Healthcare costs an increasing concern in retirement planning

The Australian population is ageing, posing an increasing longevity risk for financial advisers to plan against. However, with increased life expectancies come increased health care costs later in life, which can make a considerable dent in retirees' savings and any legacy a client hoped to leave behind.

Dial an Angel chief executive Danielle Robertson said financial planners could play an integral role in leading clients to be proactive about healthcare needs, rather than reactive when something happens later in life.

Dial an Angel has been providing in-home care and assistance to people for nearly 43 years, and Robertson has been involved for 23 years. She said the sector is growing dramatically as the population ages.

“People do not want to go into retirement villages or nursing homes, and they want to remain in their own home,” she said. “Obviously the consequence of that is they need the money to be able to have the care as needed.”

Robertson said the costs of care might at first only entail domestic assistance, such as having someone to do the cleaning, cooking or shopping.

“We have more than 40,000 clients on our database who do that, and it might only start off on the basis of slight assistance,” Robertson said. However, she said it could evolve over time into the need for 24-hour care, which can cost between $7,000 and $10,000 a week depending on the circumstances and the ailment or disability.

“It is either a case of people remaining in their home and getting equity back out of the home, or when they are doing their estate planning, looking at how much it is going to cost them for care for a period of time, say 10 or 20 years, and making sure it’s covered on the financial side of things.”

Robertson said among others, the client might have to make the difficult choice between remaining in their own home and leaving a legacy for their children.

However, from her experience, people did not consider these things in their financial planning, which is why financial advisers could play an important role.

“When they do sit down with a client, they can bring it to the forefront. The cost of care is a huge factor and a very expensive aspect of estate planning,” Robertson said.

Michael Perkins of Diamond Conway Lawyers is a lecturer in estate planning at the University of Technology, Sydney, and has been engaging with Robertson on cost projections for various situations around healthcare. He said a lot of retirement planning is predicated on continued good health and agreed that financial advisers could be doing more to engage with clients about the impact of healthcare costs later in life.