3 practical steps when planning for later-life care costs

With advances in medicine, many of us are living longer, healthier lives. But increasing life expectancy means that we also face a greater possibility of needing some form of care or support in later life.

As you age, you may find that you begin to struggle to remain living independently. In the best case scenario, you may manage with some at-home help, or you may need to move into a residential or nursing home for round-the-clock care.

Paying for support in your own home can be costly. And residential villages and nursing homes can be significantly more expensive.

Failing to think ahead could lead to significant stress and worry for you and your family.

Care costs could be more than you might expect

According to research from Canada Life, 1 in 4 people have put off thinking about care due to the financial anxiety it causes.

The cost of later-life care will vary depending on where you live, as well as your specific needs, but it could be more expensive than you realise.

According to the UK government, 1 in 7 people will face care costs of more than £100,000(excluding hotel and accommodation costs). Around 1 in 10 individuals will facecare costs above £120,000 over their lifetime.

Source: UK government

As the chart above shows, even the average cost of care forover-65s is £45,000. This means that, if you are married or have a partner, you can expect to need almost £100,000 to pay for any assistance you might need in later life. And it could be much more.

When Canada Life questioned people about how they would pay for care, over-60s respondents said:

  • 27% would use the State Pension
  • 25% would use cash savings
  • 18% would use a private pension
  • 14% would sell assets (for example, their home)
  • 13% expected the government to meet the cost
  • 9% said they would release equity from their home.

3 practical steps you can take to meet potential later-life care costs

1. Plan your expenditure and budget for your whole retirement

In retirement, your spending will take a certain shape –often it will look a lot like a smile, as you can see in the chart below.

Source: Forbes

Devised by David Blanchett, the spending retirement smile above shows how, at the start of retirement, most retirees spend more as they tend to enjoy an active lifestyle – spending on travel, eating out, and other types of discretionary expenses. As they age, retirees tend to slow down and spend less.

Then, as discretionary expenses begin to decrease, health costs tend to rise.

By understanding your spending patterns and the potential costs associated with long-term care, you can more easily predict how much money you will need throughout retirement.

Working together with your financial planner, we can build a financial forecast to work out if you are on track to meet your retirement goals and plan for the cost of later-life care.

2. Understand all the potential options

Set money aside

Earmarking certain funds to go towards care costs from your savings or pension fund could be a good place to start.

We can use cashflow planning tools to help you gain confidence that you can achieve your retirement goals. By plotting a variety of scenarios and financial inflows and outflows over your lifetime, we can work with you to establish whether you have sufficient funds to meet your lifestyle goals and have extra on the side to cover potential care costs.

Downsize to release equity

If you’re concerned that you’re short on accessible cash to pay for care, you could consider downsizing your home.

Downsizing can be especially useful if you’ve owned your property for many years as its value may have risen substantially since you purchased it.

Equity release

Should you wish to remain in your home, one option may be to explore whether you could release equity from your house to cover the cost of care.

There are a variety of equity release products. To find a product that best suits your needs and situation, please get in touch. We’ll explain everything you need to consider and help you find the right solution for you.

3. Talk to a professional financial planner sooner rather than later

As with most important life matters, putting things off doesn’t help. The sooner you get advice, the more options you’re likely to have.

Rather than waiting until you’ve reached retirement, it’s far better to plan ahead as the longer you wait, the fewer options you may have.

A well-structured financial plan can help determine the most cost-effective solutions and set you on the right course so that you can get on with enjoying life, without the worry of what might be around the corner.

Get in touch

Ensuring you can fund later-life care is a vital part of your financial plan. To find out how we can help you plan to meet potential costs of care and support, please get in touch.

Email enquiries@alexanderpeter.com or call us on +44 1689 493455.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, 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. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not are liable indicator of future performance.

Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

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