Entries by Rob Laurie

Planning for Residential Aged Care Fees

Before choosing a residential aged care facility for your loved one, you should consider the upfront cost as well as ongoing costs. The cost of living in a facility can be high, depending on the size of the room, services offered and more. If you’re looking for ways to reduce costs when contemplating residential aged care fees, look at ways such as home care packages and discounts.

Accessing support services does not always mean you have to move out of your home. Help to stay in your home longer is available through home care services but these services do not work for everyone, especially those living alone or with high aged care needs.

So for some people, a move into residential aged care may be a better alternative. Careful planning ahead of time can make all the difference and remove a lot of the stress at the time when a decision needs to be made.

What does aged care cost?

The residential aged care fees or the cost to care for someone in a residential service is $63.57 per day but thankfully these costs are heavily subsidised by the government.

The Federal Government spends over $18 billion a year on aged care.  This is in addition to costs incurred by care providers for building and maintaining the facilities and the residential aged care fees paid by residents.

With the percentage of Australia’s population over age 85 set to triple over the next thirty years the pressure on finances is increasing and the rules for fees changed on 1 July 2014.

What are the rules for residential aged care fees?

The range of residential aged care fees and calculation methods may appear complex but fees can be divided into four categories. The diagram below provides a quick overview of the fee structure for residential aged care (from 1 January 2024).

Accommodation payment Basic daily care fee Means-tested fee Additional services fee
Published rates RAD or DAP concessions for low-means All residents $61.96 per day Based on income & assets up to $32,718.57 per year or $78,524.69 lifetime Extra-service package additional service opt-in or out

The important things to know about the current rules are:

  • There is no distinction between low care and high care so the accommodation payment rules apply to all subsidised residential care places.
  • The accommodation payment is quoted as a lump sum (called a refundable accommodation deposit – RAD) and an equivalent daily fee (called the daily accommodation payment – DAP). You can check the rates at My Aged Care’s Find a Provider tool. 
  • Once you have accepted a place and signed the Resident Agreement you will have 28 days to decide which fee option to pay.
  • If you pay the lump sum RAD it is fully refundable when you leave care and repayment is guaranteed by the Federal Government provided you have paid the RAD to an approved service provider.
  • Depending on your income and assets you may be asked to pay a means-tested daily care fee. This increases how much you pay and reduces how much the government pays for your care.  This fee is capped over a year and over your lifetime (both indexed). 
  • If you moved into care before 1 July 2014, the rules are different. The previous rules continue to apply unless you move from one service provider to another (without a gap of 28 days or more) and choose to have the new rules apply.

Things to consider

Financial aspects are only one consideration when preparing for your care years. It is more important to find the right care service at the right time.

Your available options may depend on your family arrangements and your health requirements. But if your finances are carefully planned, you will have more choices and greater control over where and how you live and receive care.

Advice from an adviser who is experienced in aged care is key. Advice can help you see the bigger picture and take into consideration your family needs and estate planning considerations as well as strategies to generate sufficient cash flow, including access to government benefits and concessions.

If you think your plans need to be reviewed or you would like further information on aspects of aged care, contact us to make an appointment today.

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Australians Are Not Saving Enough for Retirement

Are you saving enough for retirement?

It’s easy to put off saving for age, but it’s important. If you don’t have enough saved up, then your savings will decline each year and your money could be lost before it has time to grow.

Retirement is something that we all hope to one day achieve. It would be a great achievement for most people to have enough saved up so that they don’t think about retiring in their later years. Unfortunately, saving money for retirement isn’t as easy as you may think. Therefore, it is important to plan and prepare for retirement financially. 

Planning for retirement

Financial security doesn’t just happen. It takes planning and commitment and, yes, money. Insufficient funds show the importance of planning for the three phases of retirement: the early (active) phase, middle (passive) phase and late (frail) phase.

According to a study conducted by Roy Morgan research, over the course of the twelve months leading up to January 2019, it was revealed that a staggering number of 430,000 Australians are expected to retire within the next 12 months. Surprisingly, their average gross wealth is estimated to be $299,000, a significantly lower amount compared to the recommended $595,000 suggested by the Association of Superannuation Funds of Australia (ASFA).

