When a loved one needs residential aged care, families can understandably focus on one immediate question:
How are we going to pay for the room?
But aged care financial planning can involve much more than simply finding enough money to cover the accommodation price.
The way you choose to pay for aged care can potentially affect your ongoing cash flow, investments, Age Pension position and the assets ultimately retained within your estate.
A lump sum isn’t your only option
Residents can generally choose to pay their accommodation price as a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of the two.
This flexibility is important because every family’s financial circumstances are different.
For example, accessing investments to fund a RAD may reduce the amount invested elsewhere, while choosing to retain those assets and make daily payments creates an ongoing expense.
With the government-set Maximum Permissible Interest Rate currently at 8.43% per annum as at 1 July 2026, the cost of daily accommodation payments is also an important consideration.
Consider the flow-on effects
A decision that appears straightforward in isolation can have consequences elsewhere in your financial position.
Before deciding how to fund aged care, it may be important to consider:
- your available cash and investments;
- ongoing income and expenses;
- potential Age Pension implications;
- the cost of daily accommodation payments;
- future care expenses; and
- estate planning objectives.
Taking the time to understand these factors can help you make a more informed decision rather than simply choosing the most obvious payment option.
At Forman Financial Services, we provide specialist aged care financial advice to help families understand their options and navigate the financial decisions associated with moving into residential care.
Planning the next step?
Moving into aged care can involve complex financial decisions at an already challenging time. Getting advice early can help you understand your options and consider how different choices may affect your broader financial position.
At Forman Financial Services, we provide specialist aged care financial advice to individuals and families navigating this transition.
Contact us here to arrange a conversation about your aged care financial planning needs.
Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.