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Balance Retirement & Aged Care Specialists

Is it better to pay a RAD or DAP?

Posted on: November 20th, 2017 by Eric Hiam in Aged Care Financial Planning

A Refundable Accommodation Deposit (RAD) means you are paying for your Accommodation in Aged Care as a Lump sum. It is Government Guaranteed (so it is very safe) & fully Refundable. Whereas paying for the Accommodation as a DAP (Daily Accommodation Payment) means that you will be charged interest at a Government prescribed rate instead of paying the lump sum.

The RAD is refunded to you, whereas the interest you pay on the DAP is gone forever, & the interest rate is usually quite high. Either way you get the same accommodation. However, there are some people that can’t sell their home or don’t want to sell their home, or maybe the person going into care may be palliative (so may not be in aged care for a long time) & hence wish to retain their assets as they are for the family

The RAD is an interest free loan you are making to the aged care facility, & so the cost of the Accommodation part of your stay in aged care, is only costing you the lost interest you would have earned on that money you lend to the aged care facility. So, whilst interest rates are so low currently, it is a very cheap way of funding your accommodation. But it doesn’t suit everyone, due to individual circumstances.

However, whether it is better to pay the RAD or the DAP (daily rate) will depend on your individual set of circumstances, and no two people will be the same. The issues to consider are;
1) Whether you have the money to pay the RAD yourself or
2) Whether you need to borrow from a bank or from family or
3) Whether you have other assets that could be sold to pay the RAD
4) Or whether you are planning to sell your home to pay the RAD &
5) How much is the RAD.

If the RAD (Lump sum) is relatively small & you have a reasonable amount of savings or can get a good part of the RAD, then keeping the home may work better for you.
At the end of the day it will get down to what is important to you, what are your priorities, & what are your expectations e.g. are you prepared to let your savings fall, or are you prepared to lose your pension or part of your pension, how important is it to keep your home, the outcome will be different for everyone.

Because everybody has different views, opinions & objectives, we suggest that the best thing to do is to sit down with an aged care planner or aged care specialist, & discover just what options you have available to you, then do financial modelling on those options to see what the outcome is, & THEN make your decision once you have the facts & the consequences.

If you want to find out which way is better for you in your circumstances, why not call us on 8814-7307, or click here to get one of our aged care planners to call you & discuss your needs, there is no cost or obligation for an initial phone consultation