What is Financial Hardship? Understanding Your Options When Money Gets Tight

Rising cost of living pressures, significant changes to the home care and aged care systems, and increasing life expectancy have created a perfect storm of financial challenges for many Australians approaching or already in retirement. We're talking to more and more people who are genuinely worried that they may not have enough money to fund their retirement years, let alone cover unexpected aged care costs. If you find yourself in this position, you're not alone. 

Living Longer, Needing More

The cost of everything from groceries to utilities, medical expenses to housing has increased dramatically in recent years. For retirees on fixed incomes, these rising costs can quickly erode purchasing power and create genuine financial stress when they don’t have a plan to make sure they are comfortable through all phases of their retirement.

While increased life expectancy is generally positive news, it also means retirement savings need to last longer than previous generations ever anticipated. A retirement that was planned to last 15-20 years may now need to stretch to 25-30 years or more.

This extended timeframe, combined with the likelihood of requiring some form of aged care during later years, means many people find their carefully planned retirement funds simply aren't enough. The financial reality of living longer often includes higher healthcare costs, potential aged care needs, and the possibility of unexpected expenses that can deplete savings faster than anticipated.

What Does Financial Hardship Look Like?

Financial hardship in retirement can manifest in various ways:

• Struggling to meet basic living expenses such as food, utilities, or housing costs

• Unable to afford necessary medical care or medications

• Facing aged care costs that exceed your available resources

• Having assets but limited cash flow to meet daily expenses

• Experiencing unexpected financial stress due to redundancy, illness, or family circumstances

  
  

Perhaps you've run out of money during retirement, had to unexpectedly retire due to redundancy or illness, or you're struggling to access aged care without enough money to pay for it. Whether it's due to socio-economic factors, family breakdowns, or other monetary problems, recognising that you need help is crucial.

Government Support Options Available

Knowing what support is available and how to access additional payments can be challenging, especially if you have limited access to information and resources. Multiple financial hardship payments are available through the government, and understanding these options is essential.

Age Pension  The Age Pension serves as a crucial safety net for Australians, ensuring that no older person is left in poverty. This payment aims to provide sufficient funds for essential living expenses and helps older individuals afford necessities such as rental payments, food, and other essential requirements to support a healthy life.

Department of Veterans Affairs (DVA) Financial Assistance If you're a veteran or widow/widower of a veteran, you may be eligible for financial assistance through the DVA. This can include an Age Pension through DVA, rent assistance, energy supplements, clothing allowances, and support for essential medical equipment.

Commonwealth Seniors Health Care Card The Commonwealth Seniors Health Care Card is available for self-funded retirees and seniors who don't qualify for the Age Pension. This card provides access to subsidised prescription medications through the Pharmaceutical Benefits Scheme, bulk billing incentives for medical services, and reduced costs for medical appointments, helping seniors manage their healthcare expenses on a fixed income.

Financial Hardship Assistance for Aged Care If you're experiencing financial difficulties and unable to cover aged care costs, you may be eligible for government financial hardship support. This assistance can help cover various aged care services, including Home Care Packages, nursing homes, or short-term respite care.

To qualify, you must meet specific criteria including completing an Aged Care Calculation, having assets below certain thresholds, and not having gifted significant amounts in recent years. The application involves filling out an Aged Care Claim form, with Services Australia assessing whether your essential expenses align with regular daily living costs.

Hardship Supplement Available to those receiving Home Care packages, respite care, or residential care, this supplement provides additional government payment to facilities or service providers to assist with aged care costs.

Rent Assistance If you don't own your home or make payments for site fees, you might qualify for rent assistance. This can include assistance for retirement village rentals and is generally provided in addition to your Age Pension.

Alternative Financial Solutions

Reverse Mortgage Options If you find yourself asset-rich but income-poor, a reverse mortgage could provide a solution. By utilising the equity in your home, you can access funds that would be repaid after your passing and the sale of your house. This can cover both aged care expenses and daily living costs.

However, it's crucial to understand that reverse mortgages aren't suitable for everyone and come with significant considerations around interest accumulation and impact on your estate.

The Importance of Getting Help

Accessing these support systems can be complex and overwhelming. Many people miss out on entitlements simply because they don't know what's available or how to navigate the application processes - and unnecessarily end in a position of financial hardship that could have been avoided with professional support. Being proactive and knowing your options is always better than waiting until you're in crisis.

What Professional Advice Can Provide:

• Assessment of all available government support options

• Help with application processes and paperwork

• Strategic planning to maximise your entitlements

• Coordination between different support services

• Ongoing support as your circumstances change

  
  

You Don't Have to Navigate This Alone

Whether through government assistance programs, alternative financial solutions, or professional guidance, there are pathways to help you maintain dignity and security during challenging times.

However, early intervention often provides more options and better outcomes than waiting until you're in immediate crisis. Professional advice can help you understand what support is available and develop strategies to improve your financial security. If you would like to know more about how we can help, reach out for a chat.

Contact Bill today:

• Phone: 0424 167 800

• Email: bill@olivegrovefinancial.com.au

  
  

Remember, seeking help isn't a sign of failure - it's a smart step toward securing your financial wellbeing and peace of mind during retirement.

Bill Savellis

Senior Financial Adviser

Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.

---

Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 8 October 2024. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.