• Most older Australians aren’t ready to move into aged care, over half are ‘concerned’ or ‘very concerned’ about making the transition
• 3 in 4 expect it to diminish their wealth and children’s inheritance while nearly 2 in 5 are worried about the financial burden on their children
• Half of over 65s don’t understand what government assistance will be available to them for aged care

AMP research reveals that 4 in 5 Australians aged 65 and over don’t feel prepared for the transition to aged care, while 7 in 10 worry about the cost of care.

The majority of older Australians would prefer to avoid aged care and remain living in the family home, with 3 in 5 saying they would prefer to age in the family home and half preferring to receive care in the home. Further, 3 in 4 expect aged care to diminish their wealth and children’s inheritance, while almost 1 in 3 worry about the burden of aged care cost on their children.

This research shows the challenges faced by the growing number of Australians heading into retirement. Retirees lack the financial confidence to spend in retirement and are living more frugally than they need to, with Treasury’s Retirement Income Review revealing many older Australians are passing away with the bulk of wealth they had at retirement intact¹.

AMP’s research follows the federal government’s introduction of the new Aged Care Act into Parliament in September, aimed at supporting growing numbers of older Australians choosing to retain their independence and remain in their homes as they age.

Other key findings include:

• 7 in 10 are against moving into a residential aged care facility
• 1 in 2 don’t know what government assistance is available to them for aged care
• Over 8 in 10 are confident their children will make the right decisions on their behalf about aged care, if needed.

The findings are indicative of the questions financial advisers are most often asked from their clients about aged care, including:

• What will it cost to move into an aged care facility and can I afford it?
• I have minimal assets besides the family home. Do I still need to pay the accommodation costs of moving into a residential aged care facility?
• Should I retain the family home (and rent it), or sell it and use the proceeds to pay for the aged care accommodation payment?
• What are the implications of each option for my social security entitlements?
• How do I minimise my aged care fees while optimising my social security entitlement?

Previous Government findings have also shown that older Australians find the aged care system difficult to access and navigate². By 2035, a total of 1.4 million Australians are expected to stay in their homes as they age² while the number of Australians aged 85 years and over is projected to increase from 515,700 in 2018-19 to more than 1.5 million by 2058³.

AMP Group Executive, Super and Investments, Melinda Howes said:

“These insights bring to light the financial worry and lack of understanding many older Australians have about aged care, including its cost, how they will fund it, and how it interacts with the pension system.  

“The Government’s Aged Care reforms are an important step towards helping support the growing number of older Australians choosing to retain their independence, and the financial services industry also needs to do more. It’s critical we continue to work with government and regulators to help take these aged care financial worries off the table for retirees, and allow them, with their families, to focus on physical and emotional wellbeing during this often-challenging phase of life.

“This begins with building financial confidence during the transition into retirement, giving older Australians greater choice and optionality when they reach this critical life stage. That means instilling a peace of mind that their savings and income will last, and understanding the available options for receiving care. This would not only provide comfort in the knowledge that they can remain financially independent as they age, but unlock a better quality of life in the early and active years of retirement.  

“More affordable and accessible financial advice is central to building this confidence, and in helping demystify the nuances and complexities of our retirement system, including how the aged care system interacts with the pension and family home.

“The onus is also on the financial services industry to develop new and innovative retirement solutions which provide greater lifetime income certainty and make it easier to downsize or unlock equity from what is most Australians’ largest financial asset – the family home.”

AMP Director of Retirement, Ben Hillier said:

“Australia is leading the way in development of new solutions that maximise and provide assurance on lifetime income for retirees. But as this research highlights, our industry must continue to innovate to provide Australian retirees with the financial confidence they’ve worked their lives to achieve.

“That means removing any financial concerns older Australians may have about aged care and providing confidence that they’ll be able to fund the cost of care if needed. This can be achieved through lifetime income solutions that will help more Australians look forward to a better standard of living and a higher rate of ongoing income in retirement.

“It also includes better access to financial advice, improved financial literacy at all ages, and a simplified retirement system. Relocating to an aged care facility, gifting and inheritance are all areas where an adviser can make a meaningful difference to more Australians in and near retirement.”

Six tips to help manage the transition to aged care:

1)  Early planning: The sooner you start planning for the possibility of aged care and factor it into long-term retirement outcomes the smoother the transition will be.

2)  Speak with your family: Discuss the possibility of aged care with your loved ones and likely carers before the need to enter a care facility to help you make an informed decision.

3)  Access Government resources: The Government’s My Aged Care website provides valuable information to help support the transition. ASIC’s MoneySmart is also a great resource for help you organise and plan for retirement.

4)   Speak to your superannuation provider: They can offer resources which help with your retirement knowledge, including a free retirement health check or intra-fund advice. Having greater control of your finances can give you the confidence that you can afford the cost of your care.

5)  Know what charges to expect: some typical costs of moving into an aged care facility include a daily fee for the day-to-day services such as meals and laundry, payments towards your accommodation and an extra fee determined by a means assessment.

6)  Increase eligibility for assistance: Eligibility for government assistance in paying aged care costs is means tested, so you can reduce your costs by reducing your assessable assets and income through strategies such as utilising a lifetime income stream. 

About the findings

AMP commissioned Dynata in February 2024 to conduct a survey of 2000 Australians aged 50 years and over and under 40 years in relation to their attitudes to retirement, aged care and intergenerational wealth transferral. 

^{[1] Source: Retirement Income Review. Australian Government Treasury, July 2020}

^{[2] Source: Once in a generation aged care reforms. The Hon Anika Wells MP. 12 September 2024.}

^{[3] Source: Care, Dignity and Respect: Royal Commission into Aged Care Quality and Safety}