

1. Heart of a teacher - You have to know what your planner is doing with your money and why.  It is your money.  A financial planner should teach you, show you all of your options, and let you pick where you want to invest your money.
2. Licensed – In Australia, a financial advising practice needs to hold, or be part of a network that holds an Australian Financial Services Licence, as issued by ASIC.
3. Certifications – Check your financial advisor’s qualifications – are they trained to give financial advice?
4. Salesmen & compensation – Financial advisors are paid either through commissions on the products they sell (although this is slowly being phased out) or by you through hourly fees or service fees. Discuss up-front how the advisor is compensated and make sure you are comfortable with the method of payment. Financial advisors have to earn a living and you as the client need to understand that “you get what you pay for” – if you pay peanuts you will get a monkey! Personally, if there are three professionals representing me that I want to be well-fed and happy, it is my solicitor, accountant and financial advisor!
5. References & Interview - Your advisor should be passionate about personal finance and investing, passionate about teaching you and explaining personal finance to you, and above all, good with money! Ask trusted friends and relatives for references. Treat your selection of a financial advisor like a job interview.

You can read the full article here - How to choose a financial advisor

Click here to go to the website of the Australian Securities and Investment Commission (ASIC) website to download their Fact Sheet - Guide to choosing your financial advisor

Also check out the websites of the Financial Planners Association and the Certified Practising Accountants to find a financial advisor near you.

What about you? Got any tips you can share about choosing a financial advisor?

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Our first-ever blog!

For our inaugural blog, I though I would take the opportunity to introduce you to my company, Find My Retirement Home (FMRH). I started FMRH in mid-2009, in the depths of the Global Financial Crisis, after being made redundant from my role as fund manager for a listed property management company. I had fully-intended to take advantage of the market turmoil and have a well-deserved year off, however it was not to be!

In between watching lots of TV and fishing, I was doing a little consulting on the side to keep my mind active. I had a client who was a retirement village operator and I was assisting them with some strategic re-positioning. While doing some market research for the client, I thought I would get in touch with a buyer’s agent that specialised in retirement homes to ask some questions around what retirees were looking for when considering the purchase of a retirement home. To my surprise, I couldn’t find one! I was stunned – here was a large and complex sector that appealed to a huge and strongly growing demographic, yet there was no-one providing our seniors with quality, independent advice about their purchase! I guess that was my eureka moment as I thought, “I could do that”! Never one to let a good idea go past, I swung into action and launched “Find My Retirement Home” a couple of months later.

Find My Retirement Home is an independent advisor and buyer’s agent that specialises in retirement living. Our mission is to help retirees get the best deal possible on their retirement home purchase and we do this in two ways – firstly, we work with retirees and/or their families to make an informed decision, to ensure they get a retirement home that is right for them. Secondly, we negotiate the deal or provide the client with information to negotiate the deal themselves to make sure they get a purchase arrangement that is right for them.

Our service ranges from a “Rolls-Royce” full turn-key solution, where we do all of the time-consuming research and analysis into any region in Australia and negotiate the best deal possible on the buyer’s behalf, to an information-only service called the Access Program, where we provide clients with all of the information and tools they need to do the work themselves.

Professional Development

We also provide professional development training to professional advisors such as accountants, solicitors and financial planners, to educate them about the retirement living sector and provide them with the training, tools and resources they need to give advice to their clients about purchasing a retirement home. The training consists of a 90 minute introductory course called “Making SENSE of Retirement Homes” and a further 90 minute course called the “Retirement Home Advice MASTERCLASS”.

These courses are designed to assist professional advisors to develop new advice and revenue streams around the provision of advice to clients needing assistance in purchasing a retirement home.

We also provide professional advisors with membership access to a special website that acts as an information and resource portal to provide them with the information, tools and resources they need to provide advice to their clients.

If you want to find out more about Find My Retirement Home or buying retirement homes in Australia, check out our:

Website

YouTube Channel

Facebook Page

Twitter

Otherwise feel free to give me a call anytime on 1300 425 442 to have a chat!

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