For most of us, residential aged care is the most significant and shockingly expensive financial decision we will ever make and we are usually required to make it at a time in our lives when we are at our most physically, mentally and emotionally vulnerable.

As teenagers, our most expensive purchase was probably our first car.  Then as young adults we were confronted with buying a home, choosing the right mortgage and borrowing funds that would take us a good twenty years to pay back.  But as we enter our twilight years and residential care becomes a necessary consideration, we discover that many of our expectations and assumptions about aged care are suddenly overturned as the harsh reality of the “user pays” system is thrust upon us.

Many of us try to save for our retirement, to ensure we have sufficient funds to choose how and where we live out our days.  We work hard, save, invest, forego holidays and luxuries so that we that we can be comfortable in our later years and maybe leave something for our children.  But then we find that this planning and frugal lifestyle puts us in a position where we can and therefore must contribute to the cost of our aged care.  In residential care, this usually equates to an upfront accommodation payment to a facility of between $200K and $800K or the equivalent daily interest on this amount (at 6%).  In addition to this accommodation payment, we are also required to pay a Basic Daily Fee which is the equivalent of 85% of the single pension, (even if we do not receive one).  We may also be required to pay a Means Tested Fee which is calculated by Centrelink based on our level of income and assets that we have accrued.

The government will quite flippantly reassure people that they don’t have to sell their family home in order to enter aged care, but the reality is often quite different for many of us.  Sometimes, the simplest position to be in is one where we have no savings, receive a full pension and do not own a property.  In this situation, a person may enter residential care and pay only a Basic Daily Fee.

For those of us who own a home and maybe have some savings though, it is often very confronting to learn that although we don’t have to sell the family home, it’s often unaffordable not to.  In some situations, holding on to the family home will mean paying even higher fees for aged care, which in time affects cashflow and may eventuate in a sudden and unplanned sale in order to relieve the financial strain.  This situation can be incredibly stressful for the entire family when they are at the same time grieving for the frailty, declining health and age related challenges of their loved one in care.

There are some situations where the residential home is not included in the income and asset assessment at the time of entering care.  Such situations include where the spouse is remaining in the home or when a dependent child or carer who is eligible to receive Centrelink payments has been living in the home for the past two years.  The final determination is ultimately made by Centrelink, but exploring these issues and obtaining some guidance in the early days will help with planning and understanding the financial implications that lay ahead.

It’s always a good idea to obtain expert advice and support from an unbiased aged care professional, before making a commitment to any facility.  Aged Care Consultants can provide support and guidance regarding your options, aged care fees and expenses as well as negotiating some of the costs, but it is important to obtain this advice before entering care so that you are prepared and can make sound decisions from the outset.  Engaging an Aged Care Consultant is similar in some ways to engaging an insurance broker or mortgage broker – but with a more personalised touch.  So, why wouldn’t you want to have some control over decisions concerning your aged care living arrangements, when it is likely to be the most expensive investment you will ever make?

Your Aged Care Companions is staffed by Accredited Aged Care Professionals providing independent and unbiased advice regarding respite and permanent placement solutions.  If you would like to find out more or book an appointment, please call us on 8332 8409 or email us at