Children with elderly parents who may need some looking after — owing to old age, or illness, or both — may be surprised to discover the cost of taking care of their folks, whether this be in a retirement village or through private nursing. According to one expert, pensioners can expect to pay almost twice as much for private home care compared to renting in a middle-market retirement village.
So, what are the costs? Twané Wessels, a product actuary at specialist retirement company Just, shed some light.
According to her estimates, to rent in a middle-market retirement village in South Africa, pensioners require about R20,500 per month for essential expenses, including frail care, whereas 24-hour private home care can cost up to R37,000 per month.
"Pensioners who require 24-hour home care may, however, qualify for an enhanced annuity — and this might reduce the capital needed to secure the same income," said Wessels.
"To cover R37,000 per month for life to stay in their home with 24-hour private home care, pensioners aged 75 with a life expectancy that is 25 percent shorter than the average life will need approximately R3.5-million as a man and R4.4-million as a woman."
Monthly essential expenses, broken down
For a middle-market retirement village, Wessels estimated the following total monthly expenses:
• Rent — R9,000
• Levies — R2,000
• Three meals per day — R4,480
• Hospital plan — R1,500
• Frail care, including 24-hour nursing — R3,520
I pay for my moms retirement home in South Africa and it's just about doubled in price for me! 😳 Ouch!— SamTheFoodFan (@SamTheFoodFan) March 26, 2018
For home-based care, these are the estimations:
• Maintenance, rates and taxes — R3,500
• A grocery bill — R3,500
• Hospital plan — R1,500
• 24-hour, home-based care — R28,500 (based on an average rate of R800 per day, excluding VAT)
Notably, the cost of home-based care varies widely per provider and depends on the number of hours of care required per day. However, it is more expensive on Sundays and public holidays. For 24-hour care, the cost varies between R200 and R1,400 a day.
How much capital does a person require to fund these essential expenses for life?
To determine the required capital, Wessels used competitive with-profit annuity rates, which target increases above inflation.
JustEnough capital to fund monthly essential expenditure, before tax, for a man and woman aged 75
For a man
For a woman
Rent in a middle-market retirement village with 24-hour nursing
Stay in own home with 24-hour private home care
Saving for retirement
Only six percent of South Africa's population will have enough money to retire comfortably without having to change their standard of living, according to data by the World Bank.
"This spirals into a series of events, from working for a longer period, to retirees having to move into a family member's home and using home-based care outside of a retirement home," pointed out the director of Cameron Property Group, David Cameron.
And this can result in unnecessary conflict.
The best option is to plan properly for retirement, which is why Wessels has encouraged South Africans who can afford to save to do so diligently, taking care that their retirement needs are well taken care of.
The rule of thumb is to save 15 percent of gross income if you start at age 25; if you start at age 30, you need to be looking to save 20 percent and starting at age 40, you are looking at 42 percent of gross income.