The Cost of Aged Care (and How Planning Can Help).

Our own Jennifer Langton recently joined Peter Hogg from Aware Super for an article written by Amy Bradney-George for the Australian Women’s Weekly where they discussed the very real concerns the majority of Australians have about the cost of aged care.

If the thought of aged care fills you with worry, you’re not alone. There are so many uncertainties that come with planning for different types of aged care, including how much it all costs.

In fact, research from Aware Super has found 94% of Australians aged 18 to 54 are very concerned about the cost of aged care. This includes costs for themselves, as well as for their parents.

Peter Hogg, Aware Super’s Aged Care Delegate, said the research showed concern also increased with age.

“At a really high level, what it identified to us is probably a lack of understanding awareness of what those costs could possibly be. And with that, an overall idea of what that could look like for them,” he tells The Australian Women’s Weekly.

“Because obviously, when you don’t have an understanding, the unknown is very fearful.”

While the average cost of residential aged care in Australia is around $470,000, Peter says the costs can vary a lot for every person.

“It’s individual for everyone. But I guess it probably plays out differently, depending on what age group you’re in, and certainly the more early planning and awareness that you have, the more you can do about it to get ahead of it.”

Preparing for aged care costs in retirement 

The individual nature of aged care costs can make it hard to know how you should factor it into retirement. But there are resources that can help you get a baseline.

For starters, there’s the Association of Superannuation Funds of Australia (ASFA) Retirement Standard. That gives an estimate of how much money you need for a modest and comfortable retirement.

Superannuation funds also typically offer support and resources.

“Different funds have different approaches,” Peter says.

“So at Aware Super, we’re really focused on having a range of help that’s available to our members at all different ages.”

This includes the My Retirement Planner calculator, which you don’t need to be a member to use, as well as video or phone consultations.

“What we’re trying to do is offer as much education, no additional cost type support. And that’s a really great place to start.”

You could also consider talking to a financial planner about your circumstances, although there may be costs for that.

The government’s My Aged Care website also has a wealth of information on aged care costs, rebates and services. This includes a fee estimator to help you budget for subsidised and out-of-pocket costs.

Expert advice from Jennifer Langton at Aged Care Steps

“Probably the best resource for unbiased and full information is the government My Aged Care website,” says Jennifer Langton, Head of Aged Care Personal Advice at Aged Care Steps.

“There’s so much information on there it can overload people a little bit. But rather than waiting to start interacting with this really comprehensive information [when it’s urgent], start familiarising yourself with information beforehand and getting an idea of where to turn and how to even register for the system.”

Residential aged care has different costs to home care, so understanding your options can help you plan ahead.

Common challenges

The complexity of aged care means that it’s often something people don’t plan for until something happens.

“The key challenge is that complicated,” Jennifer says.

“The terminology is complex, the fees and charges seem to be insurmountable, and what happens is that people start interacting with aged care after a trigger event.”

This could be a major health scare or the death of a partner, which then leads to someone needing immediate aged care support.

“So the family are under a lot of pressure and a lot of emotional stress. And suddenly, they’re interacting with this really complicated legislation and really complicated terminology,” Jennifer says.

This leads people to ask friends and family for advice. But because aged care costs and needs are so individual, the information they get could be wrong or lead to more confusion.

“For all these years I’ve been doing edge care advice, the most common thing that people will say to me is that they’re overwhelmed,” Jennifer says

“They’re so overwhelmed that they get to the stage where they can’t make decisions, because they just have this information overload, or they’re just deeply confused. And they will either not make any decisions, or they will make panicked rash decisions without actually understanding the implications.”

This can lead to further costs and challenges in the future.

The anxiety around aged care costs is also an issue on its own, because it can impact how people spend money in retirement.

“On average, we see that retirees are generally more conservative than what they need to be in terms of spending through retirement, Peter says.

“Especially in the early phases, we really encourage people to enjoy retirement: live life, take advantage of health and wellness, and do the things that they probably always wanted to do.”

8 key things to know about aged care costs

Both Peter and Jennifer says it’s important to start learning about aged care options before you (or your parents) need them.

With that in mind, here are some key details to be aware of:

• Aged care costs for Australians are subsidised by the government.

• There are means tests for aged care to help make the costs more affordable.

• Even if you have no retirement savings, you can get support through My Aged Care.

• You may not need to sell the family home. In fact, Jennifer says “sometimes selling the house can become the worst outcome” because of the means testing for aged care and the Age Pension.

• Aged care support is available when you live at home.

• There is a difference between retirement villages and residential aged care. Some retirement villages won’t allow you to live there if you need a certain level of assistance.

• Aged care can start with smaller levels of support, such as home maintenance or Meals on Wheels.

• It can take time to register for support and to get into residential aged care.

Jennifer says engaging with the aged care system earlier has the added benefit of meaning you can get further support as you need it. This means less chance of panicked decisions after a trigger event.

“As a general rule for the general population, once you turn 65, and you have care needs, you register through My Aged Care,” she says.

“Then what will happen is that they will do an assessment and assess what services and support you will need to keep you living as well as possible.”

This article first appeared on the Australian Women’s Weekly website on 6 June 2024 and can be accessed here.

*This article contains general advice only and may not be suitable for your circumstances. Make sure you seek financial advice appropriate to your individual circumstances before making decisions.