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What Is Your Aged Care Funding Strategy


Australia has an ageing population; the media keeps reminding us, as does the government. Are we ready to deal with the implications of this, though? As a society? As individuals? One thing’s for sure—it’s something we cannot ignore.

According to the Australian Bureau of Statistics, in 2018 over 3.9 million Australians were aged 65 and over.

This figure indicates to us that the very people currently contemplating aged care for elderly family members are fast approaching the age when they themselves will need it.

A sobering thought, to be sure.

As demand for aged care grows, proportionate growth in the supply of aged care facilities must exist in order for aged care costs to not start soaring. Indeed, should growth in demand outpace supply, costs associated with residential care will only continue going 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 allows aged care providers to make use of fee structures that suit their own financial circumstances.

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

Helping you estimate costs

The government provides an online Residential Care Fee Estimator to help you estimate aged care. Regarding fee types, one or more of the following—depending on the facility—may apply:

Type of fee
Included
Daily basic
Living costs such as meals, power, and laundry.
Means-tested
An additional contribution towards the cost of care determined by 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 has capped annual and lifetime means-tested fees, additional charges to cover extras—such as hairdressing, internet access, and excursions—can apply.

It’s important to question aged care facility providers about the nature and associated costs of the extra services they offer. Indeed, it is not uncommon to see the prices charged for these extras to be overvalued relative to the actual service provided.

Aged care providers are required to give itemised accounts to their residents; breaking down each of these services and their associated charges. Also, there’s legislation in place to ensure these service fees are charged no more than one month in advance.

Plan to make it easier

Sometimes—in an effort to give loved ones the best possible living conditions—older people will sell their homes so they can afford to put their partner in aged care. For the partner not in aged care, making this decision will likely affect their age pension. It will also cause them to seek accommodation—be that by moving in with relatives or by purchasing a new home. In the case of the latter, this often means they must use money they’d otherwise wished to leave as an inheritance for their children and/or grandchildren.

Self-funded retirement plans can be risky in the sense that they don’t always give proper consideration to matters such as longer-than-planned life expectancies, nor projections that go beyond basic pension funding forecasts.

This is where we at Ashfords Wealth Advisors can help. Strategies for wealth creation with extended pension horizons are fast evolving and as relevant as ever. We help to ensure clients receive sufficient income, decreasing the likelihood that they ever have to prematurely make a lump-sum withdrawal from their hard-earned retirement nest eggs.

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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