Have you considered the cost of care in retirement?
In the next 20 years, the number of elderly people needing constant care is expected to double. You’ve probably thought about how long your pension needs to last and whether you’re saving enough. But have you factored in the cost of care?
By 2035, it’s expected there will be 446,000 adults aged over 85 that need 24-hour care, according to research from Newcastle University. It’s a similar picture for those aged over 65 too; it’s thought one million will need constant care. The figure represents an increase in demand by more than a third.
It’s a figure that’s partly driven by a growing population. However, longer life expectancy is playing a role too. Estimates show:
- The number of people aged over 65 will increase by almost 50% in the next 20 years; reaching 14.5 million in 2035
- Life expectancy will increase by three and a half years for men and three years for women
Typically, retirees spend more in the early years of retirement. The first years after giving up work are often marked by a greater level of spending, such as paying off the mortgage or travelling. As people settle into retirement, costs often decrease. Care changes this.
The cost of care varies depending on where you live in the UK. However, the average annual cost of a care home is around £29,270, according to PayingForCare. This rises to £39,300 if nursing is required.
Even if you don’t require constant care, it’s likely you’ll need some level of support at home. If this can’t come from loved ones, you could be looking at a cost of £15 per hour. At first glance, that doesn’t seem like a big expense. But when you calculate that two hours of help a day will amount to £10,950 a year, it’s clear that most people will need to plan ahead for this.
With these sums in mind, it’s important to factor the cost of care when planning your pension income.
Making care part of your retirement planning
Nobody wants to think about needing care as they age. But considering what you would like and how you would pay for it can make seeking care easier and less stressful should you ever need to.
Spending in retirement follows a similar pattern for many. When you first enter retirement you’re likely to find your essential outgoings are reduced but that your spending on luxuries will increase. It’s common to want to enjoy those first years of retirement, whether you plan a few more holidays or increase social activities now you’re no longer working.
It’s then typical for your spending to settle and perhaps decrease as you enter the next stage of retirement before outgoings increase again as you start paying for care. The differing income needs throughout retirement can make it difficult to ensure your pension lasts throughout your later years.
Considering what you would choose should the need for care arise can help you forecast costs. Among the questions to answer are:
- Do you have any medical conditions that may affect your ability to care for yourself?
- Are your loved ones in a position to offer you support if needed?
- Would your current home be suitable if you were to experience reduced mobility?
- What type of care would you prefer?
- Is there a way to protect some of your assets when paying for care?
Of course, no one can predict what will happen in the future. But having an idea of what level of care may be required and the expenses associated can help you create a realistic financial plan. It’s also a good idea to speak to your family about what your preferences would be and how it would be paid for. They may have alternative suggestions, such as how they can provide support, and it could affect their inheritance.
Appointing a Power of Attorney
While we’re on the subject of your financial health and care, there’s another area where it’s important to be proactive; appointing a Power of Attorney.
A Lasting Power of Attorney (LPA) is a legal document that appoints one or more people to make decisions on your behalf. Should you have an accident or illness that means you can’t make your own decisions, those appointed will be able to make them for you.
There are two types of LPA, both are important. A health and welfare LPA will make decisions relating to areas such as medical care, moving into a care home, and treatment. A property and financial affairs LPA will allow your loved ones to manage areas such as your bank account, paying bills and selling your home.
It’s a common misconception that your partner will be able to take control of your finances. Even if you have a joint account, they may not automatically have access to it. This is because a joint account can only be operated with the agreement of both parties. As a result, appointing an LPA is important, no matter your personal circumstances.
If you’d like to understand how the cost of care could affect your retirement plans or whether your pension would cover the care required, you can contact us today. We’ll help you understand what steps you should be taking and how it will affect your income.