A recent report published in MoneyAge has found that more than 1 in 10 Gen Xers are paying the equivalent of their annual State Pension supporting elderly parents and relatives with the cost of later-life care.
Gen X – those born between 1966 and 1980 – are currently aged between 44 and 58. If this is you, there’s a chance that you might be providing support to elderly parents and financially dependent children or grandchildren.
This “sandwich generation” of midlifers will be particularly feeling the squeeze as the cost of living crisis evolves and continues.
With care home fees and tax bills rising, keep reading to find out how you can budget for care costs without endangering your own long-term financial security.
More than half of those providing support for elderly relatives felt poorer as a result
MoneyAge reports that 11% of Gen Xers are supporting elderly relatives. On average, they’re spending £237.50 a week. Over 12 months, this amounts to around £12,350, which is £800 more than the full new State Pension, set to rise to £11,542 from April 2024.
Providing support for things like care home fees and weekly expenses is making Gen Xers feel:
- Poorer (54%)
- More tired (53%)
- Stressed (42%)
With millions of UK households already struggling, the above numbers are no surprise. Confronting a loved one’s frailty or mortality is challenging at any time, but rising costs are making this a particularly worrying time for many.
If you are providing support to financial dependents, you’ll want to do all you can to ensure the help doesn’t detrimentally affect your own plans. This is where financial advice can help.
Frank discussions and early planning are key but stay focused on your long-term goals
As with any financial commitment, factoring care costs into your budgeting early is the best way to ensure providing support doesn’t upend your plans. But you’ll want to discuss these things with your elderly loved ones too.
Here are three factors to consider:
1. Discuss care costs and provisions as early as possible and put a plan in place
Preparation is key so if your parents aren’t yet in need of care, now is the time to have frank and open discussions.
You’ll need to know the types of care they would be willing to receive and the provisions they have set aside to pay for it. The difference between at-home care and nursing home fees can be huge. They also vary depending on the type of car needed, and even geographically.
Last year, interactive investors reported that nursing home fees for 2023 were up 10% in 2022 and now amounted to more than ÂŁ61,152 a year.
This is a huge sum to find if no plans have been made to fund later-life care so the sooner your parents revisit their plans the better.
As well as the purely financial side of care, you’ll want to think about the logistics of providing support.
Check if your parents have a Lasting Power of Attorney (LPA) as this could help you to manage their affairs if they are no longer able. An LPA is relatively cheap compared to the cost of retrospectively gaining permission to act on someone else’s behalf. It could save time and undue stress if care needs arise suddenly.
2. Ensure they are getting all the government help they are entitled to
A property and financial affairs LPA should allow you to manage your elderly parent’s financial affairs. This might involve ensuring they are receiving all the government help they are entitled to, including means-tested benefits.
You might also need to factor in the “social care cap”, currently set to come into force from 2025. Originally announced as a watershed moment in adult social care, the long-delayed measure would cap the amount you can pay for care in your lifetime to £86,000. This does, though, only cover the cost of personal care, meaning money for rent, utility bills, and other personal spending will need to be found separately.
Careful budgeting and compromise may be required.
3. Think carefully about what you can afford to contribute and be prepared for a frank discussion
While you will want to do all you can to help your elderly parents in later life, you need to manage your own finances too.
Your long-term plans are carefully designed to provide you with your desired lifestyle for the rest of your life. At Expert Wealth, we can factor in the cost of your own later-life care and contingencies for what happens to that money if care isn’t needed. But huge care costs for elderly relatives could compromise your plans.
Not only that, but escalating bills could affect the amount you can leave to your children.
Open financial discussion can help to highlight shortfalls or areas where compromise needs to be made. Be sure these difficult conversations take place as early as possible.
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With decades of experience, our Chartered Financial Planners have the expertise to help you plan your retirement your way. If you have any questions, please get in touch and speak to us today.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator.
