Downsizing in retirement isn’t just about moving to a smaller home — it’s about moving forward with confidence. The right decision can unlock freedom, connection and peace of mind. The wrong one can quietly erode your retirement income.
Before you sign a contract, there are five critical numbers you need to understand. These numbers shape your Age Pension, ongoing costs, exit fees and future flexibility. Get them right, and downsizing can be empowering. Get them wrong, and the “right move” may prove costly.
1. Your Age Pension Entitlement
Downsizing can significantly affect your Age Pension and Centrelink benefits.
Selling the family home may free up capital, but it can also increase your assessable assets and income, which are tested under Centrelink’s means rules. The impact varies widely depending on:
- How much your home sells for
- The cost of your next home
- What you do with any surplus funds
For example, a couple releasing $300,000 may see no change to their pension, while a single person unlocking the same amount could lose part of theirs.
Even a part Age Pension can be extremely valuable. It often comes with a Pensioner Concession Card and can unlock Rent Assistance of up to $215 per fortnight, depending on your circumstances.
Knowing your likely pension outcome before you move is essential.
2. Your Purchase Price (Ingoing Contribution)
Your purchase price is more than just the number on the contract — it depends on the type of retirement community you choose.
Retirement Villages
- You pay an ingoing contribution for the right to live in the home
- Usually structured under a leasehold or licence agreement
- You don’t own the property outright
Land Lease Communities
- You purchase the home itself
- You lease the land it sits on
- Often marketed as lower entry cost, but higher ongoing fees
Strata-Titled Villages
- You buy the home outright
- Common facilities are managed via an owners corporation
- Stamp duty may apply, which can significantly increase upfront costs
Additional costs can include:
- Deposits already paid
- Legal and contract-preparation fees
- Lease registration costs
- Optional extras (car parking, storage, caravan or boat spaces)
3. Your Ongoing Costs
Every downsizing option comes with ongoing fees — and these can differ dramatically.
- Retirement Villages: General Service Charges (usually cost-recovery)
- Land Lease Communities: Site fees (often market-priced)
It’s not uncommon for Land Lease site fees to be higher than Retirement Village service charges.
On top of community fees, you’ll still need to budget for:
- Utilities and groceries
- Transport and insurance
- Optional services such as meals, cleaning or personal care
Understanding both community fees and personal living costs is crucial to long-term affordability.
4. Your Exit Fee (Deferred Management Fee)
The exit fee is one of the most misunderstood — and most expensive — aspects of downsizing.
When you leave, costs may include:
- Sales agent commissions
- Marketing expenses
- Repairs or reinstatement costs
But the largest cost is usually the Deferred Management Fee (DMF).
DMFs are commonly:
- 25%–40% of the purchase or resale price
- Sometimes higher — contracts can range from 0% to 100%
- Occasionally combined with capital gain sharing
Some villages now offer alternative DMF structures or payment options. The difference between these options can amount to hundreds of thousands of dollars over time — making it essential to compare them carefully.
5. How Quickly You Get Your Money Back
If your circumstances change — particularly due to health or aged care needs — timing matters.
Some contracts offer:
- A guaranteed buyback within a fixed timeframe
Others require:
- The home to be resold before funds are returned
Understanding how much you’ll get back and when can be critical for funding aged care, supporting family, or maintaining flexibility later in life.
Before You Downsize, Know the TrueCost
A TrueCost Report (powered by Village Guru) removes the guesswork by showing you the full financial picture before you commit.
A True Cost Report reveals:
- Your ingoing, ongoing and exit fees
- Estimated Age Pension and Rent Assistance outcomes
- The impact on Home Care costs
- When and how much money you’ll get back
No assumptions. No surprises. Just clear, personalised numbers so you can make the right decision for your retirement.
Look for the True Cost badge on listings at Downsizing.com.au to request a report and downsize with confidence.
