Recently, some long-term clients of mine, who are well into their advancing years, faced the real possibility of having to leave their family home and move into Aged Care due to declining health and one of them having a serious fall.
Make sure you are in control
My experience has been, while many older clients are happy getting by in their own home, as they age accidents, such as a fall or sudden reduction in capability, trigger the need to move into Aged Care.
I encourage my clients to research their choice of aged care or retirement facilities and ideally to move on their own terms rather than in a sudden rush due to health reasons. This is so they can be in control of the timing and the location rather than having to make a quick decision or not even being able to actually have any choice in the decision.
Aged Care is tricky to navigate at the best of times, let alone when you’re desperately in need.
The current cost of Aged Care living
The current cost of Aged Care living is quite complex. Here is a summary of the four types of associated fees and costs:
- Accommodation costs
- Basic daily fee
- Means tested care fee
- Fees for additional services
1. Accommodation Costs
If you have assets over $165,271 you will generally be asked to pay:
- a lump sum refundable accommodation deposit (RAD) of between $200,000 and $1 million; or
- an equivalent daily accommodation payment; or
- a combination of both.
The RAD could be considered the capital value of the room the resident is occupying. If you elect to pay an RAD solely you will have 6 months to pay the lump sum.
It is possible, to pay the RAD over time however, this attracts a 6.22% interest rate set by the government. I recommend, where possible, paying the RAD as a lump sum as it is fully refundable and you do not have to pay interest.
2. Basic daily fee
All residents pay a basic daily care fee. This fee is based on 85% of the single rate of age pension. The current rate is $50.16 per day and is payable by everyone.
3. Means-tested care fee
The resident is means tested and is based on the amount the government pays the aged care provider to care for the resident. It can be up to $211.40 per day but is capped at $26,964.71 per year (or about $64,715 over a lifetime).
4. Extra and additional service fees
An extra service fee applies to a specifically determined bed and the cost is regulated. Additional services can be ad hoc – such as hairdressing, podiatry and pay TV. These costs can vary significantly.
How to fund Aged Care Living
The other big decision to make other than where and when is how to fund Aged Care living.
Deciding whether to sell the family home or access savings and investments or super to fund care and accommodation costs is a big issue faced by families when someone has to move into residential aged care.
The answer is it depends on your financial situation and risk profile
We work with families who are transitioning an elderly member in to aged care. Everyone’s situation is unique and therefore the funding solution for every person is also unique and dependent upon personal preference and the financial and property markets at the time a decision is made.
Contact arcinvest if you would like advice on how best to prepare financially for a potential move to Aged Care in the future for yourself or loved ones.