More than 35 million Baby Boomers lack any retirement savings and that statistic appears to be getting worse.
A report tilted Boomer Expectations for Retirement 2016 by the Insured Retirement Institute [IRI] shows that Boomer confidence levels have dropped each year since 2011 and now only 24% of boomers are confident their savings will last them through retirement.
What is contributing to this chronic drop in retirement confidence among workers? Two of the big worries in this area include spending to cover health care and potential costs of long-term care.
The study found that only 27% are confident they can cover healthcare expenses in retirement. A mere 16% are confident they can cover long-term care costs. Both healthcare and long-term care costs have seen higher than average rates of inflation over the last 5 years.
While most retirees will have access to Medicare in retirement, in reality though, it will cover less than 60% of retirement health care expenditures, putting a large out-of-pocket burden on most retirees.
Long-term care is a truly disruptive event for retirees, both emotionally and financially. A nursing home costs are more than $100,000 a year for a semi-private room, putting a huge strain on a retiree’s finances.
What can people do to better prepare for these two big retirement risks? First, make sure you sign up for Medicare when you become eligible. You can enroll in Medicare during the first three months before and after your 65th birthday month. If you don’t enroll, you could be subject to permanent penalties. Additionally, make sure to select the appropriate Medicare plan for you and your needs. This is especially important when evaluating Medigap coverage or Part D prescription plans as the plans vary by company, price, and coverage.
When considering long-term care planning, make sure you have a plan in place. Long-term care insurance can be a great product, but it is very expensive, can be difficult to qualify for once you are in your 60's and won't cover the complete cost of long term care anyway. As a result, less than 10% of retirees have long-term care insurance coverage. Instead, retirees will have to rely upon their family members to provide care, self-fund much of the costs, and depend on Medicaid as the primary payer for institutionalized long-term care needs. However, you can still plan for long-term care without buying a long-term care insurance policy.
The Nationwide Retirement Institute at Nationwide, says that Social Security represents about 40% of a person’s income in retirement but nearly two-thirds of Americans file for benefits early, reducing their overall benefits. “The impact of filing early vs. optimizing the benefit for individuals can be up to $400,000 in benefits from Social Security alone,”
Sixty percent of respondents to the IRI survey said they plan to retire between age 65 and 70-plus, however, Perceptions are far from reality. The average age of retirement is age 62 to 63, that’s when people retire. When people want to retire later, they need a financial reason to keep working. They also need to enjoy their job. If they don’t have both of those things, the likelihood they will continue to work is nearly zero.
Longevity is another reason, people are living longer and it is not unheard of for people to live to 100 or beyond, especially if they are socially engaged, adopt healthy living behaviors and are able to build financial security.
Questions about Long Term Care Planning? Contact us Today