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Boomers Neglect Long-Term Care Costs When Planning for Retirement
By
Stephen J. Baetge
Staff Writer
Despite
a tough economy, the boomer generation is doing better than
most when it comes to saving for retirement, but many run the
risk of being derailed because they failed to include long-term
care as a significant portion of their budget, says a recent
survey examining
boomer attitudes toward retirement.
According to the Lincoln Retirement Institute (LRI) survey, boomers fail to acknowledge
the emotional and financial challenges that come with long-term care. The survey
also found that most boomers consider themselves prepared for retirement but
overconfidently ignore the potentially-devastating expenses associated with long-term
care costs.
“This LRI survey uncovered a dichotomy between what boomers envision for
their personal retirement futures and what they expect their peers to face in
retirement,” said Bobby Greenberg, director of LRI. “Long-term care
is a tough topic for people to face; one that many would rather not think about
or plan for,” he added.
Many overconfident boomers say they know how to prepare for the costs of long-term
care, but many fail to do so. Fifty-nine percent think others should prepare
by purchasing insurance for the possibility of needing long-term care. But only
35 percent say they are using insurance as part of their own preparations.
The survey also indicated that most boomers tend to address future long-term
care needs by maintaining a healthy lifestyle and investing their money to get
the highest possible return. They expect this investment return to cover the
long-term care costs instead of heeding their own advice to others and purchasing
long-term care insurance.
“Boomers and financial advisors have pointed to ‘outliving one’s
savings’ as the most challenging retirement issue and do not consider long-term
care as a first-tier financial priority,” said Anand Rao, a partner in
the insurance industry practice at Diamond Management and Technology Consultants,
Inc., which helped interpret the survey results.
“Baby boomers tend to compartmentalize their decisions about wealth and
health, ignoring the impact of one on the other. The fear of making a wrong and
irrevocable turn in long-term care insurance paralyzes them from taking any action
at all,” Rao continued.
The survey did find indications that boomers are not completely ignorant of long-term
care issues although financial preparations for other retirement goals are still
their top priority. Not surprisingly, boomers having personal experience with
long-term care expenses faced by family members are more inclined to prepare.
“Boomers may not be planning for long-term care, but they are thinking
about it, which is the first step,” said Matt Wroblewski, director of research
at LRI.
“This is especially true for those who have experienced the challenges
of long-term care firsthand alongside a friend or family member. These boomers
are more likely to assume they have a higher risk than their peers of needing
this type of care in the future.”
Most boomers who have considered long-term care expenses are relying on themselves
to foot the bill, according to the survey. Most boomers also indicated that they
do so not fully understanding the limitations of other funding resources such
as Medicare and Medicaid. Experts worry that the lack of understanding leaves
boomers financially exposed to unexpected and significant costs.
“The survey discovered that boomers have a learning curve when it comes
to understanding the scope of coverage Medicare and Medicaid provide for long-term
care needs. For instance, more than 90 percent of boomers stated that they would
prefer in-home nursing assistance if needed, most likely without thought for
the substantial coverage gap these funding sources may create,” explained
Greenberg.
The survey also uncovered a disconnect between boomers’ attention to day-to-day
healthcare expenses and long-term care needs. Most boomers have incorporated
anticipated medical and prescription costs into their retirement plans but ignore
the cost of future nursing home care.
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Metropolitan News Company, Inc.
