Gayle Bryant outlines mistakes Australians make when it comes to aged care, and how to fix them.
You can avoid it all you like but there will come a time when you’ll need to consider your aged care needs – or those of family members.
Too often, we’re forced to think about aged care because of a crisis, such as a fall, and you find you can no longer live independently in your home. Seeking advice before such an event helps you plan for such a massive life change.
Aged Care Steps director Louise Biti says the average age of someone moving into aged care is around 80 to 84 years old, but adds that even at that age they’re generally not emotionally or financially ready.
“Most people aren’t mentally ready because we all hope aged care won’t happen – but it does,” she says. “And when the time comes they generally don’t have the documentation in place for others to start helping them make decisions around the move.”
Biti says we need to think ahead to what we want, such as whether we need in-home care or to move into an aged care facility.
“This includes decisions around what type of home we buy and where to live,” she says. “For example, can you get a walker through the doors if you need one and are there too many stairs? Sometimes it’s the unsuitability of your home that will cause you to move.”
Biti adds we also need to start having conversations with family.
“Family conversations can help members deal with their grief or better know their responsibilities at the appropriate time. We should also make sure powers of attorney, guardianship and medical directives are put in place.”
There are several aged care options in Australia depending on your needs.
Aged Care Gurus principal Rachel Lane says there are misconceptions around how much you need to be comfortable in an aged care facility: a key one being if someone doesn’t have any money they won’t get in.
“The fact is, aged care facilities have to maintain a ratio of those people who are supported by the government and those who pay their own way,” she says. “It is misleading to say the most common refundable aged care deposit is say, $500,000 for example, because while that facility may be charging that on average, there could be 30 per cent to 40 per cent of residents living there who are paying much less or nothing at all.”
However, planning for the cost of aged care should not be ignored and Lane says while much of the conversation is around selling the family home to pay for it, superannuation plays an essential role.
“While many people view superannuation as an investment to provide them with an income in retirement, it can also be used to fund a lump-sum accommodation payment in aged care,” she says. “This potentially preserves other assets, such as the family home.”
Financial planners need to start raising these conversations about use of super and other matters with clients, Biti says: “Planners like having conversations around the holidays their clients are going to have at retirement and the fun things they’ll do but they need to discuss how to prepare for the latter part of their lives as well.”
If you want care in your own home you need to be proactive about it, Lane says.
“The system is not instantaneous. There is a process to get assessed and then there is a prioritisation queue because not everyone is going to get a home-care package. You need to be talking about this with your financial planner and planning for the fact that the package won’t start on day one. So how will you get the care and services that you want and need until the package starts?”
RetireInvest Circular Quay financial adviser John Walker says if the average Australian has a house then they are well on the way to being financially prepared for aged care costs. “However, to avoid being forced to sell the family home too soon, surplus funds need to be built up.”
The next step is to start looking at how people will pay for their aged care.
“This is the hardest question,” Biti says. “How much you need depends on what happens to you and what the rules are like at that point. It also depends on how much the government will subsidise and how much your contribution will be. What you pay will also depend on what you own because of means testing.”
Family members should also be involved. “One can take on the role of project manager and coordinator,” Walker says. “It is common for one family member to step up while others show disinterest – until they disagree about the decisions being made. There should also be an individual that reassures the aged care resident that they are being well looked after. It is a challenge for all knowing that a loved one is in the final stage of their life.”
Walker says while hospitals guide the medically challenged and their families towards a range of facilities, too few are directed to competent financial planners that specialise in aged care funding.
“Advisers should specialise or refer to a specialist,” he says. “There is nothing more complicated in planning than aged care planning.”
The following are questions Walker says those considering aged care for themselves or family members should be asking:
To create an aged care plan that’s right for you, contact your financial adviser.
Gayle Bryant is a freelance financial and business journalist and sub-editor based in Sydney.
This website is issued by OnePath Custodians Pty Limited (OnePath Custodians) ABN 12 008 508 496, RSE L0000673, AFSL 238346 and OnePath Funds Management Limited (OnePath Funds Management) ABN 21 003 002 800, AFSL 238342
You should read the relevant Financial Services Guide (FSG), PDS, Additional Information Guide (AIG), Investment Funds Guide (IFG), and product and other updates (for open and closed products) available at onepath.com.au and consider whether OnePath products are right for you before making a decision to acquire, or to continue to hold any OnePath product. Alternatively you can request a copy of this information free of charge by calling Customer Services on 133 665.
Taxation law is complex and this information has been prepared as a guide only and does not represent taxation advice. Please see your tax adviser for independent taxation advice.
Before re-directing your super or moving your money into your product, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.
The information provided is of a general nature and does not take into account your personal needs, financial circumstances or objectives. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances or objectives. The case studies used in the articles on this website are hypothetical and are not meant to illustrate the circumstances of any particular individual. Opinions expressed in this document are those of the authors only.