If you have a long-term financial plan, it’s likely to be based around an investment goal or life milestone, like retirement. Building sufficient funds to sustain your chosen lifestyle after you finish work is a key part of financial stability in later life.

A new report, however, suggests that your peak financial responsibility will actually hit at age 45. This is the time in your life when it’s most likely that you’ll have older and younger dependents. You could be paying out for your children’s education and your parent’s care, for example.

So, rather than retirement, should you be planning for age 45? And how can you successfully traverse this peak and still make it safely to life after work?

Keep reading to find out.

Those aged 40 to 60 spend more than £10 billion a year on adult dependents

According to a recent L&G report, “midlifers” – those aged 40 to 60 – spend £10 billion a year helping loved ones, with 10% believing that the level of support they provide is unsustainable. This is a particular problem as the cost of living crisis bites.

The Office for National Statistics (ONS) recently announced that inflation for March had risen to 7%, its highest level in three decades. The Bank of England (BoE), meanwhile, confirms the Consumer Price Index (CPI) won’t return to its target level of 2% until at least 2024.

This household squeeze follows in the wake of another issue for midlifers – that of increasing care costs, exacerbated by the coronavirus pandemic

You might be one of the more than 6 million midlifers (33%) already providing financial support or unpaid care to at least one loved one. Unpaid caring responsibility is most common from age 58 onwards.

The report found that:

• 17% of midlifers provide financial support on top of household expenses, collectively worth £10.4 billion a year, and an individual cost of between £250 and £280 a month
• 15% provide unpaid care, either to elderly parents or grandchildren, adding up to around 15 hours a week.

Covid-19 has had an impact on financial stability and quality of life for those providing support, with:

• 52% saying the pandemic increased the financial pressures they face
• 34% confirming they had less time to themselves with 25% getting less than an hour to themselves a day, on average
• 19% aware that the time they spent on care was resulting in them neglecting their own financial wellbeing.

3 simple steps to navigating peak financial responsibility and beyond

While looking after your dependents is vitally important, so too is ensuring your own long-term plans are still on track and that your goals remain attainable. At Expert Wealth, we can help with this.

While the cost of living crisis might mean money, and your time, is even tighter than usual, good financial planning can help you to provide for your loved ones now, while still enjoying your dream retirement later.

1. Planning early

If peak financial responsibility is still some way off for you, you’re in luck. There are still plenty of things you can do now to lessen the impact when the time arrives.

Consider saving for your children from a young age, through a Junior ISA (JISA), for example. A Stocks and Shares JISA is a tax-efficient way for you to begin building a fund to allow your grown-up children to help themselves, whether that’s through higher education or getting onto the property ladder.

If you are concerned about the financial position of ageing parents, the earlier you can have difficult conversations the better. Sustainable retirement withdrawals, provisions for later-life care, and estate planning – if arranged early – could all help to limit the financial burden you face.

2. Paying your future self first

The Resolution Foundation believes that the average UK household could be £1,000 worse off this year, thanks to the cost of living crisis. Following two difficult pandemic years, you might be tempted (as many were) to cut pension contributions to save money.

Paying your future self first is vital for your own stability in later life, so resist the temptation if you can.

Pay into your pensions and investments first and then budget with what remains. If this is tough, be sure to speak to us so that we can help you manage your income and expenditure. This will ensure that all of your money is working for you, while leaving you with enough to support your financial dependents.

3. Planning for your own later-life care

While life expectancy in the UK continues to rise, so does the number of years we can expect to live in ill health. This puts greater pressure on your retirement fund, and also on the plans you make for your own later-life care.

We can help you put plans in place now to fund potential care, with contingencies to ensure that the money is held tax-efficiently, should it not be needed for that purpose.

This will help to ensure that the cycle doesn’t continue and that your children are free to concentrate on their retirements.

Get in touch

Our Chartered Financial Planners have decades of financial experience and can use it to help you look after yourself, and your dependents. If you would like help putting a long-term plan in place for your retirement or your children’s future financial stability, please get in touch and speak to us today.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.