When you take responsibility for your retirement income, you’ll need to factor in many different influences; one of them being care. However, research suggests that many baby boomers are concerned about spending in retirement because of future care costs. Taking control and having confidence in your finances can help you enjoy retirement to the fullest.
It’s easy to see why it’s a concern. The cost of care can run into the tens of thousands of pounds and, in many cases, it falls to the individual to pay for it. As a result, some pensioners are holding back on retirement plans and fully enjoying their life after work for fear of not being able to pay for care. Research from Aegon found:
- Nearly four in ten (39%) of baby boomers say concerns about future care costs will hold them back from spending more in retirement
- Three in ten said ensuring they have enough money to pay for care is important to them
Steven Cameron, Pensions Director at Aegon, commented: “The research shows that a large proportion of Baby Boomers are concerned about funding their future care costs, and with good reason. The cost of formal care can be immense and retirees often face selling their house or rapidly depleting their lifetime savings to pay for this, extinguishing any plans to pass on an inheritance to future generations.”
The rising cost of care
For those that need some support but can’t rely on family and friends, they face rising costs.
If you simply need some extra help at home, but can largely manage by yourself, this can bring the bill down. But it’s still likely to be higher than many people expect. According to the NHS, you can expect to pay around £20 per hour for a carer to come to your home. It sounds like a relatively small cost, but assuming you need two hours help each day, that adds up to a bill of £14,600 annually.
Unsurprisingly, residential care costs are significantly more. Rates vary across the UK, but on average residents without serious health issues pay £617 per week in care home fees; £32,084 annually, research from Paying For Care indicates. Where nursing care is required this figure rises to £43,888 a year. If you have specific needs, for instance, should you suffer from dementia, these sums can rise further still.
When you look at the costs associated with care, it’s not surprising that some retirees are finding it difficult to fully enjoy their retirement with these concerns at the back of their mind.
Who pays for care?
There’s often confusion around who pays for care and government support you may receive.
Most people will pay for some or all of their care costs. If your assets exceed £23,250, you’re likely to need to take responsibility for paying for the care required yourself. Your assets include your home unless a qualifying relative, such as a spouse or civil partner, lives there. When assets are depleted below the threshold, you can receive government support. However, this may mean you don’t receive exactly the type of care you want, and you will have less choice.
With care costs often coming down to the individual, it can seriously affect plans. For instance, if you have set out plans to leave an inheritance to loved ones, you may need to evaluate how potential care costs could reduce the amount you leave behind.
The solution: Financial planning
Whilst planning for care is important, you should also be enjoying your retirement. It’s often a milestone we look forward to and worrying about finances in the future can mean you don’t tick off aspirations, even if you have the means to do so.
Financial planning, including cashflow planning, can help you see how care would affect your finances. With this in mind, you can set a realistic portion of your assets to one side to cover potential costs, as well as understanding what sustainable spending means for you. It’s a step that should give you greater confidence in your finances, allowing you to pursue those retirement dreams with confidence, safe in the knowledge that potential care has been accounted for.
Remember, not everyone will require care. Some will be able to live independently throughout their life, whilst others may be able to rely on family and friends for the extra help needed. As a result, you should also set out a plan for what will happen if you don’t use it.
If care worries are affecting your retirement lifestyle, please get in touch. We’re here to help you understand how different scenarios will affect your finances, including requiring care, to give you the confidence you deserve for your future.
