If you read our recent blog post on the financial challenges facing our ageing population, then you’ll already know that the retirement landscape is changing for many of us. As we are living longer, our pensions and savings are being stretched thin, leaving many of us no option but to retire later in order to avoid dealing with income uncertainty.

The issue is that this can be somewhat of a myth. Instead of reducing income uncertainty, working later in life is not always the best way to alleviate financial problems. In fact, if your retirement planning hasn’t been managed effectively up until that point then it may simply shine a spotlight on any problems that are already festering.

Choosing to retire later comes with a lack of uncertainty in of itself and people need to adjust their investment portfolios accordingly. Many of us put our retirement plans in place during the earlier stages of our career in our 20s and 30s, but the models that we rely on at this stage are likely to lose feasibility as time goes on. If we adjust our retirement age, this becomes even more evident as we need to review our plans and ensure a good degree of flexibility to cater for such changes.

We cannot consider retirement as simply our “golden years” with the presumption that we are ticking items off our bucket list and enjoying good financial health and good health in general. It’s not an issue that any of us like to confront and denial is a major part of the problem. But the fact remains that we need to consider the potential impact of ill health and subsequent financial troubles during these years and then plan for it, especially if we have more years to contend with thanks to longer life expectancies.

Addressing the Cost of Care

To this end, our retirement plans need to cover every eventuality. Never has this been clearer than when we turn to confront the social care issue. The rising cost of care homes is a key factor that comes into play when we open the retirement planning conversation. Old age inevitably brings with it a higher likelihood of illness, decline and the need for in-house or round-the-clock care.

But the state of social care in the UK is a serious one. After news that care homes giant, Four Seasons went into administration in April of this year, this begs the question of who is going to pay for social care – the NHS or private funders?

There is currently no feasible government structure in place to support the cost and high standard of care that most of us will need and want should we face ill health and struggles in later life. The latter option – private funding – seems to be just as unlikely; research shows that 87% of people have not made any financial plans for themselves regarding potential care costs further down the line, and 88% have not done it for family members.

Indeed, the research undertaken for Tilney shows that 87% of those aged 55+ haven’t even considered the cost of care for family members despite many having elderly parents. Why? Because they simply don’t want to think about it or confront the issue. But if we only account for the day to day with our retirement, then we will face serious financial jeopardy should the need for care strike.

Savings and Investments

Retirement planning today is more complex than ever due to this range of issues. Annuities are no longer the simple, stock answer and many people are at risk of spending their full retirement pot in a short time due to lack of proper management. But there are still plenty of viable options and we recommend taking professional advice to make sure you understand each one.

For example, did you know that your pension can be a viable way to save for care home fees whilst also benefiting from a tax relief boost? You can continue saving into the fund after you have retired for a flexible way to keep your financial options open while providing a buffer for care home costs.

We would generally recommend that our clients factor long-term care into their retirement planning models to avoid facing financial catastrophe or eating into savings that are destined for other later life needs or ambitions.

A report from LaingBuisson shows that residential care homes can cost up to £39,000 per year, rising to £55,000 per year if nursing is required. For those residents in homes in sought-after locations such as London and the South East, their bill will often be far higher. This makes failing to prepare is a very risky option, but it doesn’t need to be all doom and gloom.

A Positive Approach to Retirement

We like to see retirement as an opportunity for our clients to make their hard-earned money work best to support their needs and desires in later life. Understanding how we might fund our care is necessary but planning in this way also means giving yourself, your spouse and your dependents the highest quality of life and the greatest peace of mind possible without any fear that the financial axe might fall when it’s too late to do anything about it.

Our team at Vintage Wealth Management use cashflow modelling and holistic financial planning to take a realistic and healthy view on the best retirement planning route for every individual client. We also advise on how to make your later life income work best for you and futureproof your retirement pot against financial shocks as well as provide tailored answers to the age-old question of inheritance tax.

As always, regular reviews are essential to stay on track with your goals and ensure optimum financial resilience – our services include ongoing advice and support. Contact us today for further advice.