Could your retirement plan handle care costs?

If this is you, you’re not alone. In fact, our recent Lloyds Wealth research has found that 29% of people have given 'very little' thought to the possibility of needing paid-for-care support later in life, while an additional 13% haven't thought about it at all. 

Two-thirds (66%) of respondents said they were either ‘not confident at all’ or ‘not very confident’ that they would be able to afford long-term care without the additional costs affecting their lifestyle or putting pressure on family finances.

Of the respondents who said they felt uncomfortable thinking or talking about planning for getting older or needing care, 39% said they find the costs and financial uncertainty overwhelming, a figure that rises to 43% for Generation X (those aged between 46 and 61).

The challenge is not purely financial either. Many people are also struggling to address this issue proactively. When asked how they felt about planning for getting older - including the possibility of needing care - 32% said they know they should plan ahead but ‘keep putting it off’.

One of the most difficult aspects of planning for later life care is understanding how additional costs could affect an existing retirement income strategy, and which assets may ultimately need to be relied upon. 

• Later life care needs can vary widely, from occasional support at home to full-time residential or nursing care.
• Costs may depend on the level of support required, the location and how long care is needed.
• This can make it challenging for people to predict the full financial impact of later life care.

Our research also suggests many people may underestimate the potential scale of care costs.

• 37% believe the average weekly cost of residential care is £1,000 per week or less.
• Millennials (those aged 30 to 45) were more likely to underestimate these costs than Baby Boomers (those aged 62 to 80) and Generation X (those aged 46 to 61).

Although estimates vary, according to carehome.co.uk, the average cost of self-funded residential care in the UK exceeds £1,300 a week, with significant regional variations.

For many people, funding care later in life may involve drawing on a combination of pensions, savings, investments or releasing equity from property.

Relying more heavily on pensions, savings or investments to fund care could affect how long those assets last, the level of income available later in retirement, and the amount that is ultimately passed on via inheritance. 

Each option will have different implications for retirement income, tax planning and inheritance. For example, withdrawing money from an investment portfolio during a market downturn could significantly reduce its long-term growth potential, while relying on property assets could impact inheritance plans.

Another challenge is understanding whether an existing retirement income plan will be sustainable if significant care costs needed to be covered for a prolonged period.

Cash flow modelling is a powerful tool which enables people to understand a variety of scenarios, including the possibility of needing care later in life. With the help of a financial adviser, this can give an idea of how resilient their retirement plan can be if their circumstances change.

It can also help identify potential shortfalls earlier, giving people more time to adjust spending plans, review investment strategies or build additional financial resilience before problems arise.

Building a financial buffer could help cover both essential living expenses and unexpected costs without requiring any major changes to a long-term financial plan. Keeping some savings in accessible cash accounts may also provide greater flexibility if circumstances change suddenly.

Retirement plans should evolve as circumstances and priorities change. Regularly reviewing an investment strategy can help ensure it still reflects a person's long-term goals, attitude to risk and potential future income needs, including the possibility of later life care costs.

Discussing care preferences with family members earlier can help reduce uncertainty later on and ensure important decisions are not made under pressure. These conversations may also help people better understand the type of support they would want and how this could affect financial planning decisions.

While planning for the possibility of needing care later in life may not be the easiest part of retirement planning, considering it earlier can help people make more informed financial decisions and reduce uncertainty in the future.

From reviewing retirement income plans to discussing care preferences with family members, taking these small steps can help build greater financial resilience and provide more flexibility and choice later in life.

Planning for later life can feel overwhelming – but it doesn’t have to be. A financial adviser can help you explore different scenarios and understand whether your retirement plan is on track.

You can book a free, no obligation call with one of our team today. There are no hidden fees or charges, and you’ll only pay if you choose to go ahead with the recommendations in your personalised financial plan.

Source: Attitudes towards planning for later life care research, Lloyds Wealth, May 2026, based on 949 respondents.

This article is for information purposes only. It is not intended as financial advice.

The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn't guaranteed and can do down as well as up. The benefits of your plan could fall below the amount(s) paid in.

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This article refers to third party sources which we believe to be true and accurate.

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