Think retirement now
Making arrangements for your future retirement is not something most people relish doing. But when it comes to retirement homes and frail care, people tend to leave it too late and get stuck on long waiting lists. On top of this, frail care costs are quite phenomenal, which means the sooner you start preparing, the better.

Don’t sell just yet

"Many people who own large properties believe that the right thing to do as they age is to sell and put a chunk of the proceeds from their homes into policies that will pay out a monthly amount if they need frail care," says Berry Everitt, MD of Chas Everitt.

"But there is a problem with such arrangements, in that the sale of the house must realise a really hefty sum, and that the amount available for investment will be eroded if there is still a home loan to pay off."

A better option, he suggests, is to pay off the property as soon as possible and then, if it becomes necessary, to let it out and use the monthly rental income to pay for frail care.

Employ a management company

If you decide to keep your home and rent it out when you need to move into frail care, you could get a management company to handle the landlord issues and channel the money to the frail care centre, as well as to see to maintenance of the property.

Buy as an investment

Alternatively, you could buy a retirement home say in a retirement village and rent it out until you retire, or put your parents up, thereby giving yourself a home once you reach retirement age.

Buying into a retirement village is a great investment as there is a shortage of good retirement space and they are in high demand. There are also a number of new developments which have been built, and possibly still have stands for sale. Within these are a range of ownership options such as sectional title, share block and life right which allow for different needs based on income, age and whether you expect a return on your investment.

Going sectional title

Sectional title with frail-care facilities is considered to be the best investment. Sectional title means you have full ownership of a unit and when the time comes to move into frail care, you have a capital investment that you can sell to fund your frail-care levies. Sectional title with full frail-care facilities can however be highly expensive, so remember that you will still have to pay for frail care on top of your investment.

Or choose life rights

Another option is to buy life rights. Iona Minton says that with outright ownership — where your estate receives the full benefit of growth in the value of the property — you could end up paying higher and higher levies which you won’t be able to afford if your income is fixed.

"Life rights will, on your death or transfer to a frail-care facility, pay out the initial capital value of the property into your estate," Minton says.

"Although life rights may represent a poorer investment as far as your heirs are concerned, there are no transfer duties, and there should be no levies or other unexpected costs over the years."

Facilities check

When buying into a retirement home, there are a couple of key questions you must ask, including: whether it offers frail-care facilities, what the costs are and what you will have to fork out in future levies.

You could always check the books or financials of the management to see how well they keep within budget. Also check what added services there are such as a restaurant, parking and gardens.

Get your ducks in a row

"Owners should consult their attorneys and accountants or financial planners timeously to discuss matters such as ownership and inheritance, who would hold a power of attorney to make decisions should they fall ill, and how to take care of paperwork to reduce tax and legal liabilities — for their heirs as well as themselves," says Everitt.

Article by: Thamar Houliston - www.iafrica.com