When people start looking at residential aged care, the first number they find is the Refundable Accommodation Deposit (RAD). It’s the figure advertised on aged care websites, listed in brochures and often used to compare one home with another.

While the RAD is an important number, normally $750,000 or more, it’s only one piece of the puzzle. There are actually five different fees; understanding all of them is the only way to calculate what aged care will cost you. Here’s what to look for.

1. The accommodation cost. This is the price of your room. There are three ways you can pay. First is the lump sum Refundable Accommodation Deposit (RAD), which is refunded when you leave (less 2 per cent per annum, up to 10 per cent).

Alternatively, you can pay a Daily Accommodation Payment (DAP), calculated using the government set interest rate, currently 8.43 per cent per annum on any unpaid RAD. The third way is by combination, which can include deducting your daily payment from your lump sum.

Choosing how to pay isn’t simply a cash-flow decision. It can also affect your age pension, your means-tested fees and the amount of capital available for future needs.

2. The Basic Daily Fee. Every resident pays the Basic Daily Fee. Set at 85 per cent of the single basic age pension, currently $67 per day, it contributes towards everyday living expenses such as meals, cleaning, laundry and utilities.

3. The Hotelling contribution. The Hotelling contribution is a means-tested contribution towards everyday services such as meals, cleaning and laundry. It is capped at $22 per day.

4. The Non-Clinical Care Contribution. The Non-Clinical Care Contribution is a means-tested contribution towards your personal support, like assistance with showering and dressing.

Like the Hotelling Fee, the amount you pay depends on your assets and income. This fee is capped at $107 per day. There is also a time cap of four years or when you reach the lifetime cap of $137,917 (which includes any prior home care contributions).

5. The Higher Everyday Living Fee. Many aged care homes offer extras such as wine with meals, newspapers, beauty services and entertainment programs. These services are paid for on a user-pays basis through a Higher Everyday Living Fee.

Understanding these five costs is the first step in answering the critical question of ‘how much will it cost?’ But remember, this is the cost of care, not your cost of living. You’ll still need to budget for personal expenses such as clothing, toiletries, hairdressing, medications and other day-to-day spending.

Finally, it’s not just what you pay that matters but how you pay. Whether you keep or sell the family home, use savings or investments, or pay a RAD as a lump sum or daily payment can affect your pension, cash flow, aged care fees and your estate planning.

It’s worth seeking advice to understand your options and avoid costly mistakes.

Rachel Lane is the author of Downsizing Made Simple, a book and website aimed at demystifying downsizing.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.