Few Retirees Confident They Can Afford Long-Term Care Costs
Don't look now, but you're probably not prepared for the financial impact of future long-term health care. There seems to be someone or something after your wallet, no matter where you go or what you do. The problem of long-term health care is more than just about money since your family is impacted as well.
Many people are entirely unaware of how devastating long-term care can be. It is a very serious issue that needs to be planned for, according to Richard W. Johnson and Melissa M. Favreault of the Urban Institute and Judith Dey, William Marton, and Lauren Anderson of the U.S. Department of Health and Human Services (HHS).
In a brief for HHS, they write that more than one-half of adults develop serious disabilities after they reach age 65 and use some paid long-term health care services such as in-home or nursing home care.
"More than one-half of older adults, regardless of their lifetime earnings, are projected to experience serious long-term care services and supports (LTSS) needs and use some paid LTSS after turning 65. More than one-third (39%) will receive nursing home care."
Planning for Long-Term Health Care Should Happen Earlier in Life
Ali Khawar is the Principal Deputy Assistant Secretary for the Employee Benefits Security Administration. He says that no matter how far out you are from retirement, planning for a secure financial future is essential.
"Though most people know that they need to save enough to cover basic living expenses during retirement, many overlook other common – and costly – expenses like medical and long-term care services. Many retirees require medical services that aren't covered by Medicare, and some face housing and other long-term care needs they didn't anticipate when saving for retirement."
Mr. Khawar says that products and services are available to help prepare for and manage the costs of long-term care services, including Long-Term Care Insurance. He says that Long-Term Care Insurance can pay for these future costs, including in-home care.
Many Unprepared for the Consequences of Long-Term Care
The question remains are you prepared? It seems most American families are not ready for the consequences of aging and declining health. A recent survey suggests that American retirees seem to be realistic that they are not prepared for long-term health care costs.
The nonpartisan Employee Benefit Research Institute completed a study that showed only 16% of current retirees are "very confident" that they will have enough money to pay for these costs. This is down from 20% who felt they could afford these costs in the previous study.
Thirty-four percent of the surveyed retirees said they were "somewhat confident" they could handle long-term care costs. Twelve percent of retired poll participants said their long-term care expenses are "much higher than expected," 14% said they are "somewhat higher than expected," and 23% said they are "about the same" as what they expected.
"Most Americans underestimate the risk of outliving their financial resources in retirement or experience economic hardship stemming from large, unanticipated health and long-term care costs in later life."
Some Families Lack Funds for Care - Others Will Spend Hundreds of Thousands for Needed Care
More than 11 million middle-income older adults may have insufficient resources to pay for long-term health care by 2033. The Scan Foundation reports that adults aged 40 and older also have significant concerns about long-term health care costs. Three out of four Americans aged 40 or older say they are not confident they will have the financial resources to deal with the costs and burdens of aging.
Not everyone who needs long-term health care is older, as medical science makes it harder to die - thus increasing the need for long-term care for younger people. However, most care will happen as you age and experience a decline in your health, body, and mind.
Aging is a Real Issue
America - and the world - is getting older. Every day until 2030, 10,000 "Baby Boomers" will reach age 65. As we get older, many of us will need help with the routine activities we take for granted today but will need help with in the decades ahead. These daily activities include eating, bathing, going to the bathroom, and dressing, for example. Many people suffer from a decline in memory and reasoning and need supervision.
The United Nations says long-term care is a global problem.
"Growth in the number of older persons is a global phenomenon: virtually every country in the world will experience a substantial increase in the size of the population aged 60 years or over between 2015 and 2030."
No matter if we need care due to a chronic illness, mobility issues, dementia, or the frailty of aging, being prepared will benefit our family and our finances.
Families Face Long-Term Care
Today more families experience a loved one needing long-term health care and see firsthand the financial and family burdens created by such an event. This may explain the increase in interest in various Long-Term Care Insurance products for those in their 40s and 50s.
As people see older friends and family experience the costs and see the burdens that come from long-term care, they want to plan for these costs before retirement.
According to the LTC NEWS Cost of Care Calculator, long-term health care costs are exploding. These costs vary depending on the location and type of service required.
American families can plan for the financial costs and burdens of aging in several ways. Traditional Long-Term Care Insurance usually provides the most benefits at the lowest cost.
Most states offer state-approved partnership policies which provide additional dollar-for-dollar asset protection. Partnership Long-Term Care Insurance must meet special guidelines outlined by state and federal law.
There are other solutions available. Asset-based plans, referred to by the industry as "hybrid" policies, have become popular in recent years. These plans provide both a death benefit with a long-term care benefit. In some states, short-duration policies are also available that can offer limited but affordable benefits.
Don't get off guard and place the stress and anxiety of your future need for long-term care on your family. Be sure to find a qualified professional to help you find the appropriate option.
Most people obtain coverage in their 50s, but recently with new LTC Taxes being implemented by some states, many younger people are getting coverage to protect their 401(k) and other savings and avoid the tax.