Stay Healthy, Stay Wealthy: Simple Steps for a Worry-Free Retirement

We all know the saying, "Health is wealth," but as we age, this truth becomes even more critical. While you've spent years building your savings, have you considered how being healthier and living longer might impact your retirement plans?

Planning for a Longer Life: Understanding Retirement Living Standards

With advancements in medicine and a growing emphasis on healthy living, life expectancy is on the rise. According to the Office for National Statistics, the average life expectancy has increased to around 83 years for women and 79 years for men. However, Andrew Scott, professor of economics at the London Business School, spoke that children born today could live 100 years, indicating a significant upward trend in life expectancy.

Source: Office for National Statistics

While this is wonderful news, it also means you might need more savings to ensure a comfortable retirement that could last 30 years or more.

Consider the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standard table below. It is important to determine which lifestyle you can realistically afford to aim for and plan your retirement plans accordingly.

Don’t forget to account for unexpected health costs, which can impact your financial security in later years. It’s an uncomfortable truth, but one you cannot ignore.

Source: Pensions and Lifetime Savings Association

The Real Cost of Good Health1. Know What the NHS Covers and Estimate Potential Expenses

While the NHS covers a lot, there are still some costs you might have to pay. Things like certain medications, dental or vision care, and home care services often aren’t fully covered.

It’s a good idea to look into these potential expenses now, so you can plan your retirement budget accordingly.

2. Budgeting and Saving

One smart way to prepare is by setting up a separate fund just for these expenses. To figure out how much to save, consider your likely healthcare needs and potential costs. Decide on a monthly or yearly amount that fits your budget, and start putting money aside as soon as you can. While it’s true that healthcare needs can be unpredictable, planning ahead can help you better prepared for any surprises.

3. Consider Private Healthcare

Most key NHS targets have been missed for at least seven years across the UK, resulting in unacceptable waiting times and delays that could be dangerous to patients.

Source: NHS

The NHS aims to schedule non-urgent procedures within 18 weeks. However, wait times are often much longer. Private healthcare offers quicker access, with same or next day GP appointments and potentially faster treatment.

To access private healthcare, there are two main options. You can pay for private care yourself, or get health insurance to reduce costs. Private health insurance can be a good option for more coverage, but remember that premiums rise with age, so plan accordingly.

Premiums typically rise 5-8% annually in your 40s, and 9-12% each year after age 50. Below is a table of approximate monthly premiums to consider:

4. Preparing for the Hidden Costs of a Longer Life

As we plan for a longer life, it’s important to think about not just everyday expenses but also possible care home costs. For example, in 2021, 2.5% of people aged 65 and older were living in care homes. For those aged 85 and up, this number was higher, at 10.8%. This shows why it’s important to prepare for the possibility of needing care as we get older.

Source: Census 2011 and 2021 from the Office for National Statistics

Additionally, over 60% of care home residents were in a better-than-fair health. If you’re paying for care yourself, the average weekly cost is £1160 for residential care and £1410 for nursing home care across the UK. This means that residential care costs about £60,320 per year, while nursing home care costs around £73,320 annually. Care homes specialising in dementia tend to be more expensive, averaging £75,244 per year.

Source: Census 2011 and 2021 from the Office for National Statistics

5. Review Your Pension and Investments

When planning for retirement, it’s crucial to carefully review your pension and savings, ensuring that your current savings are adequate to cover potential healthcare expenses. If needed, consider adjust your retirement contributions to set aside more for these costs.

To assist with this, a financial adviser can create a cash flow model to help illustrate your personal cash flow by mapping out your income and expenses over time. It also considers “what if” scenarios, showing how different factors, such as the cost of care, could impact your financial situation, helping you make informed decisions about your retirement planning.

6. Speak to an Adviser

Planning for healthcare costs and retirement can be complicated. Consulting with a financial adviser can provide you with helpful advice and help you make smart choices.

Your retirement should be a time to enjoy the fruits of your labour, not to worry about whether your savings will last. By focusing on both your health and your investments, you can help ensure your golden years are as secure and fulfilling as possible.