Retirement Living to Aged Care - preference versus necessity?
I've previously espoused the merits of downsizing, including the very viable option of retirement villages (you might care to open this link) in order to provide you with a more manageable home in your retirement. Not only does a smaller home mean less physical upkeep for you as you age, the smaller space just makes more sense now that the kids have "left the nest" and besides it has a significant impact on your purse in terms of lesser power and heating costs, especially now that we are experiencing significant rises in the unit cost of these essential utilities. As you will know from previous articles, we last year relocated and downsized from a somewhat isolated small acreage to a delightful "in-town" cottage within a vibrant and uplifting regional community.
We chose not to take the retirement villages route - perhaps too great a step for us, still with our beloved "H"and
"M" (our dog and cat) - but chose a cottage location where we can easily walk to town and with easy access to community facilities such as purpose-built bicycle pathes, copious parks, gardens and the local swimming pool. And we hope that this very convenient location will continue to serve us well, even into old age, assuming of course we continue to enjoy reasonably good health.
But therein lies the conundrum!! We would all like to think we will remain forever young and agile but for each of us the aging process deals different hands and none of us really knows our fate in that regard. I watched with interest as my father reached old age - at 85 he decided it was time to give up his total independence by selling his neat suburban cottage and move to a retirement community where help was close at hand, were it needed. But he did this on his own terms - he still had good health, was still driving his car and was still a keen (and very competitive) lawn bowler! He was able to make a considered decision in his own time and he certainly selected well, purchasing a free-standing two bed villa (with garage) in a manicured cluster around a central hub which housed a community dining and lounge area, library, indoor swimming pool, and yes, even a bowling green. It truly was resort-living and Dad often commented that he wished he'd done it sooner! But this facility even catered for assisted apartment-style living for those who could no longer independently maintain their own villas and so the ability to move according to your changing needs in later life was entirely possible. Dad's villa was fitted with an emergency button, and the day he was taken out by a massive heart attack just 3 weeks shy of 90, medical assistance was there within minutes although, in his case, they were unable to resuscitate. But the real moral of all of this is to be able to do what Dad did - to be able to do it before you really need it, but sadly for many of us that is not the reality.
Our dear friend and adviser, Rob MacLean of Equitas Wealth has recently posted an article to his website on this and I feel compelled to share it with you as it gives some very valuable advice and guidance:
"Your Guide to Aged Care for Family and Loved Ones
by Rob MacLean on November 12, 2013
Many Australians are facing, or will face in the future, the intricacies of dealing with Aged Care. It is the children of aged care recipients that are likely to be the ones doing the research and making the decisions on behalf of their parents. When faced with aged care decisions the family will often be forced to act quickly without being fully informed. Seeking advice early and planning ahead, before aged care is needed for your family member, will result in a much better outcome.
The government rules will change in mid 2014, which will see a more rigorous means test applied, and potential increases to the financial complexity and costs associated with entering and staying in an aged care facility. My advice is to be proactive and educate yourself about aged care before your family member needs to move into an aged care facility – this will greatly assist you to make informed decisions.
About 17% of Australians who are over 65 are currently in some form of formal care. It is estimated that about 37% of women and 24% of men who reach 65 will, at some stage, enter aged care. (Source: Australian Bureau of Statistics – 2011)
There are a number of options (listed below) for people requiring a significant level of professional care, though availability generally depends on a medical assessment.
Aging in place facilities
Extra service nursing homes
Extended aged care at home
Complex decisions associated with aged care such as determining a suitable aged care facility, dealing with the entry, ongoing and exit fees charged by the facility, legal issues and contracts, and how your decision may impact government benefits. Often these decisions need to be made at an emotionally stressful time for the family.
High cost of aged care entry fees. Entry fees can often amount to hundreds of thousands of dollars and deciding to sell the family home to cover this cost can have an adverse effect on the recipient’s financial affairs, for example the decrease and/or loss of government benefits such as the aged pension and/or additional aged care facility fees.
Supply and demand imbalances are making it harder to acquire a bed in an aged care facility. The number of Australians who need aged care is increasing due to an ageing population and increasing life expectancies. At the same time the number of beds available is not keeping up with the increased demand. The aged care sector is highly regulated by the Federal Government which has deterred private investment in the sector further exacerbating the supply and demand imbalance.
Trauma and stress is experienced when moving from the family home to an aged care facility. Poor health of a family member coupled with a loss of independence can be a very stressful experience for the whole family.
Loss of benefits. Many Australians are asset rich and income poor. Due to large increases in home prices over the last two decades, many Australians own a substantial asset in their family home. However, the majority of their income is derived from government benefits such as the aged pension. Often the aged care recipient may feel the need to sell the family home to fund the entry fee to secure a place in the aged care facility. This action may cause the aged care recipient to lose or partially lose their Government benefits and be faced with extra aged care facility fees.
Estate Planning. The move to an aged care facility is often triggered by an event whereby the family member is unable to care for themselves due to a loss of a mental or physical capacity. It is important to seek estate planning advice prior to any loss of capacity to ensure assets are managed in accordance with the family member’s wishes and decisions are legally sound.Strategies and options to consider:
Retaining the family home may reduce the loss of benefits and the level of trauma and stress associated with the aged care experience. Once the decision is made to enter an aged care facility, you may consider retaining the aged care recipient’s family home and/or renting it out rather than selling. Instead of selling the family home to fund the aged care entry fees there may be alternative options such as the Centrelink Pension Loans Scheme, reverse mortgages or paying the aged care entry fee in periodic payments. Renting out the family home may also partially or fully offset any losses in government pensions or increases in aged care facility fees which may arise due to the aged care recipient moving from the family home to the facility.
Insurance bonds and Annuities can also be an effective tool in maximising government benefits and minimising aged care facility fees. If the decision has been made to sell the family home and enter an aged care facility, you may consider investing any remaining proceeds from the sale of the home into an insurance bond or an Annuity. Insurance bonds and Annuities are investments offered by Iife insurance companies. Establishing an appropriate insurance bond or complying Annuity for an aged care recipient can, in some cases, reduce the impact on the means test counting towards Centrelink benefits and aged care costs.
Often people experience the need for aged care services suddenly because something has happened – for example a family member has just had a stroke or a fall and they urgently need help in making decisions about aged care. For others, the process is slower, with a gradual realisation that daily living activities are getting harder to manage due to progressing dementia. Whichever is your experience we can assist you by putting the appropriate structures and funding in place.
Seeking advice early and planning ahead can reduce the stress involved and assist you to better understand the complexity of the subject. Being proactive and educating yourself about aged care before your family member needs to move into an aged care facility will greatly assist you to make informed decisions.FIND OUT MORE
To request a confidential discussion, click here or call Equitas Partners on 02 9492 0444.
This information was prepared by Equitas Wealth Pty Limited and is current as at November 2013."
I do hope this post, and especially Rob's insightful article has been useful. It is true that none of us know how long we will be around or indeed how long we will enjoy good health, but one thing is clear to me - we can certainly do some planning and preparation along the journey to make our own choices while we are still able, rather than simply cast our fate (read burden) to others in our own incapacity.
...and remember...have a fabulous retirementLIFE....