There a multitude of things to consider when you are looking to retire. One of the main fears is as to how long your funds will last to enable you to live the life you have become accustomed to.
A recent survey suggested that 4 out of 5 Australian retirees suffer financial stress in retirement. What happens when in later years ill-health sets in, maybe either you or your spouse is left alone and you lack of ability to do all the things you need to do by yourself and discover loneliness and social isolation just further worsening the health situation.
It might well be quite a few years away but you need to the peace of mind that when the time comes, help is affordably and readily available. In this day and age you want to maintain your independence for as long as you possibly can, and not be reliant on friends and family to carry the burden of care in your old age.
COST OF AGED CARE
Contrary to popular belief aged care is not free in most countries. In many countries the provision of aged care and the amount of contribution is very much dependent on your assets. The more assets you have then the higher the contribution you will pay until such a time as you have spent down all your assets then more government funding and support kicks in.
Many people consider this unfair, since those with higher asset values are penalized later on in life, often with their children’s possible inheritances eaten up with health and care. This is why it is important to factor this in in your retirement financial planning; the exigencies of a possible personal need for nursing or home care in your elder years.
In Australia, the accommodation component of aged care is no small amount. Accommodation prices currently published by providers on the government website My Aged Care range between $50,000 and $2,000,000, with an average price of $359,000. This is just the accommodation component known as the (Recoverable Accommodation Deposit) and the accommodation element is subsequently deducted dependent on the length of stay. From our research this element can be up to $71 per day, equivalent to nearly $26,000 a year. This amount is not taking into account the additional fees that can be charged such as:
Basic Daily Fee
Means test care fee – dependent on the level of care you need
Extra Services fee – whereby hotel type services are bundled and offered
Additional Service fees – fees that go beyond the minimum care and service requirements
THE GROWING NEED FOR CUSTODIAL CARE
It’s not difficult to see that with the increasing prevalence of illnesses such as dementia and diabetes which can come on in the earlier stage of old age, there is a growing need for custodial care, a type of “home care” enabling you to maintain your independence with the reassurance that help and care is readily available.
THE STATS
Due to increasing life expectancy and falling fertility levels, a recent UN report (March 2020) explained that for the first time in history, individuals aged 65 or above outnumbered children under five years of age globally. Moreover, by 2050, one in six people in the world will be over the age of 65 (16%), up from one in 11 in 2019 (9%).
The number of people aged 80 or over is projected to triple, from 143 million in 2019 to 426 million in 2050. The fiscal pressures that many countries governments will face in the coming decades are enormous as they seek to build and maintain public systems of health care, pensions and social protection for older persons. With this phenomenon, you have to consider; what is available today and what will be available in 10-20 years from now?
The UN report goes on to suggest also with the huge rise in the ageing population there will be a higher demand in the market for home healthcare.
Average life expectancies in Australia for example; have increased significantly for both males and females. Males who are currently 65 are expected to live to 86.9 and females who are 65 to 89.2 years. In previous generations, people could expect to live another 10 to 20 years after they retired. Now, it’s common for people to spend 30 years in retirement – and in some cases, even longer.
Living longer means you’ll need more money to fund your retirement.
Health costs significantly influence retirement affordability with private health insurance increases being the main culprit. The average cost of Health insurance in Australia for pensioners is around $2,700 per year for singles and $5,400 per couple.
This is a brewing crisis in our country, with a rapidly increasing elder population who will need a long-term care facility at some point
The moral of the story is to plan for the long term. As the aging population increases who knows how much governments can continue to support us in the future. You need to ensure you have factored in in your retirement planning the exigencies of a possible personal need for home care in your elder years which you might be forced to partially self finance.
We would welcome your feedback and input on this topic. Join our Retire2Bali Facebook group and give us your feedback and thoughts. We look forward to your input.