What is your aged care funding strategy?
When it comes to planning for retirement few of us think beyond the opportunity to travel and do all those things we’ve been putting off until we have more time and fewer responsibilities. It’s safe to say that moving into residential aged care is not on anyone’s bucket list. But as the population ages, it’s a possibility that few of us can ignore.
More than 3.6 million Australians, or 16 per cent of the population, are currently aged 65 and over.iThis is projected to grow to 22 per cent by 2061, or more than one in five.iiWe’re also living longer. The average Australian can expect to live into their 80siii, and many of us will live beyond 90.iv
That means more of us will need some form of aged care late in life. And as pressure grows on aged care service providers to cater for more people, the costs may rise.
What will you pay?
In recent years the government has tightened the rules around the calculation of means-tested fees for residential aged care. The aim is to make the provision of aged care services sustainable as the demand for high-quality accommodation grows.
As we begin to consider the future care of not only ourselves but our older loved ones, what can we expect to pay?
The government provides an online Residential Care Fee Estimator to help you work out the likely cost of aged care. The type of fees you pay will depend on the facility and your ability to pay. One or more of the following may apply:
| Type of fee | Included |
| Basic daily care fee | Living costs such as meals, power, laundry. Set at 85% of the single Age Pension and for some people, this is the only fee payable. |
| Means-tested fee | An additional contribution toward the cost of care determined by the Department of Human Services (DHS) and based on your means-tested income and assets. |
| Accommodation payment | The government may cover some or all of this depending on your assets and income. If you are required to contribute you can do so as a refundable lump sum accommodation deposit (RAD), a non-refundable daily accommodation payment (DAP) or a combination of the two. |
| Extras/additional options | These vary depending on your choice of facility and cover extras such as a higher standard of accommodation and services. |
Watch out for “extras”
Although the government caps the annual and lifetime means-tested fees, you may be asked to pay extra for things such as a higher standard of accommodation, hairdressing, wine with meals, internet access and excursions. It’s important to check with the facility first to find out what is offered and how much these extra services will cost. In some cases, the charges exceed the services supplied and can add up to a substantial amount.
Aged care providers must give itemised accounts to the resident breaking down each of these services and the associated charge. The legislation also states that these fees cannot be charged more than one month in advance.
Plan to make it easier
Moving house can be stressful at any age, but particularly so when you are elderly and frail and have a lifetime of memories stored in your family home. Everyone wants the best possible living conditions for themselves and their loved ones, so it’s important not to make decisions in a rush at the eleventh hour. The decision about whether it’s better to sell the family home or keep it and rent it out to help fund the ongoing cost of care is one that needs careful consideration.
This is where we can help. Strategies for wealth creation that take into account all your retirement needs – including the possibility that you will need some form of aged care – are increasingly relevant. With careful planning, you need never compromise on the life you want to lead.
As the saying goes, you’re never too young to plan your future. But you’re never too old either!
ii http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/3222.0main+features32012%20(base)%20to%202101
iii http://www.worldlifeexpectancy.com/australia-life-expectancy
iv http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(16)32381-9/fulltext
v http://www.myagedcare.gov.au/estimate-fees-for-aged-care-services
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