As you begin to approach retirement, you may be thinking about the ways your later-life years will affect you financially.

This may involve drawing your pension, financially assisting your loved ones, or dealing with Inheritance Tax (IHT) issues. There is a lot to consider and think about. So, it can be easy to forget to factor in any potential health issues you may end up facing in later life and the associated costs.

Even if those potential issues are decades away, there may come a day when you might need additional healthcare support beyond what the NHS can offer, and with it an added retirement outgoing.

Care support could take the form of a professional who visits your home, or the option of moving to an elderly care facility for greater round the clock support, access to the relevant facilities, and added comfort.

It is crucial to consider the financial implications of later-life care in your financial plan. Although, research from Canada Life has shown that 7 in 10 over-60s have not begun planning for their later-life care.

Read on to discover why preparing for your potential later-life care needs is so important.

72% of Britons over the age of 60 haven’t considered later-life issues in their financial plans

Canada Life’s study reveals a rising trend in requests for later-life care over the past few years.

In 2019/20, approximately 1.9 million Britons requested help with their care needs from their local councils – an increase of more than 100,000 from the 2015/16 figures.

The research also found that 44% of those canvassed suggested they wouldn’t think about care until either they or a family member succumbs to an illness. Meanwhile, 28% find considering later-life care needs to be emotionally overwhelming and 25% said thinking about it caused them financial anxiety.

The importance of preparing for later-life care is increasing, particularly as Britain’s ageing citizens make up a growing percentage of the population demographics.

A study from Imperial College London found that a 65-year-old UK man in 2030 might expect to live an additional 20.9 years, while a 65-year-old woman in the UK could potentially expect to live an additional 22.7 years. 

Those figures are expected to rise with each new generation. So, as future retirees face up to a reality of a longer retired life — the possibility of healthcare costs is becoming greater than ever before.

So, it is essential to consider any potential care costs when you are developing a financial plan for your retirement. In working with a financial planner, you can factor in later-life care, into your arrangements.

The cost of care can make up a significant portion of your annual budget

If at the time of your request for care support, your total assets are valued at more than £23,250 (due to rise to £100,000 in 2023), you will likely have to pay for some or all of your care privately.

While from October 2023 there will be a new £86,000 cap on the amount anyone in England will need to spend on their personal care over their lifetime, you could still end up having to pay a significant sum towards your care cost. As this cap only relates to care costs and does not include so-called “hotel” elements such as accommodation and food.

According to Unbiased, residential care homes can cost from £32,000 a year, and part-time care from the comfort of your own home could cost up to £16,000 a year. Although, these costs can vary geographically with some individuals paying as much as £1,000 a week.

These costs may rise in the future, as demand increases from an ageing population. The prices can also vary greatly dependent on your own wants and needs. There are more luxury care homes available now and these obviously attract a higher cost.

Through careful planning, you can prepare yourself to fund your later-life care, or that of a loved one. This may take the form of boosting your pension, generating growth through investments, holding assets like property, or other savings vehicles such as an ISA. 

These could all potentially help pay for care costs in the future.

In being proactive and planning now, you can resolve a future headache in the present.

Remember: it’s never too early to plan for your retirement needs.

There are emotional and financial benefits to budgeting for care costs early

As previously mentioned, the Canada Life study found many Britons felt anxiety when thinking about later-life care and hadn’t begun to financially plan for any outcome.

It may be something that has weighed on your mind as you’ve considered the financial ramifications of later-life care on your own plans. And no one likes to think about getting older!

Having a plan in place can bring real peace of mind and reassurance and mitigates your concerns.

Beyond any financial growth plans, simple actions can provide you with a sense of security for your own personal future. 

While not everyone will need care some simple steps you can take are :

• Actively budgeting for your retirement care needs
• Identifying your personal care plans such as facilities you like or whether you’d prefer at-home care if possible
• Discussing your plans with friends and family in order to receive helpful opinions and to keep everyone in the loop
• Doing your research into associated costs and options.

This will give you the peace of mind of knowing that you can afford healthcare options should you need them and allowing you to enjoy a more relaxed retirement.

Get in touch

Working with a financial planner can not only help you to meet your long-term goals but can provide you with the emotional benefits of taking unnecessary stress and burden off your shoulders.

If you have concerns about your later-life care, please reach out by email at team@brunelcp.com or call us on 0117 214 0870.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

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