Financial Regrets Highlight the Need for Early Planning, Study Finds
Regrets—we all have a few. But some, like financial regrets, can feel impossible to correct when the clock has run out. Failing to plan for the rising costs and burdens of aging often tops the list.
Without early preparation, the financial impact of long-term care, unexpected medical expenses, or outliving retirement savings can place a heavy burden on individuals and their families. These regrets are a stark reminder of the importance of making informed decisions early, ensuring a secure and comfortable future while there's still time to act.
A new report by Lincoln Financial reveals that financial regrets are a common experience among older Americans, with missed opportunities for long-term care planning ranking high on the list. The study, which surveyed 1,764 Americans over age 50, highlights the disconnect between financial preparedness and the realities of aging.
Over half of respondents expressed regret about not saving more during their working years. However, one of the most striking findings was that 40% regretted not purchasing Long-Term Care Insurance. This regret was compounded when participants were presented with longevity statistics, which doubled the level of regret for not securing an LTC Insurance policy earlier.
The report underscores the financial risks tied to longevity. With one in two couples aged 65 having a 50% chance of at least one partner living to age 92, the strain on retirement funds can be substantial. The average lifetime cost of care is estimated at $277,900 for women and $200,400 for men, often leaving families to shoulder the burden.
While average long-term care costs may seem manageable for some families, many situations are significantly more expensive—especially when both spouses require care, creating a substantial financial strain. Beyond the monetary impact, families often face the added burden of coordinating or even personally providing care for aging parents, which can take an emotional and physical toll on loved ones.
An LTC News survey of long-term care costs throughout the United States illustrates the financial impact of current and projected long-term care costs. These costs vary depending on the type of care required and where you live.
Disconnect Between Expectations and Reality
The study also examined consumer and financial professionals' attitudes toward long-term care planning. While 95% of consumers believe financial advisors should address long-term care planning, only 35% reported having those discussions. This gap underscores the need for proactive financial planning to address the hidden costs of aging.
Experts suggest that consumers speak to a Long-Term Care Insurance specialist who represents the top-ranked insurance companies that offer long-term care solutions.
"Planning for healthcare in retirement doesn't have to be emotional; it's about preparation," the report notes. Early planning not only provides peace of mind but also allows individuals to design their ideal care experience while protecting their assets.
Most Financial Professionals Avoid LTC Discussion
There is a good reason many experts suggest addressing long-term care with an LTC Insurance specialist. Despite the growing demand for long-term care planning, many financial professionals find the topic difficult to broach.
According to the report, 66% of financial advisors acknowledge that clients have needed long-term care services, yet many avoided these discussions beforehand due to the complexity or emotional weight of the topic.
Americans spend billions on long-term care, with only 8% of these costs covered by private insurance policies. This significant gap highlights the importance of addressing long-term care planning as part of a comprehensive financial strategy.
Key Spending Areas (Based on 2023 and early 2024 data):
- Medicaid: Remains the largest payer for long-term care services in the U.S. In 2023, Medicaid spending on these services was estimated to be around $273 billion. These numbers will likely increase in 2024 due to rising costs and an aging population.
- Out-of-pocket spending: Americans continue to spend significant amounts out-of-pocket on long-term care services. In 2023, this was estimated at $60 billion. This figure is also expected to increase in the years to come.
- Private Long-Term Care Insurance: Plays a smaller but still important role, with spending estimated at over $14.1 billion in 2023.
Lessons for the Future
The report's findings emphasize the importance of informed decision-making to avoid financial regret. Long-Term Care Insurance can provide Americans the ability to affordably maintain their financial independence and security in their later years without burdening those they love.
"Understanding the financial realities of aging is key to creating a secure retirement plan," the report concludes. With rising healthcare costs and longer life expectancies, the need for early, comprehensive planning has never been more critical.
LTC Insurance - An Affordable Solution
Long-Term Care Insurance is designed to help cover the costs associated with long-term care services, including assistance with daily living activities (ADLs) like bathing, dressing, toileting, personal hygiene, transferring, and eating, as well as skilled nursing care, home health care, and other supportive services.
Understanding the different types of LTC Insurance policies available is crucial for making informed decisions about your long-term care planning. Broadly, these policies can be categorized into traditional, hybrid, and short-term cash options.
Traditional LTC Insurance policies are the most common type. These policies are specifically designed to cover long-term care expenses. They typically offer a monthly or daily benefit amount that can be used to pay for a variety of long-term care services. Key features of traditional LTC Insurance include:
- Benefit period/pool of money: This is the initial amount of money in the policy with a guaranteed minimum amount of time the policy will pay benefits, typically ranging from two to five years or even lifetime coverage.
- Monthly or daily benefit amount: This is the maximum amount the policy will pay per day or month for covered services.
- Elimination period: This is the waiting period between when you need care and when the policy starts paying benefits, generally 90 days.
- Inflation protection: This option helps your benefits keep pace with rising long-term care costs.
Within traditional LTC Insurance, there are also "partnership" certified policies. These policies, available in most states, are designed as a way to protect some of your assets while still qualifying for Medicaid long-term care benefits if your policy benefits are exhausted. These are state-specific programs and have certain requirements.
Hybrid Long-Term Care Insurance policies combine long-term care benefits with another financial product, such as life insurance or an annuity. Be careful; make sure any hybrid policy you are considering meets federal guidelines under Section 7702(b).
These hybrid LTC Insurance policies offer a way to address both long-term care needs with a death benefit guarantee, so even if you are lucky enough to never need care, your family will still get money. Key features of hybrid policies include:
- Lump-sum or single premium payment: Many hybrid policies are funded with a single premium payment, although some allow for periodic payments over five, ten, 20 years, or annually for life.
- Guaranteed death benefit (life insurance hybrids): If you don't use the long-term care benefits, a death benefit is paid to your beneficiaries.
- Annuity hybrids: The policy's underlying guidelines are less conservative for those with certain health issues, which makes them more difficult to underwrite.
- Long-term care benefit rider: This rider is the most important since it provides access to tax-free funds for long-term care expenses.
Finally, short-term care insurance policies, also known as short-term recovery plans or home health care policies, offer more limited cash benefits than most traditional or hybrid LTC Insurance. However, the underwriting rules are less conservative.
These short-term cash indemnity policies typically provide benefits that are paid over one year or two years. These policies are also often structured as cash indemnity policies, meaning they pay a fixed cash benefit for each day or week of qualifying care, regardless of the actual cost of services. This can provide flexibility in how the benefits are used.
Choosing the right type of Long-Term Care Insurance depends on your individual needs, financial situation, and risk tolerance. Start your education by reviewing the LTC News Long-Term Care Insurance Education Resource Center.
It's essential to consult with a qualified Long-Term Care Insurance specialist who represents multiple top-rated insurance companies to help review your health eligibility, make policy recommendations, and shop to provide you with accurate quotes.
Most people acquire an LTC policy between the ages of 47 and 67. Experts remind us that long-term care may be a significant cash flow problem, but it also causes a family crisis, and an LTC policy reduces the burdens on those you love.
Without a long-term care plan, the responsibility of caregiving often falls on your adult children, typically a daughter or daughter-in-law. They are left to juggle their own lives, careers, and families while stepping into the role of caregiver, finding and coordinating professional care, or both. This can lead to emotional and financial strain, affecting their well-being and stability.
Planning now ensures you receive the care you need while alleviating the burden on your loved ones, allowing them to support you without sacrificing their own lives.