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Why all women need to think about later life, today

Part 2 of our What How When, Money series – part of our Financially Fearless initiative for women. We look at why all women need to think about later life, today, regardless of their age.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Age shouldn’t be a barrier to when you start later life planning. It doesn’t matter whether you’re in your 20s or 30s and just starting out, or in your 50s and 60s and the reality of pensions and retirement is on the horizon.

Starting a day too soon is better than starting a day too late.

This article isn’t personal advice. If you're not sure what the right option is for you, you could ask for financial advice.

How life expectancy is evolving

The average 40-year-old female has around a 1 in 10 chance of living to 100. We’re facing the possibility of outliving our partners, who might have contributed alongside us as a family unit when it comes to finances.

And as life expectancy continues to grow, so does the need for us to have enough money to keep us going.

We’re not immune to the true cost of later life – whether it’s care or the impacts of paying for it. Truth is we’re more likely to have had to take on the role of an informal carer for our parents than men.

But until now we’ve not been given the tools to be able to know how to protect our future selves.

Here’s what you can do to find the right solutions for you:

What to think about when it comes to later life

1. Your pension

Why: think of it like this – your ‘retirement’ is your job and your pension is your salary.

Get the most out of your later life, by having a plan for your pension (even if that plan ultimately changes). Your plan could include starting or increasing the amount of money you put into a workplace or personal pension.

Some things to remember: you can’t normally take money out of your pension until you’re 55 (57 from 2028). So don’t use money you need for your emergency buffer or that you expect to use in the near future. When it comes to tax, rules can change and the benefits (allowances, relief and credits) depend on your personal circumstances.

How: increase your pension contributions by as much as you can afford. Even a small increase could make a big difference to your income in retirement. Use our pension calculator to see how much you might need to save for later life.

2. Passing down money

Why: the current rate of Inheritance Tax (IHT) is 40% on the value of a deceased person’s estate over £325,000. This includes pensions, property, money and possessions.

The £325,000 threshold is called the nil rate band. There’s up to an extra £175,000 allowance when you pass on your family home to direct descendants, called the residence nil rate band.

IHT can be complicated, to make it easier on your loved ones you could pass some of your money on sooner. For example, you can gift up to £3,000 every tax year, completely tax free. This could help reduce any tax liability on your estate and also help to build your future generation’s financial resilience. As it can be complicated, taking specialist advice could be worthwhile.

Download our guide to IHT planning

How: take advantage of gifting. There are various gifts that are exempt from IHT, including the £3,000 annual exemption and the small gift exemption that allows you to give up to £250 each tax year to anyone as long as you haven’t used another exemption on the same person.

You could consider setting up a Junior ISA for any children under the age of 18 and pay into it for them.

3. Update/write a will

Why: having an up-to-date will is one of the most important things you can do for yourself and your family. But it’s a piece of the puzzle that’s often missed.

For example, depending on how assets are held, cohabiting partners might not be entitled to inherit their partner’s share of their home if their partner passed away without a will.

We recommend reviewing your will every five years. Or after a significant life event (buying/selling a home, the death of a parent or spouse, birth of a child/grandchild, marriage, divorce etc).

How: make sure your will is legally binding and your executors know you’ve named them to carry out your wishes. Most importantly – tell them where you keep your will.

4. Know the cost of care

Why: the cost of care in England can range from £35,412 to £50,908 a year on average, depending on the type of care you need and facilities provided.

And we could spend longer in care.

Women live longer and on average, are in ill-health for three years longer than men. This is likely why the typical overall financial burden is higher for women than men.

A woman going into care home aged 65-74 will spend £132,000 on average on care throughout old age, compared to £82,000 for a man.

How: think about setting aside extra money each month for the cost of care, should you need it. You could take advantage of the long-term benefits of investing to help with this.

It’s important to invest for the long term (at least five years) and to spread your money smartly between different investment types, sectors and geographies. With investments, you’re at risk of losing money, as the value can fall as well as rise. Find out more about risk and diversifying your portfolio.

When to think about later life and long-term care

There’s no rule saying when you should start planning for the future. But the sooner you begin, the easier it becomes when you need to put them into place.

Nobody really wants to sit down and think about what life could look like in 10, 20 or even 30 years. Life can change in a moment. By taking stock of where we are now and where we want to be can positively impact our lives – perhaps sooner than we think.

Starting a day too soon is better than starting a day too late.

If you’re worried about your finances or feel later life is approaching without a clear plan, help is there. You could always speak to a financial adviser. They’re experts at being able guide you through tax allowances, pensions and long-term goals and plans.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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