You’re fit and healthy, in the prime of your life. So why should you be thinking about aged care and retirement now? The simple answer: retiring in style doesn’t happen without a plan…
According to Assyat David, Director at Aged Care Steps, retiring in style is precisely the reason you should be contemplating what you will do in later life. As David told Kochie’s Business Builders, all too often the decision to place someone in aged care is rushed with little thought behind it. This lack of foresight can often be to the detriment of the person being placed in a facility.
Three stages of retirement
“Sadly, many aged care decisions are made in the car park of a hospital, demonstrating that such decisions can be rushed and often made under a high level of emotional stress.” says David. “I believe that we have an opportunity to help Australians and their families gain the education and support to deal with their frailty years in retirement and thereby have confidence that they have made informed aged care decisions.”
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David suggests that when putting a retirement strategy into place it’s important to consider the three phases of retirement (carefree years, quiet years and the frailty years) which each have different income requirements and considerations.
1. The carefree years
David says in the initial period of retirement or the ‘carefree’ years, many retirees focus on travel, spending time with family and friends and basically loving life. This is basically the phase we think of when we think about retiring in style. “Health and wellbeing during this time are good, and the income needs of this phase of retirement are generally well accounted for in the planning process.”
2. The quiet years
The second phase includes the ‘quiet’ years when health starts to decline. “As we experience some disability, the level of activity and therefore spending declines,” says David. You’ll most likely have fewer living expenses during this phase, but chances are your healthcare bill will start to increase.
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3. The frailty years
Phase three is when we experience moderate to severe disability, aka the ‘frailty’ years. “This can account for 17-25 per cent of retirement years, where help may be needed with daily living activities, and more is likely to be spent on dealing with aged care needs,” says David. The length of this phase often takes people by surprise.
Seeking help from an accredited aged care advice professional will help you to understand your options and its implications the impact on the Age Pension, aged care means-tested fees, cash flows, estate planning outcomes. This phase can still be referred to as ‘retiring in style’ if you get your ducks in a row early.
“The important step is to plan for these three phases as early as possible (at the pre-retirement stage) and to tackle the difficult aged care conversations as early as possible.” she says. “By doing so, individuals can open up choices that provide them with greater control and independence.”
Funding the distance
With life expectancy increasing, many Australians are concerned with how they can be certain to have enough retirement funds to go the distance. David suggests it is a real risk for retirees but there is no magic answer. However, managing spending and minimising risk is a good place to begin.
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“Ensuring individuals understand and manage their spending patterns in retirement and their exposure to growth assets (shares and property that have the potential to outperform over the long term, albeit at higher levels of risk) will all impact the sequence of market movements on retirement savings,” explained David.
More importantly, David suggests planning and projecting the income requirements for the three phases of retirement will assist when it comes to tackling the challenges. Spending habits vary widely in each phase. “It also helps individuals avoid the risk of making the wrong decisions which often cannot be undone.”
Aged-care ready
Being aged-care ready is vital. “For Australians (and their families) peace of mind and a clear roadmap can make all the difference,” she says. The key to this is planning well ahead of time for your aged care needs. Understand where to start and what decisions need to be made. What will it take to get the care you need? Where can you find support to navigate through the process of moving into residential care or accessing home care?
David recognises that the retirement industry is rife with horror stories. She suggests its essential people do their homework and explore their options.
“People need to first understand the features, fees and services provided by the facility. Having a checklist of questions to ask and things to consider can help properly compare the different facilities. One of the best tips is to visit the facility. Look around, speak to the staff to gauge how they service their residents. Often it is the people in the facility that make the big difference. “
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