Given the strain on the age pension and the added unpredictability stemming from a declining property market, possible alterations to superannuation legislation, and overall instability in the stock market, the importance of Australians preparing for their future has reached unprecedented levels.

Director of Aged Care Steps, Louise Biti, says it is essential for everyone to consider the three phases of retirement.

‘When talking about retirement, we ask people to think about the care-free years, the quiet years and the frailty years – when health issues associated with living longer mean we are likely to have some level of dependency on others.’

Ms. Biti describes the average income required at each phase and cautions against the common misconception that the cost of living declines after you retire.

‘It’s really more of a U curve’ she explains. ‘Higher care needs in later life mean increased costs.’

While there is considerable government-subsidised aged care available in Australia, living well in all phases of retirement is about maintaining choice and control – especially in later life.

‘Australians are guaranteed a minimum quality of care through government-funded aged care,’ she says.

‘But the quality of life when you retire requires careful planning and professional advice.’

Here are 5 ways to prepare for retirement

Start saving, keep saving, and stick to your goals

Saving is a rewarding habit. If you’re not saving for later life yet, it’s time to get started.

Make a contribution to your company's retirement savings plan

If your employer offers a savings plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy.

Consider the fundamentals of investing

How you save can be as important as how much you save. Inflation and the type of investments you make have a big impact on how much money you’ll have saved when you retire.

Don't compromise with your retirement funds

You will lose principal and interest if you withdraw your funds now, and you may also lose tax benefits or be subject to withdrawal penalties.

Australians are not saving enough for retirement

Putting money aside when you retire is a habit we can all live with. Make an appointment with your adviser today to discuss your retirement planning needs.

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The hidden cost of retirement

The cost of retirement

The common question when it comes to retirement is ‘how much is enough?’.

Estimating your future living expenses can be difficult. Your lifestyle and behaviors may change as you approach retirement, affecting your finances. If only the answer was simple! But the fact is that the answer varies due to a range of factors, including your lifestyle aspirations, personal health and family commitments. But regardless of how much you have put aside, there’s a significant potential cost in retirement that is often not considered, and if ignored, it can undermine our plans – aged care.

According to the Association of Superannuation Funds of Australia (ASFA), to achieve  comfortable retirement, single adults aged 67 would need $595,000 in retirement savings, while couples will need $690,000, based on March 2023 quarter. That means a single person’s (aged 65-84) annual budget should be $50,207.02, and a couple’s (aged 65-84) annual budget should be $70,806.43 to cover food and utility bills, as well as health, communication, clothing, travel, and household products.

None of us wants to imagine a time when we are no longer able to look after ourselves without assistance. But the reality is that around one-quarter of our retirement may be ‘frailty years‘, where help is needed with the activities of daily living. Planning ahead for this time allows you to maintain greater control of your life, so that your choices – for example, home care versus residential care – can be respected. But it all costs money. 

The high cost of living in Australia

In Australia, retiring in comfort is no small feat. The cost of just basic everyday necessities is enough to eat up many seniors’ bank accounts in no time flat. After decades of hard work and dedication, retirees are too often forced to keep working just to make ends meet. With sky-high rent prices, the Australian dream of retiring soon becomes like a fantasy for most seniors who already live paycheck-to-paycheck. 

So if you want any chance at retiring in Australia before you can afford to buy your own yacht, it’s wise to start budgeting early on – because every dollar counts!

Seniors forced into smaller, affordable housing from their homes

As we grow older, our homes can feel increasingly like a burden, making it hard to stay in the same place regardless of the emotional attachment. For seniors, this reality becomes especially poignant as they often have to face the fact that their large homes are too expensive and no longer practical. It’s a tough decision to make, but sometimes trading size and equity for convenience can be worth it. 

After all, what good is remaining in your home if all it does is cause worry about how you will pay for things? When faced with this challenge, many seniors find that downsizing is the best option for them since it allows them to live more comfortably and without feeling like money’s an issue.

