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Types of property ownership in retirement

IOL’s Palesa Tlholoe, wrote the following article in the April 2022 edition of Money Mag. Palesa wrote:

“Retirement villages are governed by the Housing Development Scheme for Retired Persons Act, which imposes certain conditions on developers and residents. There are four types of ownership, with some developments based on one type and others offering a choice between two or more types:

  1. Freehold title

This is essentially the same as owning a freestanding home, with the same rights, expenses and responsibilities, except that, because the home is within a gated community setting, there will be a monthly levy to cover services such as maintenance of the common areas, security, catering and healthcare. Some developments will retain a certain portion of the profits on resale, as a way of subsidising the levies owners pay.

  1. Sectional title

This is similar to sectional title in a non-retirement development, where rates, insurance and maintenance of the complex is funded by a monthly levy. The scheme will have a board of trustees and a body corporate, through which all owners have a say in decision-making. As with a freehold title scheme, the developer carries no responsibility for the ongoing maintenance and cost management aspects once the development has been built; the onus falls on the owners or residents to do so.

  1. Life right

You buy the right to live in a dwelling for your life and that of your spouse – you don’t actually own physical property. There are no legal costs, transfer duties or other taxes payable. You may dispose of your life right or it will be sold on your death, in which case you or your estate will, depending on the contract, receive the purchase price plus a percentage (say, 30%) of the profit. When a life right transfers to a spouse on the death of the first[1]dying spouse, it does not form part of the first[1]dying spouse’s estate. Residents, who pay a monthly levy to cover running costs, enjoy similar privileges to those in sectional title homes; the developer, however, remains the sole owner and is responsible for the upkeep of the village.

  1. Share block.

Under this structure, which is now less common, the complex is registered in the name of a shareblock company, and each unit is allotted a certain number of shares in the company. You purchase shares, which give you the right to use a flat, cottage or townhouse and the complex’s facilities, but you do not own your dwelling. There is typically an AGM at which shareholders elect directors to the board. Directors meet throughout the year to discuss how the property is to be managed. Shareholders pay levies that cover operating costs, including maintenance and insurance. If you decide to sell, you need to sell your shares in the property and cede your rights to occupy the unit.”

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Ever wondered when is the right time to move into a retirement village? Click here to find out.

Tips to help you retire when you want to

Tips to help you retire when you want to

Business Insider’s Liz Knueven writes about 8 pieces of advice to help you retire when you want, according to people who have done it, on the 5th February 2020.

To retire how you want, it’s crucial to plan ahead — at least that’s what these retirees from Business Insider’s Real Retirement series have found.

Retirement is more than just leaving work.

If you want to make sure that you’ll be able to retire when you want, retirees from Business Insider’s Real Retirement series have some tips from their own retirement experiences, from paying off your mortgage and other debts, to working with a financial planner.

Here are these retirees’ best pieces of advice for anyone who wants to leave work someday.

  1. Find a good financial planner and work on your equity allocation

When one of his friends tell him they’re thinking about retiring, Dirk Cotton’s first advice is to find an expert. “Find a good a retirement planner, because retirement planning is incredibly complex,” he said. “They’re extremely helpful and worth the investment, and it’s worth it to start talking to them in the years before you retire.”

He also suggests focusing on your investments. “The major thing that I would say is, 10 years before retirement, you probably want to end up somewhere in the neighborhood of 40% to 50% equity allocation,” Cotton, who retired at 52, said. He said this is one of the big things that helped him retire comfortably in 2005 and get through the Great Recession.

“I weathered that storm extremely well,” he said, crediting this advice. “A lot of people had 100% equities when they were saving for retirement, and lost over 50% in a very short period of time.”

  1. Make time for a yearly or quarterly retirement planning check-in

Bill Brown, who retired at 65, says one of the most helpful things he did was regularly set aside a few minutes to strategise. “I did this maybe once or twice a year,” he said. “You sit back and you mentally go through,

  • ‘How am I doing?
  • What could I change?
  • What should I change?’

And then, you alter it.”

Doing this helped him and his wife realize they could be doing more to cover themselves with life insurance and long-term care insurance. It helped them to focus on the bigger picture of retirement planning, and keep on track to retire on time.

  1. Start planning sooner rather than later

“I got a late start. From 33 to 43, those quarterly statements I got from a TIAA, I threw them away,” David Fisher, who retired at 65, told Business Insider.

“When I was in my early 40s, I opened one of my quarterly statements that I used to throw away. And I said, ‘Oh my goodness, I’ve got $30,000 to $35,000 in there. That’s my money.’ Then I became interested in retirement,” Fisher said.

If he could turn back time, that’s the advice he’d give to his 35-year-old self. “Invest early and invest as early as you can and put away whatever you can afford,” he said.

  1. Start maxing out your retirement accounts and live within your means

Corky and Patti Ewing never made more than what is considered a middle class income in their California home. In 2019, they retired comfortably thanks to strategic saving and investment decisions. Corky told Business Insider he’d advise anyone wanting to retire to “max out their retirement accounts, their 401ks or their IRAs.”

To do this, he continued: “I’d tell someone to live within their means, because you don’t have to try to keep up with your neighbors.”

  1. Prioritize your spending on experiences rather than things

Karen and Joe Stermitz sold their home in Washington to travel the world and live frugally after they retired in 2017.

“I would tell people just to be frugal. Things don’t bring you happiness, experiences do,” Karen said. She and her husband started a journey through South America in an overlanding vehicle in 2019.

“I don’t buy things; we don’t buy a lot of things. Get away from the focus of the things, and focus on experiences and living life,” she said.

  1. Own a home you can afford

“Our home is key to our retirement,” said Bill Davidson, who retired at 54. He and his wife Rose moved from Oregon to New Mexico after he stopped working to travel, live affordably, and be mortgage-free.

They chose to build an environmentally-friendly home, which reduces utility expenses considerably. “If you reduce your utilities to almost nothing, that means you’re living in environmentally friendly, energy-efficient lifestyle,” he said.

“Our home costs about $300 per month,” he said. By owning a home they can easily afford and moving to live mortgage-free, the Davidsons are able to spend more on family and travel.

  1. Keep your credit score up and live debt-free

“I did get a little good advice early on from my godfather about having perfect credit scores and never using credit to finance lifestyle,” said Fernanda Dorsey, who is now traveling the world with her husband, Jim, after retiring at 52. “Those pieces of advice were jewels,” she added.

“We’ve been basically following those two things, so we don’t have any debt. When we left work to travel, we had perfect credit scores, and that’s good,” she said.

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Shire Retirement Properties (Pty) Ltd, offers talks on generic topics of interest to those considering retirement. To have a look at our Company Overview brochure, click here.