Aged care might not need a large lump sum
Historical article – pre-1 November 2025 aged care changes
If the prices for a room in residential care have caused you alarm and led to concerns about how to find such large lump sums, you are not alone. I have seen many clients and their families facing the same stressful situation and have helped them to navigate through to an affordable solution.
Aged care room prices are quoted as a lump sum, with prices ranging up to $2 million for a room. On average, you might expect to be quoted around $300,000 - $900,000. This might cause you to panic if you don’t have that much money sitting in a bank account or you don’t want to sell assets.
The good news is that you have choices on how to pay. You might choose to pay a lump sum, but you could also choose to pay a daily fee and effectively “rent” the room instead. With a bit of research and good advice, you can choose the option that works best for you.
The bad news however, is that with interest rates going up, the daily “rental” price – called a daily accommodation payment (DAP) is getting more expensive.
For example, assume Mary is looking at an aged care room with a price of $500,000. If Mary moves in before 1 October 2022, at the current interest rate of 5% per annum this converts to $68.49 per day ($25,000 per year). If she moves into care from 1 October when the rate increases to 6.31%, the same $500,000 room would cost $86.44 per day, an extra $6,550 per year.
The Government reviews and resets the interest rate each quarter, and it is on the way up. October’s increase will set this rate at its highest point since 2015 and it is likely to continue increasing if cash rates keep rising. Although once you enter care, the rate becomes fixed so that you have some certainty with your planning. Only if you move rooms or move to a new provider will the rate change.
We would expect that this increasing interest rate, may see more people make the choice to sell assets and pay the lump sum but every family is different, so it does require full analysis of your cash flow and estate planning objectives.
If you would like to arrange a meeting to find out how I might help yours or a loved ones’ own position, call me on 0431 414 799 or email jason@burleyagedcareadvice.com.au.
This advice is general in nature and everyone’s circumstances are different. So it’s important to speak to someone like myself who is a licenced financial adviser (I am an Authorised Representative of Count Financial Limited AFSL 227232).
As an Accredited Aged Care ProfessionalTM I have helped many clients to make this choice. I help to find a choice that is affordable, as well as works best for the family and protects the value of the estate.