While lifestyle spending does tend to reduce as we progress through retirement, expenses can ramp up again during the “frailty” years – on average, the last three to five years of life, generally after age 80. It is during this phase that we are likely to have some form of disability caused by ageing which causes a general decline in independence. And we may become more reliant on others.

Increasing longevity and expectations around the quality of care are also putting greater pressure on income needs in the later phase of retirement.

Because aged care is expensive, the government subsidises the costs, but you will still need to pay some of the costs – based on your assessed level of affordability. Access to capital or income at this time may allow you to have greater choices and control over the quality of your care, which is why planning for the cost of future care is critical to include in your retirement planning, and long before a crisis arises. 

Financial planning is crucial for comfortable retirement

Retiring without financial planning could be a nightmare. In Australia, robust nest-eggs are essential for retirees to have the retirement they envision, and with correct financial planning, this is possible. It takes much more than saving money to create a plan that, when executed properly, can ensure comfortable and safe living throughout the golden years.

Outlining spending, setting budget goals and preparing financially for any life changes such as health costs should all play a part in your overall approach to wisely preparing for retirement in Australia.

Having a financial plan in place that clearly captures your goals, preferences and financial strategies, is a great way to keep on track throughout all phases of retirement. Take some of the worry out of future planning. Calculate how much super you’ll have when you retire and whether it’ll be enough to support your desired lifestyle. It’s never too early to begin making plans for a brighter financial future.

Plan B is crucial for unexpected retirement outcomes

Retirement can be a time of relaxation and exploration, but it’s important to plan for the unexpected. Having a plan B in place is key for those looking to enjoy their retired years without worry or stress – after all, nobody should be afraid of the future when they don’t have to be. Even if you’ve planned meticulously for your retirement, it’s always best to be prepared in case your original plans don’t pan out as expected. 

Having that extra assurance will give you the freedom and confidence to truly explore what retirement has to offer. In other words, the more prepared you are for what may come, the better off you’ll be.

If you want to review your retirement plans and discuss how to start planning for your frailty years, make an appointment with us today, to learn more about how we can help you to maintain greater control and independence as you age.  

[1] Australian Institute of Health and Welfare – Selected health expectancies at age 65 by sex, 2015

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Take control & avoid elder abuse

World Elder Abuse Awareness Day (WEAAD) on 15 June puts a spotlight on issues around elder abuse – not just physical abuse, but also financial abuse.

Elder abuse

Elder abuse occurs when a trusted person (such as a friend or family member) takes advantage of this trust to cause harm to the older person. The abuse can take many forms, and sometimes the trusted person may not recognise that their actions are effectively a form of abuse. For example, we sometimes see families using an Enduring Power of Attorney to make financial decisions that benefit themselves, rather than focussing on the best interest of the older person. You might hear this referred to as “inheritance impatience”.

The Australian Government is committed to preventing and responding to elder abuse. The Attorney-General’s Department provides policy support to address elder abuse. They cannot provide legal advice to the public or investigate any complaints of unlawful or abusive behaviour.

The Commonwealth Attorney-Department General’s created the animated movie ‘Elder Abuse Everyone’s Business,’ which provides information about elder abuse and its various forms, as well as where individuals can go for support or further information.

It is important for all of us to think about who would step in and make decisions for us if we lost capacity to make these decisions on our own. Life can change quickly. If we lose capacity and need help, who would we trust to support us with decision-making or to make the decisions on our behalf? The increasing incidence of dementia and cognitive decline as we age, makes this particularly important in our older years. But it is never too early to start the conversation and set up appropriate arrangements.

You should always work with a lawyer to put in place the legal documents but as aged care financial planners, we offer support and guidance to our clients to help them understand the financial implications and practicalities. When the time comes for the nominated person to start making decisions, we can be there to help them make decisions to manage the older person’s finances.

Take the time on World Elder Abuse Awareness Day to think about your family situation. And look out for elder abuse events in your local community. Call us on 1300 550 940 to review your own financial situation or if you need help in your role as Enduring Power of Attorney.

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