Getting Unstuck: Creating a Win/Win for Parents and Children
Are You Stuck Financially?
As the CEO of a Freehold Independent Living Retirement Community, I am dealing with the financial problems faced by the elderly and retirees every day. It is heartbreaking when people say things like … ‘mum and dad just can’t afford to get into an independent living community that they really want’ or ‘we didn’t plan for our future independent living home by selling the family home at the right time… and now we are stuck.’ Being ‘stuck’ in your own home can be a recipe for loneliness and despair in what were supposed to be your golden years. Some time ago, I set about trying to resolve this problem and developed a new independent living model, based on freehold homes, so that people would not get stuck financially when it came to finding the right independent retirement community to live in.
The Financial Issues:
Finance can become a stumbling block irrespective of the other issues you may have considered in choosing where to live in your later years. When I talked to people about how the financial challenges had arisen, I found some common themes:
- A lack of planning for your independent living home while you are still working
- Not enough cash to purchase your desired independent living home where there are hefty entry fees and your family are not in a position to help you with added cash.
- In most retirement complexes you do not own the land freehold so mortgage or other financing is not possible.
Real Life Solutions
Bill and Maze both 68 visited me recently on one of our estates. They just loved it. Bill wanted to ensure he could continue to drive for as long as possible and hence loved the country town environment to allow this. But they just did not have enough cash to purchase. On the other hand, their son Vincent and daughter in law Ester both had good jobs and earning a good income and had great borrowing capacity in this time of extraordinarily low-interest rates but did not have substantial ready cash to help Bill and Maze. Everyone was stuck. So how to get ‘unstuck’ for everyone’s benefit. Bill and Maze lent Vincent and Ester their cash and Vincent and Maze purchased the home as an investment property. With Bill and Maze paying rent the investment property was cash flow positive and Vincent and Ester had great depreciation benefits for their tax. It was a win/win all around.
Recently, I met Paul 57 and Therese 54, who owned a beautiful large sprawling home in Canberra. Both were working. They were really planning and focusing on their future and finances. They wanted to live in a community environment. Paul felt that it could take time for the right buyer to come along to purchase their home when the time came and did not want to be pressured to sell when they found the independent living retirement home they really wanted. They moved fast and now purchasing a home as an investment property in the freehold Summerfield community estate in the vibrant Braidwood between Canberra and Batemans Bay. With guaranteed rent, low borrowing interest rates, deprecation benefits and real value in the home, as Paul said to me ‘if we waited till we were 65, no one will lend to us, we don’t get the tax benefits and we may have needed to sell our current home quickly at a lower price to purchase what we want’. Our new plan is smart and just makes common sense.
In our company we have actually given our concept a name – Invest + Retire. Basically, we are saying that there may be a way of not getting stuck financially when it comes to living independently in a community environment of your choosing in the future. While it may not be possible or desirable for everybody and you should consult your own professional advisers; for some of us, it may be a good solution to buy our desired property in a freehold independent retirement community before we actually need to live in it and rent it out as an investment until we want to use the home ourselves.
Taking a Holistic View
If I were giving a step – by step timeline to make sure you don’t get stuck, I’d suggest:
- Start thinking, researching, planning and preparing for retirement some years, not just months, before you want to retire.
- Find the best financial solution to support you through the different stages of retirement – this may include arranging loans which are easier when you are working. Get advice on this from professionals who will take your individual circumstances into account because one size does not ft all.
- Involve your family and loved ones. Remember your retirement will affect many people and, on the flip-side, your changed lifestyle will require many people to support you.
- Take a holistic approach – it’s not all about one thing – it’s every aspect of life you have to think about – where to live, finance, how relationships will be affected…
One Size Does Not Fit All
The bottom line is that I believe that if you choose the right structure families can work together to achieve a common goal. It takes planning to start as well as process to achieve – but all things worthwhile take effort. To end, please remember, that on all matters financial an article such as this does not take your individual circumstances into account and you should consult your own financial advisers before taking any financial decisions. Lack of planning for your independent living home while you are still working can mean you will get stuck and not get what you really want as to a community living environment.
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Tim Wright, CEO, Summerfield Property Group.
The opinions contained in this article are those of the author only. The information and opinions in this article are general in nature and are not advice. The contents of this article do not take into account the particular circumstances of any reader and should not be taken as a basis for making or not making financial or other decisions. You should seek specific advice from your own professional financial adviser before making any financial decisions. The Australian Over 50s Living & Lifestyle Guide and its publisher, editor and agents take no responsibility or liability for the actions or decisions, whether financial or nonfinancial that a reader or readers may or may not take as a consequence of reading this article or any part of this article or any extract of this article or any quotation attributed to this article by any party. For More information: click here