Decisions on where to live when you retire are going to influence the quality of your retirement and should be made with much care. In part 1 we looked at factors you should consider when you plan to move to a new home. Let us now look at other housing options as well as keeping your home.
For many retirees keeping their own home, where they usually have spent 20 or more years living in, can be an emotional one. However, if you are short on retirement savings, with a suitable house for the flow of guests, an Airbnb option could be considered. Many retirees have also successfully adopted boarders into their homes with cleaning and cooking responsibilities, together with monthly rent, that can make a difference in affordability when keeping your house.
One of the latest options is opting for a reverse annuity mortgage where you can sell your house a little bit at a time. The amount you receive depends on your age and come in various options. A variation of this is the sale-and-leaseback scheme where an investor purchases your home (often below market value) but agrees to allow you to continue to rent the home for as long as you live. The interest received from investing the lump sum should hopefully cover the rent and give you additional income as well.
Although most people prefer to own their own home, renting a home can be an option with the following advantages: i) you can sell your existing home and invest the money to hopefully cover the rental cost in the future and maybe even supplement your income; ii) you have the freedom to live in other areas, and iii) worries about repairs and maintenance on your home virtually disappears. Disadvantages, like not being able to do with the home what you want, rental increases that are higher than the inflation rate, and no security of tenure, should be considered when making a decision.
In line with current times where three or more generations live in a single home, granny flats or garden cottages are viable options. It is no longer a choice limited to lower-income families. Maintaining a close-knit family environment is a great advantage. This concept works great if there are children involved where grandparents can play a positive role in the lives of their grandkids and vice-versa.
A current growth industry is retirement villages but should be approached with caution as they come in various shapes and forms with varying costs depending on ownership structure, location and services offered. A general rule is to consider a retirement village that offers a full range of amenities, including healthcare and frail-care facilities. Since retirement villages are a form of communal living they must adhere to the Housing Development Schemes for Retired Persons Act (HDSRPA) with the Older Persons Act also providing the elderly with protection against exploitation. Before signing any agreement or deed of sale, have a lawyer or accountant check all the details, it will be worth the cost.
The accommodation looked at so far is aimed at those in the monthly R4 000 and above income range. For those less well-off there are various alternatives run by both private and state organisations with and without state subsidies. These include state-subsidised villages and homes and more than 400 sub-economic housing projects operated by welfare and private organisations.
Charitable housing provided by charities, religious institutions including churches, focus on providing housing for poor retirees. Some of the more prominent charities include the MOTH’s, the Niall Mellon Township Trust and Abbeyfield South Africa.
Finally, when it comes to a home, deciding whether you should stay put or move does not depend on a single answer but an individual and specific financial picture. Find a trusted financial advisor or planner who will know which questions to ask and assist in making the relevant calculations to provide better data before a final decision is made.
Wouter Fourie is the co-author of the best-selling book The Ultimate Guide to retirement in South Africa with Bruce Cameron. Please visit www.retirementplanning.co.za for more information on this book and the top-seller Secure your Retirement.