Planning for the costs of aged care
AMP financial adviser Mark Haynes is a Certified Financial Planner (CFP) and Principal of Adelaide-based Haysman Financial Services. He specialises in retirement planning, superannuation and self-managed super.
Making the call about aged care for a parent or loved one can be a challenging and confronting issue, both emotionally and financially.
With many avenues to explore, thinking about the options sooner rather than later can provide you with greater choice and flexibility down the track.
It’s an issue affecting many, with figures showing more than 50 per cent of people aged over 45 have previously, or are currently, dealing with aged care services for themselves or on someone else’s behalf.
Figures also show the likelihood a woman over age 65 needing residential care in her lifetime is 54 per cent, and for men that figure is slightly lower at 37 per cent.
When should you start planning
It might sound premature, but you really should be considering your aged care options once you start winding down from work and planning for retirement.
With the average age of people going into aged care being around 80, many retirees in their 60s might think it’s too early to think that far ahead. What this means is it’s often too late to consider aged care when the need for it actually arrives.
We have seen a rapidly growing ‘sandwich generation’ of baby boomers who are seeking advice on aged care on behalf of parents or relatives because of a lack of planning. When families are forced to suddenly decide on aged care for a loved one, the added emotional stress can make finding a solution which family members all agree on almost impossible, not to mention the financial burden it places on everyone involved.
Aged care options
It’s good to know what options you have for aged care services well in advance. Here are just a few to consider:
- Help in your own home – if you are generally able to manage, but require assistance with daily tasks, there are various home-care packages for a range of services, including transport, food, home maintenance, household jobs, nursing care and medical assistance. It’s a good idea for anyone with health issues to get an assessment from an Aged Care Assessment Team (ACAT) as early as possible to ensure you get access to these support services as soon as it’s needed.
- After-hospital (transition) care – if you’ve been in hospital, but need assistance while you recover and additional time to think about the best place to live long-term, this type of service can be provided in your own home for 12 to 18 weeks.
- Short-term restorative care – this provides a range of services over eight weeks to help prevent or slow down difficulties with completing everyday tasks. It aims to improve wellbeing and independence, and delay or reverse the need to enter long-term care.
- Residential aged care – this is where you live in full service residences and receive ongoing care and support. If it’s the best option for you, it’s a good idea to research and visit several residences to find the right place in terms of location, services and activities. The Aged Care Home Finder can help with this.
Each of these options have an eligibility criteria and an assessment process which can be arranged through the Federal Government’s My Aged Care initiative.
The costs
Aged care costs depend on the type of care needed, but the government regulates the fees and charges of aged care facilities to help make them more affordable. The fees for an at-home-care package or residential aged will vary and depend on your personal income and assets.
With a residential aged care facility there may be one-off payments (or deposits), as well as ongoing fees for care, accommodation and daily living expenses. These costs also will be determined by a means test of your income and assets, including the family home.
If you’re a self-funded retiree, it’s a good idea to seek an income assessment before commencing an at-home-care package or entering residential aged care to avoid paying maximum fees and charges.
The government’s Home Care fee estimator and Residential Care fee estimator can help with giving you an idea of costs.
What to do with the family home
It’s tempting for homeowners without enough cash to cover the cost of aged care accommodation by selling or renting out their property. For example, if they rent out their home, a combination of rental income and part-pension may provide enough money for living costs, while preserving the family nest.
On the other hand, selling the family home could reduce your pension entitlement if the value of the home far outstrips the cost of care.
With so many different avenues to consider when it comes to aged care, it’s really important to seek professional advice. An adviser can help you navigate all the recent rule changes and help you to work out the best option for you.
*Mark Haynes is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.