Cost of care for loved ones

MY MOTHER is 83, widowed, has progressive dementia and lives alone in a house worth $400,000 in Brisbane. She has a Veterans Affairs Gold Card (my father served overseas) and $300,000 in the bank. My sister is saying that if she goes into a nursing home all of the cash will go into a bond and it is rarely seen again. Could you please spell out the financial implications of putting her into a good nursing home? J.H.

Your mother needs to be first assessed by an Aged Care Assessment Team or ACAT (call 1800 052 222). If she is then accepted into a government-subsidised low-care hostel, she will be asked to pay an accommodation bond which is, in effect, a zero-interest loan.

The size will depend on her assets but the hostel will only be able to keep about $3500 a year for up to five years.

Annual costs are set at about $33,300. If she pays a small portion of the bond as an ongoing charge, with interest, then her house and any rent are ignored by the age pension means tests. If her situation is sufficiently serious that she moves into a high-care nursing home, there is no bond (although they are pushing to introduce one).

This will cost an accommodation fee of an additional $10,000 a year.

Your best approach is to research which facilities exist in your mother's chosen neighbourhood, phone to ask for brochures and fees and visit those deemed worthwhile.

Age gap retirement

WE OWN a house worth about $900,000 with a home equity loan at $40,000 outstanding, used for renovations, and we have $60,000 in investments. I am 56, my wife is 35. I work for the public service, earn $105,000 a year with 37 years of service. I have super with the State Authorities Super Scheme (SASS) and I found out recently if I wait to leave work at 60 instead of the SASS age of 58, I am entitled to take the employee benefit as a lifetime pension, currently estimated at $1700 a fortnight, indexed to CPI, plus a lump sum of $380,000. This, I was told, is because I was in the old NSW Retirement Fund, which transferred to PASS then to SASS. My wife earns $65,000 a year and has $65,000 in her super. I plan to work to 60 and then retire to get the best benefit from SASS. My wife plans to continue to work, starting part-time by 40. Is this the right plan for us? D.R.

The old state pension funds were wonderfully generous (which is why we don't see them available to new employees) so I agree with your plan to take the SASS pension. You seem set for a comfortable retirement.

One of the problems that marriages can face is when the older partner, usually the man, retires and pressures his spouse to retire and go travelling or fishing with him.

However, the wife may just be hitting her straps in her career or, if she had ceased work to rear children (which is not the case with you but may be with other couples), then she may be uncomfortable giving it all up again to stay at home. This is something the two of you need to talk about.

Super as loan repayment

WHEN I leave work, should I pay off an existing loan of $182,000 for an apartment we own, valued at around $495,000 and rented for $1800 a month? Our house is worth about $430,000. We plan to build on a block on the peninsula for around $500,000 and pay off the apartment loan with my super, now down to around $690,000, living off the rent together with a pension of $17,000 a year. We can then build and sell the family home to pay off the building loan. I have received advice suggesting we use the super to pay off the apartment and cover building costs, then sell the house and place the money into super. N.W.

I would agree with the advice you've been given and avoid taking out a building loan. You might even live in your apartment for a year while you are building. This approach will save you interest of $45,000 or more on a 12-month building loan.

Doing this would also safeguard you from the uncertainties of the property market, which is likely to take a price dip in this current period of massive uncertainty.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: bank ombudsman 1300780808 pensions 132800.