Planning Finances for Aged Care

Now or in the future you will need to consider aged care options for your parents

As our parents age and become fragile we need to consider safety, home care and aged care services for them. From my experience, in most cases we are not able to provide this assistance ourselves, we need to consider external persons or organisation to assist us to care for our aging parents. Obviously, we want the best care for our parents and we want them to be happy in their twilight years. One dilemma is money. Everything costs money and typically our parents are asset rich but income poor. The following addresses some of my experiences with my clients and issues you need to consider or address before your parents require aged care assistance.
  • From retirement age , say, age 65 to early 80’s your parents cost of living will decline as they receive a similar income but their travel, entertainment, clothing, transport expenses reduce in their 70’s and 80’s as they tend to do less and have a very simple lifestyle. However, once they require aged care services this expenditure tends to increase.
  • Increasing cost of aged care. Most benefits pensioners received are linked to inflation or CPI. However, we are finding that aged care costs are increasing at a greater rate than inflation. This expenditure is linked to the level of care the retiree requires. This level of care tends to increase as the retiree ages.
  • Capital expenditure may be required to update the home. In the case where the retiree wants to remain at home, allowance may need to be made for wheelchair access, such as replacing stairs with ramps, changes to the shower, bathrooms etc.
  • Access to Government subsidies help to drastically reduce the cost payable by the retiree, but having additional savings creates more options with regard to the level and type of aged care.
As the legislation is now, the Aged Care Industry is moving more and more to a user pays system. As such, you need to consider the following on behalf of your parents;
  1. How will the aged care needs be funded.
  2. Will you retain or will you need to sell the home to finance aged care.
  3. Would you consider renting the home and moving your parents into aged care.
  4. What will be the cost of the optional level of aged care services for your parents.
  5. What effect will question 2 and 3 above have on any Centrelink and aged care benefits received by your parents.
  6. If your parents move into residential care, how will the accommodation deposit and ongoing costs be funded.
  7. Consider tax planning strategies such as the Downsizer Contribution Strategy. Essentially this strategy is designed to use the proceeds from the sale of your parents home to fund new accommodation such as residential care and the ongoing costs associated with that care and provide them with more money to spend in their latter years. It essentially moves the retiree from an asset rich, income poor financial position to a more balanced financial position. There are a number of conditions to this strategy and it may have Centrelink implications.
If you are considering aged care options for your parents feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166. The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.  It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.