5 min read
Believe it or not, the number of Australians aged over 75 is expected to rise from about 6.4% to 14.4% of the population over the next 40 years.
Living longer is great, but are we adequately planning for the health care and aged care costs associated with getting older?
Data from the federal government's Australian Institute of Health and Welfare (AIHW) shows that men who were aged 65 in 2012 could expect to live an average 8.7 years without disability and a longer period of another 10.4 years with some form of disability, including 3.7 years with severe or profound core activity limitation. Similarly, 65-year-old women could expect 9.5 years without disability and another 12.5 years with some form of disability, with the forecast of severe activity limitation rising to 5.8 years.
If you're approaching retirement, chances are you've already given this topic some thought. In a recent survey of National Seniors Australia members, 71% of respondents rated being able to afford aged care and medical costs in retirement as "very important", with 20% saying it was "somewhat important" and only 4% being neutral.
Knowing your options
While it's not pleasant to think about getting old and frail, the sooner you start thinking about aged care and the likelihood of increasing health care costs, the better off you'll be.
Financial adviser Steve Nielsen, principal adviser of Ascent Wealth Management, says his objective with his clients is to "ensure people that are pre-retirees are taking aged care costs into consideration in some way, in broader retirement planning as well as estate planning."
Not planning for aged care can leave you worse off, financially and emotionally, Nielsen says. "If we have to make decisions on the run, after your health has deteriorated, we're not going to strategise in the best way how to fund moving into care," he states. "So, pre-planning is very important."
The most important matter to consider is the variety of aged care choices available and understand what you can afford, according to Nielsen. There are a number of options within the Australian aged care system, including support at home (whether it's help with preparing meals or medical care), residential care for those who can no longer live independently in their own home, as well as a variety of flexible care options. You can visit the Government’s MyAgedCare website for more details on the options available.
What will it cost?
In 2002/03, 642,000 people used aged care services. In 2015/16, that figure had more than doubled to 1,330,900.
How much you pay will depend on the type of care you access. You can use an online calculator to estimate the cost of aged care in your own home, or in residential aged care. It is also important to remember that when entering residential aged care you may (depending on your assets and income) need to make a payment towards accommodation, where the average cost of accommodation in an aged care home is $380,000 — although it can exceed $1 million.
"It's important that people are aware of aged care costs when they are planning their retirement," Nielsen said. "It's about understanding broadly what they can afford and talking about the decisions they may have to make, such as whether they'll have to sell the family home to pay for the refundable deposit."