Baby Boomers: Plan Today For An Expensive Tomorrow
According to a new poll released by the Nationwide Financial Retirement Institute, 72% of affluent baby boomers incorrectly believe the Affordable Care Act will cover their long-term care (LTC) costs in old age. The poll, conducted by Harris Interactive and consisting of 801 Americans over 50 with at least $150,000 in household income, shows a stark difference in the perception of boomers about LTC from a year ago. When Harris conducted this poll in 2012, boomers estimated that LTC would cost about $79,000 per year. That estimate was already unrealistically low, as currently the median annual cost of a private room in a nursing home is $90,520. Those polled this year were even further off the mark, however, as they expected their LTC costs to be only about $36,000 per year. This steep fall-off seems to be due to a mistaken belief that the ACA will fund not only healthcare, but long-term nursing care, as well. The source of these boomers’ misconceptions about ACA is still under debate, but most have taken to blaming mixed and unclear messages in the media regarding the new healthcare legislation.
Even though most baby boomers seem confused about the role of the ACA in paying for LTC costs, they appear, at the same time, to understand that they have not planned sufficiently for the expense. A clear majority of those polled (54%) said they would rather die than end up living in a nursing home, with most saying they fear becoming a financial burden on their families. That fear seems sadly justified when one considers that, by 2030, as the last of the boomers reach retirement age, the average cost of a year in a nursing home is projected to be around $265,000. (You might be inclined to ask: “Why is LTC so outrageously expensive?” The nursing homes would reply that it costs a lot to provide the sort of comprehensive care they do, from nutrition to medical care to assistance with activities of daily living. Sadly, our firm all too often sees the dark side of industry, where thousands upon thousands of dollars spent get the patient only injury and neglect.) And that colossal cost of care, whatever the actual number, could wind up being an expense that lasts for decades as people’s longevity has increased. Medical science has dramatically extended our average lifespan over the past 50 years. Incredibly, current estimates are that, by the year 2050, one in every five Americans will be age 65 or older, with close to 15 million people age 85 or above!
No federal program, be it Medicare, Medicaid, or the Affordable Care Act, can adequately respond to the tsunami of elder care expense represented by the aging baby boomer cohort. We need to be proactive and prepare to fund most, if not all, of our own care in old age. This could be through personal savings, the purchase of long-term care insurance, or other financial vehicles. But it is a responsibility we need to assume, and a need about which we need to be realistic. The Harris poll revealed that only 24% of those polled thought they would eventually require LTC, but it’s actually estimated that over 70% will eventually require LTC.
None of us wants to wind up in a nursing home, but the truth is that many of us eventually will. None of us wants to be a financial burden on our family, but without some sober planning and financial discipline, many of us might.