Planning your income carefully is crucial in retirement. If you spend beyond your means, you could run out of money. That’s why it’s important to consider what your annual expenses are likely to be and how long you can afford to maintain your chosen lifestyle.

However, when making your calculations, it’s easy to overlook the cost of care should you fall ill in later life.

You might have budgeted for utility bills, groceries, social spending, and travel. But if you suddenly face a large outlay for care costs, this could disrupt your plans and force you to make sacrifices to your lifestyle.

Equally, spending a significant portion of your savings on care means you won’t have as much left to pass to your loved ones.

Read on to learn more about the potential cost of later-life care and how you can protect your retirement savings.

The average cost of a UK care home in 2026 is £1,298 a week

If you fall ill in later life and can no longer live independently, you have several options. Your family could care for you, but this may not be feasible if they have a busy work schedule and their own children to consider.

As such, you might need to move into a residential care home, and this can be incredibly expensive. According to Care Home, the average weekly cost of residential care in 2026 is £1,298, or £1,535 for nursing care. Specialist dementia care is typically more expensive than this.

In England, the local authority only offers support with care costs once your total assets, including your home, fall below £23,250. Before this happens, you will be required to pay for care yourself, which may mean spending savings, liquidating investments, and selling or releasing equity from your home.

Read more: Should you use equity release to fund your retirement?

Even if you don’t require residential care, you may need some support in your own home. This could take up a significant portion of your retirement income.

For instance, figures from Home Care reveal that if you need a carer for two hours a day at an average rate of £30 an hour, this would cost you £20,160 a year.

If you haven’t planned for this cost, you may have to reduce your spending in other areas and sacrifice important retirement goals. Alternatively, you might deplete your retirement fund much faster than expected, meaning you have less to pass on to the next generation.

77% of UK adults have not taken steps to prepare for their long-term care needs

Although care costs can seriously disrupt retirement plans, many UK adults are yet to put any plans in place to manage the expense.

According to 2025 research from the Institute and Faculty of Actuaries, 64% of UK adults were aware that care is largely funded by the individual, but 77% said they hadn’t taken steps to prepare.

So, if you haven’t considered how you will fund your own care, should you need it, you’re not alone.

Fortunately, you still have time to plan.

3 ways to protect your retirement savings from the cost of later-life care

1. Factor care costs into your retirement income strategy using cashflow planning

When designing your retirement income strategy, you might want to factor in how your plans could change if you need to pay for later-life care.

Cashflow planning can be incredibly beneficial here. We will input data about the projected size of your retirement fund and your planned spending based on your desired lifestyle. This gives us an idea of what you will spend each year and how long your retirement fund will likely last, taking variables such as investment growth and inflation into account.

We can then stress-test the strategy. For instance, if you needed to pay for in-home carers, how much extra income would you need each year? Alternatively, we could see how a large outlay for residential care would affect your retirement fund.

Using these forecasts, you can then determine how much additional wealth you need to build to absorb care costs without disrupting your wider goals. We can adjust your financial plan accordingly to make sure you’re prepared.

2. Understand your entitlement to government support

Although you may have to cover most care costs yourself, you may be entitled to some government support. Claiming these benefits could help make the expense more manageable and protect your retirement fund, to some extent.

You may qualify for:

• Attendance Allowance – A non-means-tested benefit for those over State Pension Age who need support due to illness or disability.
• NHS continuing healthcare – In some cases, if your care requirements are primarily due to a medical condition, the NHS may cover your care costs. However, this requires extensive assessments, and it can be difficult to qualify.
• NHS-funded nursing care – If you don’t qualify for continuing healthcare, the NHS may still pay a fixed amount towards your care costs each week. Again, not everybody qualifies for this, and you will need to be assessed.

This additional support might not cover the entire cost, but it could reduce the amount of your own retirement savings you need to spend on care.

3. Consider lifetime gifting strategies

Despite your efforts, you may still find yourself in a situation where you need to use your retirement savings or even property wealth to cover care costs. This means you have less to pass on to your loved ones.

As such, you may want to consider lifetime gifting to transfer a portion of your estate to your beneficiaries now. This has several advantages.

First, if you later fall ill, any wealth you have already passed on will be protected, and you won’t be made to spend it on care costs.

Secondly, gifting may reduce the size of your estate for Inheritance Tax (IHT) purposes and potentially reduce the amount your family pays. However, the rules around IHT and gifting are complex and you’ll need to seek specialist advice.

Finally, you get to see your loved ones enjoy the wealth you pass on as they use it to reach important milestones such as buying a home or getting married.

Get in touch

We can help you incorporate later-life care costs into your financial plan and protect your retirement savings.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, we can assure you that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

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