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Four Ways to Potentially Save Hundreds of Thousands of Dollars in Aged Care

As Australians live longer, more and more will end up in residential aged-care. The number of people in permanent aged care in Australia is expected to triple in the next 25 years, from nearly 200,000 today to over 700,000 in 2050. Children may consider a parent to be many years away from aged-care, but circumstances can change very quickly.

The Australian aged-care sector is a maze of jargon and acronyms. Decisions involving tens of thousands of dollars must often be made in a short time frame, putting massive pressure on children with aging parents.

The result is that most Australians pay way too much for residential aged care. Some are paying hundreds of thousands of dollars too much, particularly if they rushed into signing a contract without looking at the options available.

These rising costs are becoming even more pronounced for self-funded retirees under upcoming policy changes. Learn more about how new aged care changes could impact self-funded retirees.

Four ways to potentially save hundreds of thousands of dollars in aged-care

Here are four ways to dramatically reduce the cost of residential aged care:

  1. Negotiate on the Refundable Accommodation Deposit (RAD). The RAD (formerly known as the bond) to secure a room at an aged-care facility can be as high as $2 million. In many cases these RADs are negotiable, and at times can be reduced significantly. The willingness of an aged-care facility to negotiate on RADs depends very much on the demand and supply of rooms at their facility.

  2. Look at potentially part-paying the RAD. Although aged-care facilities may prefer people to pay a RAD in full at the time of entry into aged-care, it is possible to choose to pay interest payments only or pay with a combination of lump sum and interest payments. This frees up capital for other expenses. It is possible to negotiate to pay some or all of the daily fees from the RAD to minimise the impact on a person’s cashflow. This means of course that less of the RAD will be returned at the end of the care period.

  3. Structure finances so that a parent can keep the full pension. Currently a full single pension is just under $30,000 per year. This can be lost if the family home is sold and the cash from the sale is added to the person’s assessable assets. It may be beneficial to keep the family home and pay aged-care fees from the rental income generated. In addition, the funds used to pay the RAD are excluded for pension calculations, so this needs to be accounted for too.

  4. Look closely at the Additional Services Fees. Premium Additional Services Fees packages can cost as much as $120/day and provide for additional services like a choice of meals, alcohol at meals, expanded activities program, cable television etc. Look closely at this fee and ask what services are being delivered to assess whether they represent value for money.

The earlier that advice is sought, the better the outcomes that can be achieved. Once a contract has been signed the leverage for negotiation has gone, but there are still some aspects that can be altered such as the means-tested fees and pension entitlements.

For a broader understanding of aged care costs in Australia, including payment options and government subsidies, contact an advisor at Clarity Aged Care advisors.

Our experienced Melbourne aged care advisors can help simplify this complex journey. Contact us today to learn more about how we can assist you in making informed decisions for your loved one’s aged care needs.

Note: Figures are accurate as of the publication date