One consequence of improved longevity is a rising cost of care in later life. Whether experienced directly or indirectly, long-term care expenses are now a standard feature within the financial plans we construct for our clients.
The financial impact of this later life care varies depending on a variety of factors, including the age at which it starts and how long it continues. According to new research, the average cost of caring for an elderly relative is £5,545. This is the financial cost of either lost earnings or money spent directly on care fees.
The research, which forms part of The Modern Life Report from Fidelity International, found that nearly a third of people had to care for an elderly relative at some point. Of these individuals facing care requirements, 20% took time off work to provide care, with 14% cutting their hours at work, and 10% leaving their job altogether to become an unpaid carer.
Taking time off work or leaving work altogether to provide care to an elderly relative is an expensive proposition. The financial impact for men was found to be higher than for women, at an average of £8,138 compared to £3,187. Millennials face the highest indirect care costs of any generation, spending an average of £6,183.
We are often faced with clients who find themselves as part of the ‘sandwich generation’. This term describes being sandwiched between the financial pressures of having young adult children, along with time or financial commitments with elderly parents. In the future, we expect even more people to become part of this sandwich generation, thanks to rising life expectancy and more time spent in poor health in later life.
Official figures show we can now, on average, expect to spend between 16 and 19 years in failing health as we get older.
Despite the financial consequences of care in later life, relatively few people seem willing to put in place suitable financial plans to cover the costs. The research found that 25% of people haven’t considered the cost of long-term care, and 24% believe they will rely on any available state provision. A further 23% don’t know how they will fund care in later life.
Perhaps more worrying is the lack of planning among those already in retirement. According to the research, a little over a quarter of over 50s haven’t considered their long-term care funding. 20% of those in their 60s and 25% in their 70s don’t know how they will meet future care costs.
With more people needing long-term care in later life, it seems likely that state provision will struggle to keep pace with demand. Emma-Lou Montgomery, associate director for personal investing at Fidelity International, said:
“Health, wealth and happiness has long been the prescribed recipe for a good life. But as we know all too well, if just one of those components is missing the knock-on effect can be devastating.
“When it comes to health, we aren’t always in control of what happens, and while we are living longer and spending more years in good health, the number of years we live in poor health has also increased. This is especially true for women, who live longer than men, and unfortunately, the majority of these extra years can be spent in poor health. Our research shows this not only affects those suffering from ill health or illness, but it affects their loved ones too.
“While the government is committed to solving the social care crisis it won’t happen overnight – there is no easy fix.
As we await further clarity from the new prime minister people must take their future into their own hands and ensure they are prepared for life’s twists and turns. While our own mortality or possible ill health is something few of us like to dwell on, taking steps to plan for your own care in later life is essential.”
It’s all too easy to bury your head in the sand when it comes to the relative unknown of long-term care funding.
A better approach is to factor in some later life care scenarios, for yourself and close relatives, when creating your financial plan, to fully understand the consequences of this as you work towards your goals.