Retirement Village vs Aged Care?

Understanding the difference

As we get older, our health or increasing levels of frailty may significantly impact the type and location of homes suitable to our current phase of life. Where we live in our older years is not just a decision about the physical location, but how we can access care and support.

One of the most common questions we hear is "What's the difference between a retirement village and residential aged care?"

This is only the start when it comes to planning and researching the options, so you can make a well-informed decision when you think it's time to move. A home can come in many shapes and styles, including a house, townhome, apartment, granny flat and even shared accommodation.

It is important to understand what is affordable and how your daily routine can be managed when weighing your options.

Accommodation vs care

When care is needed, many people compare the option of a retirement village against residential aged care. While both provide supportive environments for older people, they are not the same service, and the funding and care implications are quite different.

In a retirement village, you may have access to a whole unit or villa, while for a similar price in residential aged care service, you have only a single room.

It would help if you also thought about how much support you need each day. A retirement village usually has age-friendly designs and may even have mobility aids such as handrails installed. However, retirement villages are generally designed for independent living, while residential aged care offers care services for those who cannot look after themselves at home.

Retirement village vs aged care

Retirement villages offer the opportunity to live in a community of older people. The village operator will maintain the external building and community garden areas, but it is still independent living.

For an additional cost, you may be able to access support inside your home, but services vary from one retirement village to the next. Unless provided through a Home Care package, costs are not subsidised by the government.

Residential aged care bundles fully supported living and care together with accommodation. This care is provided 24/7, and the government heavily subsidises the costs.

The table below provides a basic summary of some of the key comparisons:

	Retirement village	Residential care
Entry cost (accommodation)	Set by the operator and specified in the contract. Usually a lump sum “purchase” but some villages may allow a rental arrangement.	A published price which you can choose to pay as a fully refundable lump sum or a daily “rental” amount.
Tenancy right	Occupancy usually under a lease or licence arrangement.	Permanent tenancy for life, with rules for future moves specified in the agreement
Centrelink /DVA means-test	Homeowner status depends on the amount paid. If determined to be a homeowner, the entry amount paid is exempt.	If a homeowner before moving, this status continues while a spouse continues to live there, or otherwise for the first two years only (or until home is sold).
Options when you leave	Depends on contract. If the unit is sold you may or may not share in any capital gains. A deferred management fee and refurbishment expenses are generally deducted from the refunded amount.	A lump sum paid for the room (less any fees deducted) is refunded. All other rights terminate.
Cost of care	Optional services provided at the operator’s discretion – with commercial and non-subsidised pricing.	Rules for calculating fees are set by the government based on means-testing, with minimum and maximum annual fees.

The value of advice

If you are weighing up the option of a retirement village vs aged care for yourself or a loved one, there can be a lot of pressure and stress for you and your family. Emotions can run high.

Giving yourself time by starting your research early can reduce stress levels and for an older person, can ensure their voice is heard more clearly.

Bill Savellis

Senior Financial Adviser

Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.

Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 14 February 2023. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.