The cost of care in old age has risen to an average of £50,000, according to research for a government inquiry into funding reform.

Almost one in five people who need residential care after the age of 65 face a bill of more than £100,000, the study found. One in 100 incur costs in excess of £300,000.

The research, the first of its kind for 16 years, shows the need for a system that avoids people with property and savings having to meet all the costs themselves.

The inquiry, led by economist Andrew Dilnot, is due to report in July and is expected to recommend a "partnership" arrangement by which the state would pay more but the individual would be given incentives to take out insurance.

At present, the state offers help with care costs to people in England only if they have savings and assets of less than £23,250. An estimated 20,000 people a year sell their homes to fund moving into a residential or nursing home.

Unlike figures used by the Labour government when it sought to tackle the issue, the new research combines the costs of care and accommodation and shows the total bill facing people in care homes.

Using data covering more than 11,000 people who were supported in Bupa care homes between 2008 and 2010, the study concludes that the average length of stay was 832 days. However, there was wide variation. One in two people die within 462 days, but more than one in four remain in the home for longer than three years.

Researchers from the personal social services research unit at the University of Kent and the London School of Economics conclude that at age 65 everyone faces care and accommodation costs averaging £50,300. – irrespective of whether they eventually do enter residential care.

Women, who have longer life expectancy, face average costs of £64,800. Men face an average £34,300.

Julien Forder, deputy director of the research unit, said people approaching old age were justifiably anxious at the prospect of paying such costs, especially the significant numbers facing "catastrophic" six-figure bills.

"For someone we found it was over £800,000," said Forder. "This is why it is important to be prepared. You can take a chance and hope you are one of the lucky ones who won't ever need residential care, but on average people are looking at an average cost of £34,000 for care only or £50,000 if you include accommodation."

Mark Ellerby, the managing director of Bupa Care Services, said: "We hope these figures will help the Dilnot commission to design a sustainable system for the future."