Aged care – know what’s involved

Aged care can be a tough subject for many families to broach, but as we enjoy longer lives, there’s a growing likelihood that at least part of our final years will be spent in formal care. 

The decision to move into aged care doesn’t just come with a raft of emotional issues. There are also financial considerations. That’s because high level care accommodation can involve substantial costs, especially for self-funded retirees. 

The costs involved 

New residents entering aged care are often asked to pay an upfront accommodation bond. There is no set level for this bond – the only proviso is that residents must be left with at least $46,500 in assets (excluding the family home) after the bond has been paid. 

An accommodation bond works like an interest-free loan to an aged care home. Any income earned from the bond is used by the aged care home to improve accommodation and services for residents. 

As aged care facilities are generally free to set their own bond, it’s usually open to negotiation between families and the home’s staff. This can be a source of discomfort as it means revealing your financial worth to complete strangers. Simply being aware of how the system works can help you plan for it. 

How do I pay my accommodation costs? 

You can choose to pay an upfront bond by: 

  • a lump-sum style ‘refundable accommodation deposit’ 
  • rental-type payments called a ‘daily accommodation payment’, or 
  • a combination of both. 

    The accommodation bond is generally returned to residents or their estate if they move out or pass away when it is paid as a lump sum. 

    Bonds vary widely and in some of our capital cities, the cost starts from half a million dollarsSo, it’s extremely important to consider all the facilities available and consider if a particular aged care home is the right place for you or your loved one. 

    Unfortunately, high demand for aged care, particularly high-level care, often means families who haven’t done their research have to accept the first place that becomes available and that can see a mad scramble to find the bond money. 

    Basic daily fee 

    In addition to the accommodation bond, a basic daily fee is used to contribute towards your day-to-day living costs such as meals, cleaning, laundry, heating and cooling. Everyone entering an aged care home is required to pay this fee. 

    The maximum basic daily fee for new residents is $48.44 per day. This equals 85% of the basic age pension rate and it increases on 20 March and 20 September each year in line with changes to the age pension. 

    Means-tested care fee 

    This is an additional contribution towards the cost of care that some peopleself-funded retirees in particular, may be required to pay. The Department of Human Services will work out if you are required to pay this fee based on your income and assets. 

    There are annual and lifetime caps that apply to the means-tested care fee. Once these caps are reached, you cannot be asked to pay any more means-tested care fees. 

    Additional services and extra services fees 

    Additional service fees are for additional ‘hotel-like’ services that an aged care facility may provide, which can be voluntary or a mandatory package. You can only be charged this fee if you can make use of or benefit from the additional service. Extra service fees are for aged care homes providing a higher standard of hotel-like services. It may apply to the whole facility or to a specialised room. If you enter one of these specialised rooms or facilities you will need to pay the extra service fee whether you make use of the services or not. Both the additional service fee and extra service fee are not government subsidised and need to be paid in full. 

    The government’s Aged Care website features a Residential Care Fee Estimator to help gauge the sorts of fees you could be looking at. 

    Funding it all 

    Meeting the future cost of aged care is just one aspect retirees need to factor into their investment portfolio. 

    The way your portfolio is structured can impact on your age pension entitlements as well as the costs you’ll pay for aged care. 

    To watch our Aged Care webinar click here 

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    I see my role as a financial adviser as a project manager and financial coach. It starts with helping clients articulate their vision of their future and success, understanding their challenges and complexities and their starting point.