Planning our finances – i.e. channelling your funds into areas of your life in a way that feels supportive for each need and phase – while we’re in the thick of our careers, often revolves around our immediate goals. Food, entertainment, living expenses, kids’ expenses, bills, holidays – the list goes on. What’s hard to work into our budgets is saving for our loved one’s care or our own future when we’ll no longer have employment income, because it’s not at the front of our minds.
Aged care can be an expensive journey. The cost and complexity of using these services when we, or people we love, enter this time of their lives makes early aged care financial planning not just smart, but necessary. At Best Financial Planners, we’re dedicated to providing forward-thinking financial strategies that optimise your investments and budget allocations, and give you more back. Our recommended aged care financial planners are dedicated to identifying all the ways in which they can optimise your finances and protect your wealth today, requiring little budget adjustments in order to have the aged care you deserve.
In this guide, we explore how to create a flexible, forward-thinking financial plan that adapts with life’s changes and ensures the care you or your loved ones deserve.
Why aged care financial planning matters
As we live longer, the need for high-quality aged care continues to grow. This typically means we have more years to support ourselves after we retire. This is all well and good when we think about superannuation and retirement, but aged care is a whole other kettle of fish, with high costs that are often too large to stretch out of our superannuation income.
Without a proper plan, families often find themselves making rushed, emotional decisions under pressure. Unexpected costs, confusion about government entitlements and limited accommodation options can create financial and emotional stress. Or maybe you have current financial stressors like preparing for a divorce or working a job that doesn’t offer superannuation. Aged care financial planning helps avoid these pitfalls by providing clarity, structure and confidence today around one of life’s biggest transitions.
How to approach aged care planning
For most of us, financial planning tends to be segmented. There’s saving for a home, investing for retirement, budgeting for education or travel. But when it comes to aged care financial planning, taking a step to look at the bigger picture can really help us to iron out our priorities. When the time comes when we need supportive aged care, the ship has sailed when it comes to the idea of saving for it. Instead, integrating it into your budget throughout your career and life stages will mean you’re setting yourself up with a decent nest egg for your aged care, without sacrificing too much at any stage.
But when we’ve already got an airtight budget, how do we go about incorporating this into our budgets? Well, let’s not think of it as something we have to save for in the future, but rather, we’re just setting our vision a little broader, and balancing our current and future needs.
Merging your current and future needs
You don’t need to sacrifice your current lifestyle to prepare for aged care, but you do need to make informed decisions now that will leave room for flexibility later. That might mean:
- Segmenting a small portion for retirement – your superannuation is a fantastic boost of income when you stop working, but it’s really only designed to support a self-sufficient lifestyle. Aged care should be seen as an additional cost that needs to be funded separately. Any little bit of your monthly budget you can put towards aged care today is very helpful, contributing significantly to your aged care needs.
- Creating liquidity in your investment portfolio – liquidating your investments, like holding onto stocks, can help you access funds to cover unexpected aged care costs. This could also look at buying an investment property if possible, to give you long-term passive income.
- Paying down debt strategically – working on reducing your current debt strategically can mean more money in your pocket over the course of your life. It’ll help you enter so that you’re in a stronger financial position earlier, which you can begin setting up the later stages of your life earlier.
- Maximising government benefits and tax efficiencies through timely asset structuring – remember every dollar counts when it comes to investing in your future, so doing what you can today, like maximising tax benefits in your tax return to help optimise your finances, is always beneficial.
- Considering lifestyle choices – while you don’t need to make sacrifices in your adult years that limit your quality of life, by considering your current lifestyle choices now that align with longer-term savings, you’ll make a big impact on your aged care financial planning. We’re not even talking about huge changes, just subtle considerations like avoiding luxury holidays or purchases, minimising your subscriptions or holding onto your perfectly fine car for longer than you otherwise would. These savvy financial choices will give you more room in your monthly budget for your future.
The role of financial advisors in aged care planning
Fitting the requirements of life’s later stages into your budget and financial planning is not a simple task. For many of us, we have bucket lists to tick off, dependents to support and retirement plan dreams on top of everyday financial pressures to manage before we begin thinking about aged care.
Thai is when expert financial advisors are invaluable by helping structure your assets to minimise fees, identifying appropriate funding strategies and clearly explaining how your decisions may impact pension entitlements or government benefits. Often, you may not need to make any big budgetary sacrifices, because they can help find avenues to optimise your current situation in a way that pays the dividends towards proactive retirement planning.
They can also assist with complex applications through Centrelink or the Department of Veterans’ Affairs, ensuring you access all available support. Additionally, they play a crucial role in creating estate plans that account for current needs while accommodating the future costs of aged care.
Successful aged care financial planning breaks down your unique circumstances and involves a balance between current needs and future goals. Here are the primary elements to consider:
1. Asset and income assessment
Well, start by taking stock of your current financial situation:
- Superannuation balances
- Real estate and property value
- Savings and investments
- Pension entitlements
- Liabilities and debt
As well as helping to plan your aged care funding strategy, a clear understanding of your financial position will help you determine eligibility for government assistance and inform your choices regarding care providers. From here, a planner can assess if you can afford to put more away for your future, like in the form of investments or voluntary super contributions.
2. Aged care options and lifestyle goals
There is no one-size-fits-all approach to aged care. Some individuals may prefer to stay at home as long as possible with in-home support, while others may opt for early entry into residential aged care for a more structured environment. Aged care planning should incorporate your preferred living arrangements, desired level of comfort and service, proximity to family, as well as planning for any unexpected difficulties. So, when an advisor considers how much we need to retire at 65, it always depends on what our expectations and preferences are for our lives during this period.
3. Understanding the means test and fees
Residential aged care in Australia involves several types of fees, including a basic daily fee, a means-tested care fee, an accommodation payment and additional service fees. These fees can significantly affect your financial plan. Knowing how they apply to you or a loved one allows you to plan in advance and avoid last-minute surprises.
A plan today means aging comfortably
With smart, steady and early preparation, you can set yourself up for aged care with options, peace of mind and dignity when the time comes. Life moves quickly, and while we can’t always predict the road ahead, we can build a roadmap that gives us confidence to navigate it.
It’s never too early to prepare your life stage financing, whether you’re in your 30s juggling mortgages or budgeting for a house deposit, or nearing retirement and thinking about what’s next, taking a moment to consider your aged care needs today can make all the difference later.
At Best Financial Planners, we’re here to help you merge your current lifestyle with your future goals in a way that feels achievable and empowering. In this guide, we’ve explained how you don’t have to sacrifice big chunks of your monthly budget to set yourself up to age comfortably. By structuring your investments, assessing your current situation, applying for additional support, and understanding your aged care preferences, you can protect your wealth early for a better future. An advisor will work with you to maximise what you have, access the right support, and build a flexible, future-ready aged care strategy that suits your life, not someone else’s. Contact the team today.
