Most of us have a rough idea what our life expectancy is but not many are familiar with their “health expectancy”, which should be an important element in our retirement planning
The Australian Institute of Health and Welfare measures health expectancy and estimates that for around 20 per cent of our retirement years we will have a “severe disability”.
According to the AIHW, a man aged 65 could expect to live another 19 years. Nine of those years will be disability-free and 10 will be accompanied by some form of disability.
Seven of those “disability years” would involve “no severe or profound core activity limitation” but three would involve severe disability. For a man those three years represent 17 per cent of their retirement years (assuming they retire at age 65).
The numbers for a woman aged 65 are 22 years of life expectancy – 10 years disability-free and 12 years with a disability, of which six would involve a severe disability. Women can expect to spend 25 per cent of their retirement years with a severe disability.
The AIHW cautions that health expectancy at any given age includes people who already have a disability. As such, the expected years of life with disability for a person who does not already have a disability at age 65 would be fewer than the estimates presented, which average the experience of people both with and without disability at that age.
Financial advisory group Aged Care Steps, says that, with growing awareness of such ageing issues as heath expectancy, aged care advice is emerging as an important segment for financial planners, with 29 per cent of planners reporting that more of their clients are seeking help with their aged care arrangements.
A survey of planners conducted jointly by Aged Care Steps and Swiss Re shows that the increasing complexity of the aged care system has prompted consumers to seek help to ensure they get the right care and make appropriate provisions. Ninety per cent of respondents say they “definitely’ or “probably” see an increase in client demand over the next few years.
However, people tend to wait until they have a medical event or some other problem before seeking advice, even though the health expectancy data tells them there is a high probability that they will need some kind of aged care support.
Assyat David, a director of Aged Care Steps, says: “People need to think about things before they happen because if you leave it until there is an emergency they decision you make may not be optimal. The problem is that it can be a difficult thing to talk about.”
Issues that arise include what to do with the family home, financing a place in an aged care facility and inheritance.
She says people need to choose an aged care facility in much the same way they buy a house. They have to look at the lifestyle factors and finance issues. It takes time to do that well.
Louise Biti, a director Aged Care Steps, says the trend in aged care policy is to push more of the cost back onto the consumer.
Biti says the cost of looking after someone in care can be as much as $105,000 a year. The average subsidy is about 65 per cent, leaving as much as $40,000 a year to be paid for.
If you are going into an aged care home you may have to pay accommodation costs, depending on your income and asset position. You can elect to pay a refundable accommodation deposit, a daily accommodation contribution or a combination of both.
The balance of the deposit is refunded to you or your estate when you leave the aged care home, less any agreed deductions for extra services.
Aged Care Steps recommends that people plan to have a lump sum that would cover a refundable accommodation deposit or cover the cost of modifying the family home to accommodate someone with a disability.
On top of that they might need income of as much as $25,000 a year to pay for services not covered in a standard aged care arrangement.
Biti says people spend less as they age and some of that extra cost would be offset by lower cost of living expenses.