You’ve probably not thought about the cost of care in later life, but it’s becoming an increasingly important part of retirement planning. Life expectancy has increased over time, and with longer lives comes a higher chance of poor health in old age. Increasingly, care is a service you are likely to have to personally pay for, at least in part, in the future.

Research from Which? has found that millions of people are underestimating the associated costs. Having a detrimental effect on their finances at the time, individuals may struggle or have to settle for a lesser level of care.

Specifically, the research found;

  • 55% underestimate the cost of care
  • The gap between the actual average cost and estimates was £12,000 p.a.
  • Three in ten simply didn’t know the cost of care in their hometown at all

The need for care is becoming increasingly common. Currently, approximately 400,000 people live in residential or care homes in the UK. Almost half of these people pay for it personally and many of the remainder make a contribution towards the overall cost. There are, of course, different levels and types of care that you could require, from home support from a family member or a visiting nurse to full-time care in a home.

At present, 10% of retirees with care needs pay in excess of £100,000; quite a significant sum of money. Despite this statistic, 10% of people aged 55 and over say they’ve not made any savings towards potential care. This really goes some way to highlight the imbalance of planning vs reality.

Planning as early as you can has some key benefits:

Choose your own preference 

When you start considering your potential needs, you’ll begin to build a picture about the kind of service and surroundings you would prefer. It really is an individual opinion, there’s isn’t a standard solution for all people. There are many options available; your priorities and likely health needs will play an important role in the decision. Understanding what you want can help you access your preferred type of care in two ways:

  1. You can identify the potential cost and are therefore able to plan for it
  2. It gives you the opportunity to let your family know your preference

Take last-minute stress away from your family 

A last-minute rush to arrange care provisions can be a difficult and stressful experience for you and your family. Emotions are likely to be running high at this time no matter your planning efforts, so it’s important to ease as much of the burden beforehand as possible. Planning now is likely to make the often-challenging process run much smoother.

Improve your retirement financial security

When considering any financial planning you must consider how various scenarios, planned or unplanned, can affect your financial security. When nearing retirement, this should certainly include the potential provision for care.

You’re likely to spend more of your retirement savings at the beginning of your retirement, when you discover more free time and are more likely to be in good health. This does, naturally, increase the likelihood of running out of income if you’re unexpectedly liable for the cost of care in later life.

Of course, you may not need any form of care later in life. As a result, your planning should include what you want to happen to the nest egg if you don’t use it, for example, using it as an inheritance to loved ones. Effective financial planning is about considering the potential different circumstances you may face and taking steps to improve your financial security with these in mind.

What should you do?

The sooner you identify a potential issue and address it the better. It’s the same with most situations in financial planning and you put yourself in a stronger position. Putting aside a portion of your income when working, for example, will leave you with some valuable savings to rely on, if and when, the time comes.

Don’t leave it too late, many people only really start to plan their potential care costs during retirement. Planning pre-retirement as part of your wider financial plan can result in a more sustainable income later in life.

If you’d like to discuss the potential effect of care costs in your retirement planning, don’t hesitate to get in touch. At Boolers, we offer tailored financial advice from expert financial planners. We cater for all types of clients, but have specialist experience and knowledge of near and post-retirement planning.