Why have my aged care costs risen over 30 per cent?

Many retirees aim to “retire safely”, but increasing costs in retirement villages can make this more difficult than expected. Legislation in most states sets rules for how operators charge residents, with base charges often limited to being increased only by the consumer price index (CPI). But there are some loopholes: some fees are exempt and operators can request increases above the CPI by special decision.

This can give a false sense of security. In my village, total annual wages have increased by about 31.5 percent over the past three years, and that figure would have been even higher if residents had not voted against the proposed increase. A special resolution requires 75 percent approval to pass, and in this case it did not pass. So the question is: Are retirement village residents really protected from big increases because wages are “linked to the CPI”?

Aged Care Guru Rachel points out that the ongoing cost of a retirement village (often called the general service charge or recurring charge) is subject to strict controls. While each state-by-state legislation has some differences, the universal rule across them is that the ongoing charge should operate on a cost recovery basis.

Unfortunately, some of the costs in these budgets add up much more than anyone expected; An example of this is municipal rates; Some residents have seen this cost alone increase by 400 percent after municipalities decided to change the way they collect taxes from villages.

I disagree that residents should understand their rights and deal with the expense budget that drives these costs where possible, but fundamentally it is not a profit center for the operator so the increases are the result of increased costs, not increased profits.

My wife and I sold our home and want to take advantage of the $300,000 in downsizing contributions and the “step-up rule” for nonconcessional contributions of $360,000 per person. My concern is that my wife is 74 years old and I am 73 years old. I am aware that no further voluntary contributions can be made after the age of 75. Since we are still under the age of 75, can we benefit from both the minimization and highlighting rule?

You should be eligible for the downsizing contribution provided you qualify for the downsizing contribution under the rules, including having owned your main residence for at least 10 years and paying the contribution within 90 days of settlement.

The downsizing contribution can be made regardless of your age (a lower age limit of 55 applies, but there is no upper age limit) or your current retirement balance, and if the sale proceeds of your home are more than $600,000, then each of you can contribute up to the $300,000 limit.

If your total superannuation balance at last June 30 was less than $1.76 million and you are not in a triggered roll-forward period, you can make non-concessional contributions of $360,000 this financial year. The same goes for your spouse.