Funding the cost of care in later life: Planning for Peace of Mind
As financial planners, one of the most common concerns we hear from clients is about funding the cost of care in later life. It’s a topic that evokes worry, not necessarily just about having enough, but also about the prospect of paying for care at all. Many people would prefer to pass on their hard-earned assets to their children, hoping the State will cover their care costs. However, this approach can have significant downsides, both in terms of the quality of care and the financial burden that might still fall on the family.
The Reality of State-Funded Care
The idea of gifting assets to children to avoid care costs might seem appealing at first glance. However, this often means relying on the State to cover care costs, which typically results in receiving the most basic level of care. This is far from ideal, and in reality, many children would still choose to spend money on ensuring their parents receive the best care possible. So, if your aim is to leave a legacy, it’s worth considering that the best legacy you can leave might be ensuring you receive the quality care you deserve.
- Limited Care Quality: Relying solely on state-funded care often means receiving basic services.
- Financial Burden on Family: Even with state support, family members may still incur significant costs.
“It matters not how long we live but how.” —Phillip James Bailey
You Should Want the Best Care for Yourself
It’s natural to want to protect your wealth and provide for your children, but it’s equally important to prioritise your well-being in later life. Paying for your own care can actually help you maintain the quality of life you’ve worked so hard to achieve. Rather than viewing care costs as a financial void that will deplete your assets, consider some reasonable assumptions that can reshape your outlook.
Understanding the Realities of Care Costs
- Only One Person Likely Needs Care: For many couples, the thought of entering care is put off because they take care of each other. It’s usually after one spouse passes away that the other starts to consider care options. Statistically, it’s likely that only one person from an elderly couple will enter care.
- Age and Life Expectancy: The average age of someone entering care is early 80’s. According to the Office for National Statistics, men and women entering care between the ages of 80-84 have an average life expectancy of 3.1 and 4.2 years, respectively. This means that the period of paying for care might be shorter than anticipated. https://shorturl.at/cUubC
- Average Care Costs: A study by “Which?” reports that the average cost of residential care in England is £63,800 as of August 2024. This figure can seem daunting, but let’s put it into perspective. https://shorturl.at/Iis78
- Property Value: As of January 2024, the average property value in England is around £300,000. If needed, this could cover the cost of care for approximately 4.7 years, aligning closely with the average time spent in care. https://shorturl.at/v4kzD
- Income Support: Don’t forget about additional income sources. The State Pension currently provides £11,500 per annum, and many will qualify for the Attendance Allowance, which adds an additional £5,600 per annum. Together, these could reduce the annual care cost shortfall to £46,700, meaning your property could sustain care costs for about 6.4 years.https://shorturl.at/NMvYk
A Balanced Outlook on Care Costs
By considering these factors, you can see that the financial impact of care may not be as severe as most people imagined. The average person owning the average property can fund care for the average amount of time required. This is not to downplay the importance of planning for care costs, but rather to offer a more balanced perspective that replaces fear with a sense of preparedness.
The Importance of Seeking Financial Advice
Ultimately, the best way to ensure you’re prepared for any eventuality is to seek professional financial advice. Planning ahead can help you make informed decisions that protect your assets while ensuring you receive the quality of care you deserve. Remember, the goal is not just to preserve wealth but to preserve your quality of life.
Planning for Yours or your Parents’ Future?
To discuss your personal circumstances for a view on future care arrangements, schedule a consultation with SN Financial and ensure financial security.
