Boomers are overconfident about their ability to withstand long term care events in retirement, according to new research from Lincoln Financial Group.
Lincoln Retirement Institute, a research arm of Lincoln Financial, Philadelphia, found 59% of boomers think other people should prepare for the possibility of needing long term care by purchasing insurance. Yet many are not using insurance as part of their own preparations.
Although 85% agreed it would be prudent to buy LTCI for themselves or their loved ones, 46% had no plans to do so.
When asked what they are doing to prepare themselves for potential LTC needs in the future, respondents cited such uncertain precautions as maintaining a healthy lifestyle (54%), investing to get the highest possible return (40%) and saving additional money to cover LTC (39%).
As a further sign of their overconfidence, more than 40% estimated the average 65-year-old has a 60% chance of needing LTC for 3 months or more at some time, but only 30% said they themselves run the same risk.
Boomers listed their top 3 financial planning goals as having enough saved or invested to last as long as they live (98% of respondents listed this as important), being able to afford adequate health care (97%) and making sure they don’t rely on family for financial help (96%).
More than 80% of the boomers surveyed said they know that LTC costs could reduce their retirement income and assets significantly. Furthermore, 66% said the cost of LTC could force them to sell their home. Yet 73% plan to use their savings or investments rather than insurance to cover these costs.
Among those surveyed, 80% think others would use Medicare, Medicaid and the equity in their home to fund LTC costs, while 92% assumed others would use savings or investments to pay these costs.
When asked how they would pay for LTC for themselves, however, 49% said they would use Medicare, and 45% said they would use health insurance. Boomers apparently don’t realize the limits these sources have for covering LTC costs, Lincoln Financial points out.
About 25% said they plan to use Medicaid to help with these expenses–some perhaps not realizing they’d practically have to exhaust their assets to do so, Lincoln Financial noted.