Can you afford to retire in luxury?

If you pick up a brochure of a retirement village, you’ll typically see smiling pensioners talking to nurses, frolicking by the sea, exchanging loving glances at one another while playing a game of chess or getting a back massage at the local spa. They’re always happy and appear to be without a care in the world.

But if you’ve put yourself down to live in a particular retirement village or if you foresee yourself living in such establishments, can you genuinely say that you’ve done adequate research into them to ensure that they offer what you’d need in retirement and whether you can, in fact, afford it all?

If you aren’t careful, making the wrong choice could be costly. You may not be happy with the service, level of care being offered or the options available as your circumstances change. But you may be stuck with your choice as your life savings will often not let you make another move easily.

Gerhard Kotzé, managing director of the RealNet estate agency group, warns pensioners not to be blinded by glamourous facilities offered by some retirement villages. “While many of the buyers currently considering a move to a retirement village currently own their own homes outright, they will generally not have another chance to build that sort of equity, or accumulate their current level of savings, even if they continue to work full or part time for many years.”

He adds that retirees should make health their priority: “Consequently, their primary consideration should be to make provision for the fact that their health and mobility will naturally deteriorate at some stage – no matter how young and healthy they feel now. Many people in their sixties and seventies can also attest to the fact that life “accidents” such as heart attacks, strokes and even a bad fall can undo even the best-laid plans for an active retirement.”

Kotzé recommends choosing retirement villages that enable and encourage residents to stay independent as long as they’re able, but also offer several levels of stepped-up healthcare as they need them. “In short, they must use the funds they have available for their retirement housing to buy the most security of lifestyle they can afford.”

The key to finding the right retirement village or accommodation that suits your needs (see below) is to plan early, because there’s a lot of demand and it’s only set to get worse. According to the World Health Organisation, the proportion of South Africa’s population aged over 60 will double to 15.4% of the country’s total population by 2050.

The shortage of accommodation for the elderly means that, in many instances, people do not have a range of options to select from. “Waiting lists for retirement homes are often really long, and it can take five to 10 years before someone finds a place,” says Arthur Case, CEO of Evergreen Lifestyle. “This is why it makes great sense for people to research what is available in good time, and to put their names down on lists in advance of their having to make the move into a retirement village.”

Providers of accommodation include the state; nonprofit community organisations such as Durban’s Association for the Aged and the Cape Peninsula Organisation for the Aged; and property developers. The accommodation each offers differs substantially, based on income.

Costs can vary considerably depending on the location of the retirement village, the facilities included, and the type of accommodation. “It can cost around R500 000 up to R4 million or R5 million. The buyer will also pay a monthly levy that covers a range of costs associated with living in the village, but may exclude some services, for example meals, a hairdresser, nursing, and so on, which is offered on a fee-for-service basis,” explains Case.

Levies may also be payable even if you buy a home in a retirement village. These are paid to the body corporate or homeowners’ association that covers the control, management and administration of the place or scheme. “Different retirement villages have different facilities, but if there are more facilities on offer, it will usually mean that the levies are higher,” warns Pauline Sannasi-Pillay, a senior associate of Hogan Lovells SA.

Your contract or documentation should contain provisions relating to fees or penalties applicable on certain events such as the transfer of land or unit if the occupant vacates the property, but these may not be so easy to find, so it’s important to peruse all the paperwork.

You could be charged homeowners’ levies, retirement village association levies, healthcare levies, and for things and services such as nursing, meal vouchers, laundry, gardening, domestic workers and handyman services.

“It is advisable to compare retirement villages and the facilities available, as well as the associated costs. Always peruse the retirement village constitution, conduct rules and the contract relating to the housing interest,” says Sannasi-Pillay.

Your retirement choices explained

Retirement village is the collective name for all types of retirement models. There are various ownership options to choose from, including freehold, sectional title/share block and life-right schemes.

Freehold: With freehold retirement schemes, the retiree gets ownership of a separate stand (an erf) with a housing unit already built or to be built. The purchaser receives a separate title deed proving ownership.

Sectional title properties/share block: With a sectional title you own units or sections within a complex or development. Sectional title homes include semidetached houses, townhouses, flats and apartments. Like any sectional title scheme, residents will need to form a body corporate to govern the scheme and appoint a third party managing agent to take care of maintenance and estate management.

Life-right schemes: There is no purchase of real estate, but rather a purchase of the right to live in a specific unit. The ownership of the unit is retained by the developer and is not transferred to the individual as with sectional title. It can’t therefore be inherited by your children. A life right terminates when the owner of the life right sells it or dies. However, an estate could still be liable for the levies of the life right until the developer sells a new life right attached to the same property, says Case. “A life right provides security of tenure for life for both partners and is protected by an act of Parliament. The development is usually managed by the developer who takes responsibility for maintenance and all aspects of estate management. Residents’ interests are protected via a residents’ committee.”

If you don’t want to own a property in some way, there are two other options to consider.

• Old-age home (private): Retirement homes, also called old-age homes, can refer to nursing homes that are multiresidence housing facilities intended for senior citizens. “In an old-age-care home, the lifestyle facilities are usually more limited. Here, the focus is primarily on the accommodation and nursing services. Private old-age homes are more often than not owned and operated by a nongovernmental or church organisation,” says Case.
• Old-age home (state): According to the department of social development’s website, you qualify to live in a state facility if you are a female aged 60 years or older or male aged 65 years or older. You also qualify if you receive an old-age grant. You have to apply directly to the home itself and the final decision to admit you will rest with the organisation that manages the home.