How to fund my move into an aged care home?
Approaching what professionals call the ‘frailty’ years can lead you to lose your ability to live independently in your home. Reaching those years may mean it’s time to move into assisted living. With the potential for frailty (on average) to span 20% of our retirement years, it is important for you to plan so that you are not left with just undesirable choices.
Make a plan for the transition.
Creating a plan for making the transition into an aged care home means:
- Doing your research (starting with this article) by finding out what aged care accommodation is available to you, what the costs may be and if there is government funding help available.
- Talking through the options with your family or a third party, such as a financial advisor accredited to provide advice around aged care, to help you find the most suitable choices for yourself.
- Considering not just financial costs but also family considerations, required amenities and location.
- Incorporate contingency measures and decision pathways, as not everything always goes our way or how we plan.
- Finalise your plan and ensure your preferences are recorded and stored in a safe place for when the time comes.
Planning is still essential even if you need more time to prepare for a move to an aged care home. In the meantime, government funding options are available if you desire to live in your home but realise you may need assistance like home care services. If this is you, read our latest blog, ‘Staying at home as you age, how a Home Care Package could help you’.
To start your research on aged care accommodation.
Here are some of the available options:
- Residential accommodation – is available to people with physical, medical or social care needs that can’t be cared for in the community. These services are provided in residential aged care services, such as:
- Retirement Villages – available to people over 55 who can live independently or reasonably independently. It is a lifestyle decision based on no longer wanting to maintain a house.
- Supported Residential Services– providing a community setting to support senior Australians who need assistance with daily activities. No Aged Care Assessment Team (ACAT) assessment is required for entry.
- Independent Living Units- like a bedsit or self-contained unit with a kitchen and bathroom and suited for residents who can live reasonably independently with or without a disability.
- Permanent Aged Care Facilities– a residential aged care facility that provides aged care services and has the appropriate staff, which includes nurses on call 24 hours a day. However, this does limit your visitation with your elderly parents.
What are the costs of these, you may ask.
Generally, four types of fees make up the cost of living in an aged care home:
1. Daily Care Fee
Day-to-day living costs (i.e., your meals, laundry, cleaning, utilities like power and basic telecommunications) make up this fee.
The fee everyone is expected to pay is set by Services Australia at 85% of the single Age Pension. Currently, the daily payment is $56.87/day (from the 20th of September 2022). Hence, the Government is essentially funding your care through the Age Pension.
To keep up with the rising cost of living, it is indexed (increased) twice a year as the Age Pension is too. So, you will be notified each year on the 20th of March and the 20th of September.
This will be the only fee they will need to pay for some people.
2. Means-Tested Fee
This fee goes towards your day-to-day personal care and nursing costs and is based on your income and assets. So, it only applies to those who can afford it. Generally, those people are typically not paid the full aged pension, so this person or couple with have some level of assets outside their family home.
You may understand this fee as the ‘income-tested care fee’, but its name has changed since 1st July 2014. Its purpose stayed the same, but it now considers both assets and income to determine who pays for mean-tested care.
At the time of writing this article, the indexed annual cap is $30,574.33, and the lifetime cap is $73,378.49. Fortunately, for those contributing to a Home Care Package [link article], the fees paid will count towards your annual and lifetime safety net.
3. Accommodation Fee
This fee is set by individual aged care homes (which they must, by law, clearly advertise). It covers the accommodation they provide and will vary according to factors such as local property prices, types and size of your room and amenities (e.g., gardens, gym, swimming pool).
The amount of their set fee you must pay depends on your finances (like the means-tested care fee). You will be advised by Service Australia what you will be expected to do, which will be one of the following:
- Subsidised accommodation costs – if your means are below a certain amount, the Government can subsidise a maximum of $55 per day towards your accommodation cost. The amount depends on your standards and how recently the accommodation was refurbished.
- Accommodation contribution – partial payment of the cost (the Government will pay the rest)
- Accommodation payment – the total cost
Three different methods can pay this fee:
1.Lump-sum payment – a ‘refundable accommodation deposit’ (RAD).
It acts as an interest-free loan, and you’ll be refunded the balance of your deposit once you leave the village.
2. Rental-type contribution – ‘daily accommodation payment’ (DAP).
Paid fortnightly, this is a periodic payment based on a daily interest rate.
3. A combination of both
- Pay a nomination deposit and pay the outstanding balance in rent.
- Pay a nominated deposit and pay the balance within six months. Still, interest is calculated on the unpaid amount and is payable by direct debit fortnightly.
4. Additional services fees
Only payable by those who desire extra services and will not be subsided by the Government. These may include,
– higher quality accommodation
– social activities
– entertainment options
– special therapies such as massage, hydrotherapy
– personal care such as hairdressing and manicures
If you don’t choose an extra service room, you won’t miss out on having these services available. You will still be able to pay for them on a fee-for-service basis.
If you want a rough idea of these costs, try out this fee estimator created by the Government’s Myagedcare.
What if I can’t afford it?
Don’t worry. There are different ways to pay for you aged care home stay, and you may qualify for Australian Government assistance depending on your financial situation.
Suppose you can’t afford aged care home costs for reasons beyond your control. In that case, you can request to be considered for financial hardship assistance. If you are eligible, the Government will pay some or all of your aged care costs (discussed above, except for additional service fees). For more information on how to apply for this, see myagedcare’s website.
Can I seek financial advice?
Yes, you can. It is recommended to ensure the best outcome for you/ you and your partner. At Vision, one of our financial advisors, Hamish Ferguson, can provide a level-headed perspective to your family conversations that can sometimes be distressing or emotional. He can also evaluate your income and assets and guide you to make the best decision for the payment of your move into an aged care home.
How can Hamish help?
- Funding Options like Government funded aged care
- Impact on age pensions and means-tested fee
- Estate planning impacts
- Emotional and family considerations
- The potential value and use of former home
- Ability to generate cashflow
Contact Hamish today to start planning your future transition now.