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Care cost concerns impact retirement spending

30 April 2019

Baby boomers are increasingly concerned about how they will fund care costs, potentially impacting the way they spend their retirement.

New research among those born between 1946 and 1964, shows that nearly four in ten (39%) boomers said concern over future costs will hold them back from spending more in retirement, while 30% said ensuring they have enough money for care costs is important to them, according to a report by Aegon.

Currently, more individuals are required to pay for all care costs unless their assets and income fall below a threshold between £23,250 and £28,000. For those receiving residential care, assets include the individual’s home unless a relative such as a spouse lives there.

The average cost of staying in a residential care home is in excess of £32,000 per year, while a typical hourly rate for home care is around £20.

In response to growing concerns about the rising costs of care, the government announced it would publish a green paper on a new approach to social care funding in its March 2017 Budget, but a series of delays have prevented baby boomers from receiving the clarification they need.

Steven Cameron, pensions director at Aegon, said: “The cost of formal care can be immense and retirees often face selling their house and rapidly depleting their lifetime savings to pay for this, extinguishing any plans to pass on an inheritance to future generations. What makes it worse is that until the government sets out clearly how much individuals will in future be expected to contribute, it’s almost impossible to plan ahead.

“With more people living into their 90s and beyond, Baby Boomers thinking ahead to their own care needs will have elderly parents to care for and may face having to opt to work part time or give up work entirely, which can have significant knock-on consequences for their own finances and retirement plans.”

Professional Paraplanner