From reactive response to proactive planning: integrating aged care into retirement advice

Aged care is not an event that occurs suddenly in life, but an expectation. Advisers now have an opportunity to shift from reactive problem-solving to proactive planning.

"It really is something that’s going to affect us all if we're lucky enough to live long enough," said AMP’s Director of Retirement, Ben Hillier.

In an Ensombl three-part podcast series, Sarah Leslie joins advisers Matthew Lloyd, Alex Berlee, Shaun Ganguly and Ben Hillier to explore how advisers can confidently navigate one of the most complex and emotionally significant aspects of retirement planning.

Aged care is part of the retirement journey

The Aged Care Act 2024 has put greater importance on advisers to have earlier conversations with their clients about planning for their later years. It’s also changed how we should view the retirement journey, which historically has been focused on income, investment, and lifestyle goals.

"Start early. That's it," said Lloyd.

Leslie added “Aged care has really moved from being that end-of-life event to a core retirement planning risk.”

It may be a difficult conversation but having the conversations early could provide more options and less pressures when transition time comes.

To accomplish this, Leslie said that advisers must adapt advice processes so aged care becomes part of a long-term retirement plan from the start.

Rethinking retirement spending and funding for care

The aged care conversation needs to move from “How much will age care cost” to “How might spending evolve throughout retirement,” explained Hillier.

As people age, spending does not suddenly increase overall. Instead, it shifts lifestyle activities towards more health and care needs, he said.

By reframing the transition, advisers can help clients understand aged care funding differently.

"We can assume that our capacity to spend that money on lifestyle will decrease in line with our need to spend it on care,” Hillier said.

"It doesn't necessarily need to be a separate bucket of money for those needs, just a reallocation."

Another part of age care planning is about giving clients the confidence to enjoy themselves while knowing there’s a strategy in place for their future needs.

Hillier said it’s common for retirees to underspend during their active years because of the fear of running out of money.

"People are actually spending less than they can afford to," he said.

Advisers are guides for families, not just finances

Transitioning into aged care is not just about reallocating finances; there’s also the additional layer of emotional complexities that comes with it.

Advisers agreed that aged care advice extends beyond technical strategy because they often become guides and support for the family.

It’s important that advisers and the client’s family decide who has key decision-making responsibilities like power of attorney, family dynamics and estate conversations.

Despite the sensitive topic, Ganguly found clients are never uncomfortable talking about estate planning decisions.

At his practice, they hold a family meeting and are upfront with these conversations.

“Some might consider that a little bit distasteful, but at the end of the day, it's so valuable, so there's no surprises along the way,” he said.

Many clients and their families want to understand the aged care system and make sense of what the options are, so they are willing to participate in these sensitive conversations, added Leslie.

Early conversations, realistic cash flow modelling and thoughtful retirement income strategies can help clients navigate future care needs while giving them confidence to enjoy retirement today.

For a deeper dive into the costs of aged care, download our aged care  whitepaper.