Have you ever considered about the cost of care you may need to pay later in life? It’s not something anyone wants to think about but it’s becoming increasingly important.
As life expectancy increases, more of us will need some form of care as we enter our later years. It’s a service that many are likely to need to pay for either wholly or partly themselves. However, according to research from Which? millions of people are underestimating the cost of paying for a care home. It’s a shortfall that could place some retirees at risk of facing financial difficulty later in life or not having the care they’d prefer.
The Which? survey found:
- 55% underestimate the cost of a care home
- The average gap between average cost and estimates was £12,000 a year
- One in ten people understated the cost by £39,000 annually
- Three in ten admitted they simply didn’t know the cost of care in their region
It’s becoming more common to need some level of support as we age. Around 400,000 people in the UK live in residential or nursing care homes. Of these, almost half pay for care themselves and many of the rest pay for a portion of their care themselves. In addition to this, there are other forms of care that you may end up needing, such as some at home support throughout the week.
In total, around one in ten older people with care needs face bills in excess of £100,000. Despite this, only one in ten adults aged 55 or over say they’ve put money aside to pay for potential care needs as they age. With the size of the bill in mind, the cost of care should be something you think about long before you need it.
While planning how to pay care costs isn’t something anyone looks forward to, doing so early can have several key benefits.
1. Accessing the care you want
Once you start thinking about care, you probably have some idea about the type of service you’d prefer. There’s no one-size-fits-all solution when it comes to care, so thinking about what’s right for you is important. There are a huge number of options when looking for care. What your priorities are, as well as the state of your health, should play a role in deciding which option you’d prefer.
Understanding what you want can help you access your preferred type of care in two ways. Firstly, costs can vary hugely and planning ahead can help ensure you set enough money to one side. Secondly, it also gives you an opportunity to let your wishes be known.
2. Alleviate some of the stress on your and loved ones
Accessing any type of care can be a stressful experience for you and your loved ones. It’s a time of change and one that is likely to be marked with mixed emotions. Knowing that you have a clear idea of what you want and have made financial plans to achieve it can ease some of the burden.
Taking steps to make provisions for care now can help make the whole process smoother should it become necessary in the future.
3. Improve your financial security
When you’re planning your finances, you should also look at how different scenarios will impact your financial security. As you approach retirement, this should include the potential need to pay for care. If you’ve spent a significant portion of your pension during the early years of retirement you could face financial difficulty when care bills start coming in.
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, 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.
When should you consider the cost of care?
The simple answer to this is: the sooner the better.
As with many areas of financial planning, the sooner you start thinking about potential care costs, the more time you have to put yourself in a better position. Putting aside a portion of your income when working, for instance, can mean you have a nest egg to fall back on if necessary.
However, the reality is that many people only start to think about the cost of care at retirement, or even later. Doing so at retirement can be useful for planning a sustainable income to take once you’ve given up work. As a result, considering care when you’re planning your retirement should be considered a crucial step.
If you’d like to understand how needing care would affect your finances, please contact us. Offering bespoke advice, we can help you see how different decisions and circumstances will affect your finances throughout life. We can then help you put a strategy in place to pay for future care costs should support be needed.
