A recent survey by the Lincoln Retirement Institute (or LRI) points to a long-term care risk exposure among boomers. The results showed that many boomers were deliberately ignoring the potential impact of long-term care on their finances, a result that LRI calls the “overconfidence effect.”
“The number one thing we found was this overconfidence effect,” says Bobby Greenberg, director of LRI. “We asked two questions back-to-back. The first was, what do you think the average 65-year-old should do to prepare for long term-needs, and resoundingly they said they should insure for that. But when we asked, what are you doing for yourself, insurance was way down the list. The top answer was living a healthy lifestyle. Those two things are disconnected. We found it interesting how people are projecting one thing for other people but when it came to their own personal decisions, they were doing something quite different.”
Greenberg notes that many of the respondents also had incomplete or incorrect information about funding options for long-term care expenses. Specifically:
(1) More than 80 percent of boomers surveyed say they know that long-term care costs could significantly reduce their retirement income and assets, yet 73 percent plan to use their savings or investments to cover the costs versus insurance.
(2) Two out of three boomers say that the cost of long-term care could force them to sell their home, a scenario that may have additional ramifications in today’s economy.
Nearly half of those surveyed state that they will use Medicare (49 percent) and health insurance (45 percent) to help pay for long-term care expenses; however, boomers are overestimating the impact these sources may have on covering total long-term care costs.
The online survey was conducted for LRI by Mathew Greenwald & Associates Inc., a research firm in Washington, D.C., in December 2007. The survey included 1,011 adults 50-70 years of age, who have household incomes of at least $75,000 or total household financial assets of over $250,000 (not including the value of home or other real estate).