The Aged-Care Home Decision: How Do You Source the Accommodation Funds?

Advisor September 3, 2019

Whether it’s you or your parents that have lived to that ripe old age, it’s always stressful to choose between staying at home or taking the route of an aged-care home.

When it’s your parents, you struggle with the thought that people may think you’re already giving up on them, and that you consider personally taking care of them an extra responsibility.

When you are considering a home for yourself, you may wonder what your family and friends will think about you moving into such a facility. Will they come visit?

Will they think that age has finally caught up with you? How will you pay for it? These, among many other, are the common questions you ask yourself before moving into an aged-care home.

Emotionally and Financially Taxing

Emotionally and financially taxing

Truth be told, the issue is both emotionally and financially taxing, so you have to be prepared in advance. Rodney Horin, MD at Joseph Palmer & Sons (based in Australia), eases us into the options that are available, majoring on the financial portion of the whole affair.

He starts off by reiterating that we are living in quite the emotional time, having to take care of both our young kids and our aging parents.

Basing this argument in his home country, Horin says that there are 225,000 people in permanent aged-care homes, a number that is expected to have grown three-fold over three decades’ time.

There are currently 225,000 people in aged-care homes in Australia

Drawing a lot from his personal experience, he reveals that when confronted with the reality that his elderly mother couldn’t stay at home any longer, he sought an aged-care advisor to advise him on how to go about it. Finding none, he chose to go into it himself, a service he is still delivering via Palmer & Sons.

As he puts it, there are a lot of expenses that go into staying at a home, namely the entry fee that could be as much as AU$1 million, and monthly payments of between AU$10,000-14,000.

Formerly known as bond prices, the entry fee is now referred to as RAD (Refundable Accommodation Deposit), and Horin explains that you can go about paying the amount in three ways.

The Options

You can either choose to foot the whole bill upfront if you can afford it, agree on a part payment plan with interest on the remaining balance, or have the home calculate your interest rate on the entire amount, with the result being what you’ll have to pay.

Unfortunately, the rate is quite high, making this final option more expensive. Horin even advices that taking out a bank loan to pay for the home would be cheaper than taking the interest rate option.

These options are disadvantageous to the middle class

Unfortunately, these options are disadvantageous to the middle class who make up most of the population. The elite are able to pay upfront, while those who are really poor are eligible for what is known as a concessional bed; a free bed in the best homes in the country. It’s not entirely free, however, as it comes with a daily AU$ 51 charged on the individual’s aged pension.

More often than not, people find themselves selling their family home to meet the aged-care home finances due to the agreements they make with respective facilities.

However, Horin explains that if there’s a minor or a person living with disability dependent on the family home, selling it, by law, is never an option.