What is your aged care funding strategy?

We’re an ageing population; the media keeps reminding us, as does the government, but are we prepared for what this means? As a society? As individuals? One thing’s for sure – it’s something we cannot ignore.

According to the Australian Bureau of Statistics, in 2019 around 4.1 million Australians were aged 65 and over.

Consider for a moment: this figure shows those people contemplating aged care for elderly family members are fast approaching the age when they’ll need it themselves. Sobering thought.

What this means is that as aged care becomes increasingly important, the need for aged care facilities is growing proportionately. As demand out-grows supply, costs associated with residential care can only go one way.

Fees are regulated

There are strict regulations governing aged care fees and charges. Aimed at consumer protection, a degree of flexibility within the guidelines enables aged care facilities to adapt the fee structures to meet their own financial pressures.

So as we age, and as we begin to consider the future care of not only ourselves but our older loved ones, what can we expect to pay?

To help you estimate the costs

The government provides an online Residential Care Fee Estimator to help you estimate aged care costs here. As for the type of fees, depending on the facility, one or more of the following may apply:

Type of fee Included
Daily basic Living costs such as meals, power, laundry.
Means-tested An additional contribution towards cost of care determined by the Department of Human Services (DHS) and based on your means-tested income and assets.
Accommodation The government may cover part or all of this as determined by DHS income and assets means-test.
Extras/additional options Applies where higher accommodation standards or additional services are required. Variable depending on the home and available facilities.

Watch out for “extras”

Although the government capped annual and lifetime means-tested fees, additional charges to cover extras like hairdressing, internet access, excursions, etc, can apply. It’s important to check with the facility first to find out how these extra services are offered and their associated costs. They can sometimes be disproportionate to the services supplied and 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

The desire to provide loved ones with the best possible living conditions sometimes forces older people to sell their homes to afford care for an aging partner. Not only can this affect the age pension they receive but can see the partner not in care-seeking accommodation with relatives or alternative housing – a heartbreaking situation for someone wishing to leave an inheritance behind.

The focus on self-funded retirement doesn’t always consider increasing life expectancy and what happens beyond pension-funding projections.

This is where your financial advisor can help. Indicative of our times, strategies for wealth creation with extended pension horizons are increasingly relevant. They help to support appropriate income levels so you are less likely to need a lump sum withdrawal from your investment portfolio.

You’ve heard it before: you’re never too young to plan your future. But you’re never too old either!

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General Advice Disclaimer

This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.

Paradigm Strategic Planning Pty Ltd is an Authorised Representative of Sentry Advice Pty Ltd AFSL 227748

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