Will Your Clients' Retirement Resources Cover Long-Term Care?

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To stop a conversation cold, just ask a group of friends, “Do you ever worry that you might outlive your retirement income?” The response will be nervous laughter. It doesn’t occur to most people to seriously consider this possibility.

The greatest financial risk for depleting retirement resources is an unexpected and lengthy stay in a long-term healthcare facility, like a nursing home or an assisted living center. Common estimates say that about 50% of older adults will need long-term care at some point in their lives; for adults over 65, the odds shoot up to 70%.

Long-term care is expensive. One reason is that the demand outstrips the supply. This means there are often long waiting lists to get into independent living, assisted living, or nursing care facilities. Waits for most of the facilities in my town run from months for studio units to years for larger spacious units.

Not surprisingly, a question I often hear is, “What do you think about long-term-care (LTC) insurance?” If you have a net worth of over $3,000,000, you can probably afford to spend down your retirement nest egg to cover your long-term healthcare needs. But since the care is not affordable for most Americans, it’s a risk that many need to insure against.

Unfortunately, the percentage of Americans that have LTC insurance coverage is just a small fraction of those who are likely to need it. According to an article in The American Prospect, “The Collapse of Long-term Care Insurance,” by Alexander Sammon on October 20, 2020, fewer than 1 in 30 Americans, and only about 7% of those over 50, own a LTC insurance policy.