Planning for a retirement with care, dignity and respect

Wealth Management Insights

The costs of Aged Care in Australia are projected to increase and greater emphasis on self-funding may be required moving forward. To ensure a high quality of care is accessible in the later stages of retirement, planning should be given at the outset of retirement, not left until it is too late.

Aged Care report FindingsAged Care and Retirement Planning

The Royal Commission into Aged Care Quality and Safety has passed down its final report, outlining an extensive plan to overhaul Australia’s Aged Care system. The two commissioners have differed on a number of recommendations, and the proposed changes are subject to parliamentary hearings, however, if key recommendations are implemented, Australia will see a transformed aged care system in the coming years.

Problems identified (Increasing demographics)

More Australians are leading longer lives. Unfortunately, these later years are some of the most difficult, with many older people suffering from memory and mobility disorders, often at the same time. The prevalence of these conditions necessitates the availability of suitable care resources to support retirees in aging with dignity and respect. Increasingly, older Australians wish to remain in their homes for as long as possible and demand a greater variety of care choices. However, there is an increasing need for higher-level care as the lengths of stays in residential aged care facilities are increasing.

The number of Australians aged 85 years and over is projected to increase from half a million in 2018 (2.0% of Australia’s population) to more than 1.5m by 2058 (3.7% of the expected population). In 2018, there was 4.2 working age (15–64 years) people for each Australian aged 65 years or over. By 2058, this is projected to fall to 3.1.

Costs of Aged Care Projected to Increase

Aged Care and Retirement Planning

In 2018, the Australian Government’s spending on Aged Care programs was over $20 bn. This is expected to grow at 4% per annum, ahead of total government spending growth of 2.7%. Older Australians also contribute directly to aged care costs through co-contributions, means-tested care fees and accommodation payments. Despite this, approximately 31% of home care providers and 42% of residential aged care providers report operating losses.  

Changes in demographics are likely to see an increasing demand for Aged Care services coincide with a proportionately lower public revenue base to fund those services. To ensure your needs are catered for in the later stages of retirement, a greater emphasis is likely to be placed on self-funding for higher quality care services.

Taking control of your retirement Planning

This raises several questions about how Australians can ensure their quality of life in the later stages of retirement moving forward. If we consider retirement as composed of three stages – early, mid, and late retirement, a common view is that spending is highest earlier in retirement (as retirees travel and take a well-earned break from work), decreasing into middle retirement (where the focus is on spending time and supporting young families and grandchildren) and lowest in late retirement, where the focus is on aging comfortably and with respect. However, as the commission has foreshadowed, substantial funding is going to be required to turn around Australia’s dated aged care system and this burden may increasingly fall to individuals.

Careful consideration, therefore, needs to be given to what level of care may be desired/required and a sound retirement plan should ensure sufficient assets are preserved and earmarked to meet these needs. Plans should be made around how to deal with the family home, what assets (if any) should be sold to meet accommodation costs and how the ongoing costs of care will be funded.

Australia’s Aged Care system is complex, and not all assets and structures are assessed equally. By structuring your affairs efficiently, you can minimise the costs of aged care, increase age pension entitlements and ensure assets are preserved for the next generation.

Unfortunately, moving into residential aged care often coincides with a lack of capacity, making updating estate planning documents (such as Wills and Powers of Attorney) difficult, if not impossible. Even where a valid Power of Attorney exists, the person nominated cannot make amendments to their Grantor’s Will or superannuation nominations. planning for retirement


The Royal Commission outlined the challenges and underfunding issues facing the aged care sector today. While we hope the findings and proposed solutions will address many of these issues, it is clear from changing demographics that funding Aged Care will continue to be a challenge for governments moving forward. Future changes will therefore likely result in an even more user-pays oriented system.

Looking for financial advice? RSM can help you with your financial planning.

An RSM financial adviser can work with you from start to finish to structure a retirement plan that caters for all stages; providing valuable guidance by reducing uncertainty and maximising your financial position. For financial services, contact your local RSM adviser today.

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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