It might seem too early to be thinking about what sort of care you may need in the future. But believe us, it’s not. A bit of assistance at home or the care that comes with moving into a residential aged care facility or village can go a long way to maintaining the lifestyle you see in your future.
Taking the bull by the horns and starting to plan what you want for your future is the best way to set yourself up to get there. These can seem like big decisions – especially when you think about all the financial considerations – and that’s exactly why you should start grappling with them now.
Sometimes, supporting the life you want in the future determines the level of care you need.
What is aged care?
Aged care is basically divided into home-based care and residential care. Both of these care types operate differently, and have different schemes providing means-tested access to government funding assistance.
Our advice: make it easier on yourself and get some help. You’ll need solid financial expertise to guide you thought the tricky territory of care costs, pension entitlements, asset tests, and so on… It makes sense to bring on some extra firepower. Plus, this can be emotional stuff, and having an objective third party who can help you see the nuts and bolts behind it all is invaluable.
So, here’s a great starting point: four essential questions to get the discussion started with your financial advisor.
Q1: What will our aged care bill look like?
OK, let’s be honest: aged care costs are complicated. Your bill will depend on a number of things: where you want to be (at home or in residential care), whether or not you pay (or part-pay) a refundable bond to live in residential care, what your income and assets are. Plus, you may be paying daily care fees, a portion of which is income-tested.
And remember – all your day-to-day expenses don’t necessary go away once you’ve decided which care route to take. You may need medication. Certainly, you’ll need a shopping splurge, a day out with friends. Ask for help to draw up a realistic budget covering all your expenses, so you have a full picture of your financial needs.
Q2: Can we afford it?
That’s the big one! There are options for everyone with both In Home and Residential care and of course, they’re going to depend entirely on your particular position. Getting financial advice will help you get a really clear picture of that – and help you structure your assets and income to maximise your position.
That’s where your financial advisor comes in – they can outline all the options for how to downsize and get some help at home or fund a move into residential care, and what could be best for you. And it’s also why the best time to start thinking about this is now!
Q3: So we’re talking about the family home – what are our options?
When you start talking aged care finances, the subject of the family home is going to come up pretty quickly. It’s often the major asset and if moving into residential care that requires a bond, selling up is an obvious way to cover it.
But of course that’s not the only option. You can consider holding on to the family home and renting it out, giving you an income stream to cover your care bills (remembering that could also impact on your pension entitlements).
If you have the luxury (and the smarts) to be thinking ahead, downsizing is an option that can allow you to release the equity in the family home. By selling your home and reinvesting in a cheaper one, you can put more into super or other investments.
Q4: What will happen to our pension entitlements?
This is a big piece of the puzzle and something you definitely want help to get your head around. Any big surge in your income or assets – for example, from selling a home – will impact your pension entitlements, so it’s important to be aware of the side-effects of any financial decisions you make, and when you make them. Your financial advisor will be able to help you decide on the best course to take – freeing up equity, conserving your entitlements, and ensuring you can finance the kind of care and lifestyle in the future that you want.
Timing is everything
Are you convinced? Or even half-convinced? The best thing you can do is act now. Even if it’s just a very pie-in-the-sky discussion, clarifying your financial position and understanding your options will give you a sense of empowerment and control over your future.
Remember: if you decide to downsize to set yourself up, the real estate market may not agree with you. You want to give yourself the luxury of being able to wait until the market is in your favour, not sell under pressure.
Take these questions as a guide, seize the day and take control of your future.