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Boomers underestimate their longevity, LTC costs

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Boomers’ attitudes toward how long they will live in retirement and the need for, and cost of, long-term care (LTC) are not in line with reality.

According to a recent survey conducted by Nationwide Mutual Insurance Company (Nationwide), boomers age 50 and older who have yet to retire, expect to live an average of 20.7 years in retirement while boomers who have already retired expect to live 27.1 years — 31 percent longer than their still-working counterparts.

Financial professionals have tried to get the word out about the risk of outliving one’s money by pushing annuities, life insurance solutions and LTC products. They have had mixed results. As the recent Nationwide survey suggests, there is still a prevalent disconnect between what is needed and what is in boomers’ retirement coffers.

When it comes to LTC costs, boomers surveyed said they expected their costs in retirement to be $78,923 a year, with two-in-five respondents reporting that they did not factor in inflation. In actuality, by 2030 — when the last of the boomers will retire — the cost of nursing home care will hit $265,000 a year.

Survey respondents were accurate in their estimation of how much it costs on average for one year of nursing home care: $66,949. However, they failed to see clearly into the future, underestimating the costs in 2030 (when they will actually need it) by more than half.

The survey also uncovered confusion and misconceptions about what LTC actually entails. Of the 813 retired and nonretired Americans age 50 or older with at least $150,000 in annual income or investable assets who were surveyed, 75 percent reported they consider LTC to be nursing home care or assisted living when a significant amount takes place in the home.

Interestingly enough, 65 percent of respondents reported that LTC was there top concern when planning for retirement, while 57 percent said they do not account for LTC expenses, and only 47 percent have sought LTC information. 

Baby Boomers, many with inadequate—or even negative—retirement and LTC savings, will inevitably have to answer a question that has become popular recently when it comes to medical care for the aging: Stay in the U.S. and receive adequate care and likely take on debt to pay for it or travel to a foreign country and receive excellent care at a fraction of the cost? As the chart illustrates, many are not saving enough for potential medical needs in the future, which points to a possible surge in medical tourism.



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