Individuals Need Long-Term Care Conversations
However industry figures show that only about 11% of people older than 55 actually do. Nearly one-quarter (23%) of respondents are not planning at all for LTC expenses and others say they plan to cover the costs with their 401(k) or retirement savings (22%) or their personal savings (21%).
“Through our research we found it is so important [for individuals] to have conversations about long-term care, and many are not,” Kevin McGarry, director for Retirement Income Strategies for Nationwide Financial, told PLANSPONSOR.
While nearly half (45%) of survey respondents have discussed LTC costs with their spouse, only 10% have discussed it with their children and only 6% with their parents. Less than one-quarter (23%) of respondents say they have discussed LTC costs with their financial adviser. Respondents indicated that they find it difficult to discuss LTC (35%), most noting that the topic is depressing (33%).McGarry noted that there are consequences for loved ones if individuals are not prepared for long-term care costs. If individuals have LTC insurance, they can provide for their care at home or in a facility, and they are not depending on a spouse or children to dip into savings or miss work to provide that care. In addition, LTC costs can deplete retirement assets and assets individuals wanted to leave as an inheritance.
The survey found more than three in five respondents (64%) say they do not believe that state laws can force children to pay their parents’ unpaid nursing home bills. However, 29 states currently have laws that could make a patient’s children responsible for unpaid LTC bills.
Advisers say only 15% of their clients have a good understanding of the potential costs of LTC. According to Nationwide Financial, research shows that people living to age 65 have a 70% chance of needing some type of LTC in their lifetime, and the average cost per year for a nursing home is projected to be $265,000 by 2030.
A 55-year-old single individual purchasing long-term care insurance protection can expect to pay $2,065-per-year for $162,000 of current benefits which will grow to roughly $330,000 of coverage at age 80, according to the 2013 National Long-Term Care Insurance Price Index just released by the American Association for Long-Term Care Insurance. Prices for long-term care insurance policies are higher as a result of increasing care costs and significantly lower interest rates that factor heavily into policy prices—in 2012, the organization noted, identical coverage cost $1,720 annually.
One of the survey results that struck McGarry is that individuals were able to estimate a cost for LTC, but did not factor in inflation over time. ”When you think of the costs for anything, there is such a high inflation rate, but even more so for health care,” he said. Respondents’ estimates are right for today’s costs of care, but they will not need care for 20 or more years, he noted.Nationwide Financial launched the Personalized Health Care Assessment program to help advisers estimate their clients’ health care expenses in retirement (see “Nationwide Develops Program to Assist with Healthcare Planning”). The program uses proprietary health risk analysis and up-to-date actuarial cost data such as personal health and lifestyle information, health care costs, actuarial data and medical coverage to provide a meaningful, personalized cost estimate that will help clients plan for medical expenses.
Plan sponsors can also work with providers that offer tools like Nationwide’s Personalized Health Care Assessment, McGarry said. It helps sponsors present to employees a truer picture of long-term health care costs. He suggested plan sponsors include LTC education in their ongoing employee education programs, and show employees how they can increase savings today to help cover this care.
The survey of 813 Americans age 50 or older with at least $150,000 in income or investable assets revealed only 21% say they have expectations that their children will help them in retirement—including providing physical care and financial support, and letting them live in their homes. Nearly four in five (78%) Boomers say they do not expect their children to support them in retirement.
“[Individuals should] make sure they have conversations with their families about the importance of LTC coverage, and information from plan sponsors and providers can help them have more effective conversations,” McGarry concluded.