Aged Care Who Cares Book

First, a big apology to all those who ordered our new Aged Care Who Cares book online.  Unfortunately there was a computer glitch and even though the orders were processed we were not advised of the transaction.  Therefore we were unable to post the book out. 

The glitch was only discovered when a journalist telephoned me to ask why a request for an article she had sent to the website had not been responded to.  Even though it was disappointing to hear the system had failed us, we were able to respond quickly and everything is back to normal again. 

One of the main problems in Australia is that many older people are terrified to go into aged care facilities because they think they are no better than old style prisons, and also because any bond they pay will be lost forever.  This is why it is important to understand the difference between retirement villages and aged care facilities (formerly called nursing homes). 

The amount you pay to enter a retirement village is called the entry contribution and is set by the village operator.  The contentious item for retirement village residents is the deferred management fee (DMF) which is deducted when the resident leaves, often to move to an aged care facility. The amount of the DMF varies widely between retirement villages and may be as low as three percent per annum for a maximum of 10 years, or as high as 10% per year for four years. 

The ‘entry contribution’ paid to an aged care facility is called an ‘accommodation bond and works differently to that paid to a retirement village.  There is a maximum amount that can be charged which is set by the government but, within that limit, the incoming resident is ‘free to negotiate the amount of the accommodation bond to give them the best outcome. 

Because the bond is exempted by Centrelink it is often a smart strategy to pay a higher bond in exchange for lower ongoing fees.  Expert advice is essential here because factors such as the amount of aged pension, the income that can be earned on remaining funds that have not been used for the bond, and the ongoing fees all have to be considered. 

It is particularly important to note that accommodation bonds paid to aged care facilities are government guaranteed, and the maximum amount that can be taken from the bond when the resident leaves is currently $318 a month with a maximum of $19,080 over five years. 

Even if a bond of $300,000 or more is paid, the most that can ever be deducted from it is $19,080.  Contrast this with the entry contribution paid to a retirement village where deferred management fees could take $150,000 or more on exit. 

Aged care is a difficult area.  It is immensely complicated and decisions to move are usually accompanied by high emotion and often tensions between family members.  Reading our new book won’t make you an aged care expert but it will certainly show you the areas to be aware of.  Full details are available at http://www.agedcarewhocares.com.au. 

Reverse Mortgages

I have been a fan of reverse mortgages in certain situations but a letter I received today shows you the traps that can be involved.  In this case a couple took out a reverse mortgage in November 2007 for $40,000 with a fixed rate of 8.59% for life.  The husband passed away in November 2010 and the widow now has to sell the home so she can relocate to a ‘retirement home’.  I am not quite sure what she meant by that term but that is what she said. 

The loan balance has now grown to $56,435 and because it is a fixed loan the provider is going to charge a break cost.  This was $9140 last May but has now grown to $15,835.  This means the cost to get out of the initial loan of $40,000 is now $72,745. 

I will be making further investigations into this and will let you know the outcome in a future newsletter. 

Obviously the older a person can be before taking out the loan the less interest he will be charged and in an ideal situation the children would contribute to pay the monthly interest so the debt did not grow. 

Points on Credit Cards

This is the time of the year when the credit cards get a workout, so it’s appropriate to spend a few minutes reminding ourselves all of some of the ways that credit cards can bite.  And bite they can - unfortunately, what started as a tool for making shopping easier has now mushroomed into a fee feast for the banks.

There are two types of credit cards - those that offer an interest free period, and those that don’t.  Now the interest free period might sound fine, but remember you are only eligible for it if you pay the entire balance before the due date.  Unless you pay the card off each month, it is pointless wasting money on cards that offer an interest free period.  To make it worse, these cards usually have the highest interest rates on the outstanding balance. 

There is no doubt that the institutions are watering down the value of the points.  My Amex card is still giving me 1.5 points for every dollar spent but I have just found out that my Westpac card is giving me 1 point for every $1.50 spent.  As soon as I discovered the difference I shopped around but could not find any card that seemed to be any better.  Certainly there are some that give you 1.5 to 2 points for every dollar spent, but when you drill down into the fine print you discover that you need two of those points to get one frequent flyer point. 

You always get a better deal on points with an Amex card but a lot of institutions will not accept Amex and you are therefore forced to use Visa or Mastercard. 

I always pay my card on time and pay my business expenses on it so the main feature I am looking for is high rewards. 

Any suggestions would be most welcome. 

Noel Speaking in Perth Thursday 1 December 2011

This Thursday Noel and Rachel Lane will be launching their book Aged Care Who Cares in Perth.  The launch will be held at Royal Perth Yacht Squadron in Crawley.

Admission is free but space is strictly limited, so it is essential to register for the event.  RSVP by contacting COTA WA on 08 9321 2133.  Look forward to seeing you there.

And finally

If you don’t read the newspaper you are uninformed, if you do read the newspaper you are misinformed.
Mark Twain

I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
Winston Churchill

A government which robs Peter to pay Paul can always depend on the support of Paul.
George Bernard Shaw

A liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money.
G. Gordon Liddy

Democracy must be something more than two wolves and a sheep voting on what to have for dinner.
James Bovard, Civil Libertarian (1994)

Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.
Douglas Casey, Classmate of Bill Clinton at Georgetown University

Giving money and power to government is like giving whiskey and car keys to teenage boys.
P.J. O’Rourke, Civil Libertarian

Government is the great fiction, through which everybody endeavours to live at the expense of everybody else.
Frederic Bastiat, French economist(1801-1850)

I don’t make jokes. I just watch the government and report the facts.
Will Rogers

If you think health care is expensive now, wait until you see what it costs when it’s free!
P.J. O’Rourke

In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.
Voltaire (1764)

Just because you do not take an interest in politics doesn’t mean politics won’t take an interest in you!
Pericles(430 B.C.)

No man’s life, liberty, or property is safe while the legislature is in session.
Mark Twain (1866)

The government is like a baby’s alimentary canal, with a happy appetite at one end and no responsibility at the other.
Ronald Reagan