How safe is your RAD?
Every day, Australians are moving homes to upgrade their accommodation, to relocate for work or family reasons or to try a different lifestyle. The move usually means selling an existing home or borrowing to buy a new home, or perhaps renting a new home.
The same concept applies if you can no longer live independently in your own home and make the move to residential aged care. This requires moving to a home owned by the care provider and you need to “buy” or “rent” a room in that home.
Just as the prices of private homes can vary widely, so can prices for aged care accommodation depending on location, type of accommodation and amenities – with prices potentially ranging from $100,000 to $2.5 million.
Tip: Go to www.myagedcare.gov.au and click on the “Find a Service” tab to search for services in your area and compare room prices.
Choosing a home is not just about cost. Five important questions to consider when choosing which aged care service suits you best are:
- Where do you want to live and what is important in relation to location, care and lifestyle?
- Can you afford the cost of the room and still generate enough cashflow to meet ongoing fees and living expenses?
- How does the cost compare to other suitable alternatives?
- How should you structure finances to meet your cashflow needs?
- What actions can you take to protect your estate?
The cost of a room in an aged care service is called the accommodation payment. This is quoted as a lump sum (Refundable Accommodation Deposit – RAD) which is like “buying a room” or a daily fee (Daily Accommodation Payment – DAP) which is like “renting a room”.
The RAD may seem like a large amount of money, but remember the amount paid is returned to you or your estate when you leave. It is only reduced if you allow the provider to take some of your ongoing fees out of the lump sum or fees are outstanding when you leave.
Think of it as “buying” a room with a guaranteed sale price that ensures you will not lose capital. You cannot lose your money even if your service provider goes into liquidation. Repayment is guaranteed by the Federal Government provided the service provider is an “approved provider”. You can check this status with the service provider or on the myagedcare website.
Did you know?
Residential care providers currently hold over $20 billion in RADs/bonds paid by residents.
Financial advice can help you to check what level of accommodation payment you can afford and the options that are available to provide sufficient cashflow and protect your estate. Call us to make an appointment today to discuss options for you and/or your family.