Boomers Worried About LTC — But Not Worried Enough
According to a new report from the Nationwide Financial Retirement Institute, around 70 percent of Baby Boomers are under the mistaken notion that the Patient Protection an Affordable Care Act (PPACA, aka “Obamacare”) will provide for their long-term care needs. Furthermore, in spite of being worried about becoming a burden to family members, few are doing enough to prepare for the inevitability.
The annual survey, released this week, also shows that ‘Boomers “desperately want to receive LTC in their home,” but again — few are adequately planning, if they’re planning at all.
By The Numbers
Harris Interactive conducted polling of 801 Americans over 50 with at least $150,000 in household income. From that number, only 28 percent knew PPACA didn’t cover LTC costs. Around 50 percent said they are worried about becoming a burden to their families, while more than half (54 percent) said they would rather die than live in a nursing home.
“Neither the Affordable Care Act nor Medicare will help America’s workers pay their long-term care costs,” said John Carter, president and chief operating officer of Retirement Plans, Nationwide Financial. “Virtually no one wants to end up in a nursing home, but few are planning for long-term care costs. And if they have to rely on Medicaid, they may not have a choice.”
The poll also gauged expectations of ‘Boomers regarding their LTC costs. Most expected, on average, that it would cost them $36,220 annually, less than half of what they estimated in 2012 ($78,920). Nationwide noted that by 2030 – the year the last of the Baby Boomers hit retirement age – nursing home costs alone will be estimated at $265,000 per year. This doesn’t take into consideration more specialized care, such as retirement communities and home care.
“This drastic drop could be due to the media’s focus on the Affordable Care Act and people’s misconceptions about what it covers,” Carter said. “The reality is we can’t count on someone else to fix this problem. We will have to fund our own long-term care costs in retirement.”
Home Care Vs. Assisted Living Vs. Nursing Homes: Expectations
The survey determined that 71 percent of affluent pre-retirees wanted home-based LTC with “fewer than half” actually expecting they would get it. About 40 percent thought they would end up in an assisted living facility, and 10 percent expect they will be in a nursing home.
Many were in denial that they would need a long-term care plan, but the US Department of Health and Human Services estimated that 70 percent of Americans over age 65 would need it in their lifetime.
Close to 80 percent said they think of nursing homes when they hear the phrase “long-term care” in spite of the fact that nearly half of all LTC is home-based. Just 27 percent occurs in a nursing home and 24 percent in adult day care.
“The most common mistake a financial advisor makes is his or her approach to the discussion. When an advisor says the words ‘long-term care,’ the client often hears ‘nursing home,'” said Kevin McGarry, director of the Nationwide Financial Retirement Institute. “This often causes the client to shut down. Instead, advisors should say: ‘Let’s talk about ways we can keep you in your home longer.'”
McGarry advised to “get a fact-based estimate of what those long-term care costs may be and work to build a plan from there.”
“Four in five advisors say they know if they can have these discussions, their clients will be more likely to stay with them,” he added.
Long-term care is one of the biggest expenses for which Americans are not adequately prepared. As an advisor or an insurance agent, you can make a difference, provided that you’re using the right approach to talking about LTC. Emphasize maintaining quality of life throughout the client’s later years.
Guide them toward cash-value life insurance policies, annuities, and other investments now, so they will be able to meet the staggering cost of care in their twilight years. If you can help a client see the big picture early enough, not only will you be able to do a lot of good for them down the road, but you may even have a customer for life.