Are you in aged care denial?

No one likes to think about getting old. The ageing process brings many unknowns and it can be tempting to think ‘it will never happen to me’, hoping that you’ll never need help to get by. While optimism and staying active definitely have their benefits, ignoring the realities of old age could come at a price for your finances.

Fact 1: We’re living longer than we used to
Improvements in living standards and innovation in medical care mean that we’re living longer than ever. According to the Department of Health[1], the number of Australians aged 85-plus is expected to grow by 35 per cent by 2029. Research[2] shows that in the 25 years between 1992 and 2017, the most common age of death increased by 10 years to 88. Yet the average 65-year-old underestimates their life expectancy by almost five years[3].

So, what does this all mean? If you’re 65 today, there’s a good chance you’ll live into your 90s. This might be good news for you, but bad news for your finances if you have aged care fees to cover.

Source: Australian Bureau of Statistics, Retirement and Retirement Intention, Australia, 2016-17 and Australian Life Tables 2010-12 with 25-year mortality improvement factors from the Australian Government Actuary.

Fact 2: We tend to underestimate the help we need
You might feel fit and able now, but living until your 90s (or beyond) is likely to mean that you’ll need some sort of day-to-day assistance. If you don’t have the luxury of a family carer close by, you could well be calling on some kind of aged care service for support.

The Australian Institute of Health and Welfare found[4] that almost two thirds (59 per cent) of Australians aged 85-plus need some form of healthcare assistance. Heading into later life with a realistic view of the kind of help you might need can put your mind – and your finances – at ease.

If you find the idea of losing your independence too daunting, it’s good to remember that aged care doesn’t have to mean moving into a residential facility. In Australia, there is a wide range of other options available to you – from home care support to flexible, short-term care if your family carer is away. You can find out about the different options on the government’s My Aged Care website.

Fact 3: Aged care fees are complex
Money is, of course, a key factor in what kind of aged care services you can afford, and research[5] shows that many Australians underestimate the costs involved. Around two thirds of older Australians expect their future care costs to be around $400 per week ($20,800 p.a.) or less. If you’re considering residential care as an option, depending on your circumstances, you may also need to contribute towards the cost of accommodation.

Aged care fees are complex, with both home care and residential care fees broken into several components. How much you’ll need to pay for aged care depends on the level of care and provider you choose, and an assessment of your finances.

The fee estimator tool on the My Aged Care website is useful and gives you some idea of the fees you may have to pay. Your actual fees will depend on your own circumstances.

Aged care fees and charges

Home care


Basic fee

$3475 p.a. – $3880 p.a.

Income-tested care fee

$0–$11,102 p.a.

Residential care (extra-service fees may also be payable)

Basic fee

$18,845 p.a.

Means-tested care fee

$0–$27,755 p.a.

Accommodation payment

Up to $550,000
(higher if approved by the Aged Care Pricing Commissioner)

Source: Department of Health – schedule of fees and charges for residential and home care from 1 January 2020

Fact 4: Timing is everything
We tend to have a blind spot when it comes to planning ahead. Decisions around aged care are complex and emotionally charged, so it’s no wonder these conversations are often put off. 

But putting things off until your health is deteriorating could lead to hasty decisions that aren’t carefully thought through. Planning early is crucial if you want to take the time to weigh up all your options and, if necessary, find an aged care home you’re happy with.

Just as important is starting conversations about aged care with family members early. Getting all opinions and expectations on the table with those closest to you leaves plenty of time to work through any potential areas of conflict.

Fact 5: There are ways to reduce ongoing care costs
If you’re planning to move into a residential aged care facility, you’ll need to make some decisions that could greatly affect your finances.And perhaps one of the biggest decisions is whether or not to sell the family home to help cover your aged care fees.

The good news is that there are some strategies to help reduce the cost of ongoing care. What you do with your home, and how you invest, can all help to improve your cash flow, Age Pension entitlements, regular income or help to reduce your ongoing aged care fees. The key is finding the right strategy for you.

Talking to a financial adviser could help you and your family work through all the different options, taking into account your broader financial plan and what assets you would like to leave your loved ones.

Access aged care resources
The aged care system can feel complicated and stressful, but it’s good to know that help is on hand. To access easy-to-follow resources and find out more about the steps you need to take when planning for aged care, visit the Challenger website or call the Challenger team on 13 35 66.

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[1] Department of Health – 2018/19 Report on the operation of the Aged Care Act 1997

[2] Australian Bureau of Statistics, Age at death data, 2018.

[3] National Seniors and Challenger, Outlook for Australian seniors’ retirement plans, August 2015.

[4]  Australian Institute of Health and Welfare – Australia’s Welfare, 2015.

[5] McCrindle Absolute Care & Health study 2018

Related articles:
The facts about buying or renting
Renting tips for pensioners
Home is where the cash is

DISCLAIMER: All content in the Retirement Affordability Index™ is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances. Before making a decision about whether to acquire or continue to hold a financial product, you should obtain and consider the Product Disclosure Statement (PDS) for the relevant product. A copy of the relevant PDS for a Challenger product can be obtained from your financial adviser, by calling 13 35 66, or at

Written by Challenger Group


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