June has been struggling to cope at home and while her family think that residential aged care is the best option, June is not sure she can afford it. In all reality, June would rather remain in her own home.
She owns her home, which has a value of $650,000. She has financial assets totalling $60,000 and receives the full Age Pension.
Case study 1: home care
June has an ACAT assessment, which approves her for a Level 3 home care package. This provides a budget of $36,306 per year for home care services. June will need to contribute just the basic daily fee of $10.10* ($3686.50 per year) towards the package of services.
June and her family can work with service providers to determine which services are provided and who will provide them. She will need to pay an administration fee and other fees may also apply – these are deducted from the package value available to pay services. If the package does not provide enough care to allow June to stay in her home, she may need to pay for additional services. On top of this, June still needs to pay for her normal living expenses and home maintenance costs.
Case study 2: residential care
After looking at what can be provided under a home care package, June decides to move into residential care for a $400,000 accommodation payment.
She decides to sell her home, but this may take a few months, so she starts by paying a $12,000 refundable accommodation deposit (RAD) to cover the daily accommodation payment (DAP) for the first six months. The service provider will deduct the DAP from the RAD paid.
At the end of the six months the home has sold and June uses this money to pay $400,000 RAD and invests the remainder in the bank. Her Age Pension will go down slightly to $20,814 per annum and she earns $8932 (as per deeming rate) of interest – total income of $29,746. She will pay daily care fees of $27,505* (basic fee plus means-tested fee) which cover costs such as food, electricity, daily care, laundry and cleaning services. June should be able to fund this from her income with a small amount left for personal extras.
*Rates current to 19 September 2017.
Finding a financial planner
When making decisions about accessing aged care, it can be a very stressful and difficult time. But you don’t have to make the decision alone. A financial planner who is experienced in aged care advice can help you to make fully informed choices.
Ensuring that you have adequate cash flow or cash reserves to meet the cost of your care services is vital. You might choose to withdraw the money from your savings to meet the costs or you might need to look at how to increase your monthly income.
In some cases, your financial adviser may even be able to offer recommendations to structure your finances to minimise the fees for home care or residential care.
Planning ahead and seeking professional financial advice may save you a lot of time and stress as well as help to prevent you from making a wrong decision.
If you have a financial planner already, ask if they are able to help you with your aged care decisions or refer you to someone else who can. You can also use the ‘Find an Adviser’ service on the Aged Care Steps website to search for an adviser who has completed the Accredited Aged Care Professional training program.
*Rates current to 19 September 2016.