3 January 2023
The average South African can retire anywhere between the ages of 60 and 65 – although many people continue to work for long after this. The number of retirees in the country is set to increase dramatically as time passes, and in just eight years’ time, roughly 10% of the population (or 6.6 million people) will be over 60. To put this number into perspective, that’s about twice the current population of Durban and Cape Town combined.
Whether you plan to retire soon or in the distant future, you’ll need to consider the practicalities of what will happen when you stop working. A big decision for many retirees to make is where they’ll live. Depending on your preferences and ability to live independently, a retirement home may be a good choice and a savvy financial decision. Here’s what you should know about making this investment.
When you reach retirement age and no longer wish to live independently you can join a retirement home or community. These communities offer different levels of support and independence with some allowing a person to remain in a single community even as their needs evolve.
An independent living community involves you moving to a small home or apartment in a complex or village where you can socialise with others but still live independently. Professionals are on hand to help with daily tasks, and you can access amenities you may not have at home. In a supported retirement community, you live independently but with social and medical care available to help you manage common conditions like dementia, sight loss and osteoarthritis. Should you require more intensive support, a frail care community can provide around-the-clock medical care to manage significant mobility issues and prevent you from injuring yourself.
Retirement communities offer diverse ownership options. Most require payment in cash in the form of a lump sum to secure the property and monthly fees to cover your ongoing support. You can purchase a full title freestanding property that you own outright and can resell in future. You can also purchase a sectional title property in a development or complex, where you pay associated fees and become a body corporate member giving you a say on what happens in the community.
The final option you can choose is to purchase a home in a life rights scheme, where you don't own the property but get to live in it until you pass away in exchange for a lump sum or interest-free loan. This option forgoes some of the costs associated with a property purchase and usually involves lower levies. Upon your passing, the deed remains in the retirement community’s name and your estate will get your investment lump sum back plus a percentage of the sale’s net profits.
When moving into a place where you’ll spend a significant part of your future, you will want to know that it offers you access to the facilities and care you require. However, there are other factors to consider.
It’s important to investigate a retirement village’s financial health and past performance. You should also carefully consider the terms of the proposed sale, which can differ drastically from one community to another. You could find that a community’s proposed levies will increase year after year by a certain percentage or that they only cover a small percentage of the community’s collective upkeep, leaving you out of pocket.
A retirement community can also come with certain lifestyle-related restrictions that might not suit your lifestyle. For example, you may not be able to bring in any pets. You also may only be able to take residence at a certain age or be required to join a lengthy waitlist.
Moving to a retirement home can have its disadvantages. Most will require you to downsize your living space and the communal services offered may mean you have less privacy than you’re comfortable with. As with all major changes, moving out of your home and away from your usual environment can take some getting used to.
Despite this, retirement homes have plenty to offer the right person. They’ve evolved in leaps and bounds over time and can offer you access to a better quality of life than you initially anticipated. Many integrate travelling and trips and allow you to pursue your favourite hobbies and pastimes while meeting like-minded people. Retirement homes also eliminate much of the minutiae of home ownership such as its constant maintenance and upkeep, allowing you to enjoy your life without wasting it on administrative duties.
While many South Africans choose to retire abroad where they can join family or live a specific lifestyle, many will stay in the country. In fact, global travel site Big 7 Travel recently named South Africa as one of the best places to retire in the world, thanks to our country’s weather, diversity of cuisine and cultures and overall quality of life.
As safety and quality of life are top priorities for many retirees, many South Africans are leaving the city and settling in smaller towns. Popular retirement areas include towns on the Eastern and Western Cape coastline which offer a more relaxed way of living, picturesque surroundings and plenty of leisure activities to help them pass the time.
It’s never too early to start discussing your retirement plans and this will impact the property you current own or live in. Even if your retirement is a long way off, it helps to seek guidance on how to negotiate this next phase of your life before it happens. SA Home Loans can assist you with this by addressing some of your property investment-related questions. Contact us today to get started.