Risk to Retirees of Financial Ruin

Risk to Retirees of Financial Ruin - Attention is drawn to the potential for a retirement village resident to be completely decimated financially on departure and there is no legislative protection against it. A retiree with a long term stay in a retirement village is particularly vulnerable from two provisions of their contract of occupancy.

1. 
   

   Whether their Deferred Management Fee is charged on the in-going or the out-going unit value.

   
   


2. 
   

   Whether they share in any of the capital gain in value of the unit over the period of their occupancy.

   
   

Table 4 below shows that the value of the respective unit occupied by the retiree would only need to rise in value x 1.5 times for the resident to lose 100% of their in-going amount paid. Any further increase in value of the unit has the potential to place the retiree into a position where they are actually in debt to the operator based on the terms of their contract signed many years before realisation of the implications.

Consideration must be given by law makers to legislate that where the deferred management fee is calculated on the outgoing unit value, the outgoing resident must receive 100% of any capital gain.

Table 4

 

Risk to Retirees of Financial Ruin.

[blog_subscription_form]