Retirement Costs Three Times More than Boomers Perceive

Americans aged 50 and older underestimate long-term care (LTC) costs during retirement by more than three times the actual cost, according to a Nationwide Financial consumer survey released this week.

While boomers expect LTC costs to be $78,923 annually, an estimated 37% of survey respondents failed to factor for inflation. 

By 2030—the year the last of the boomer will retire—the cost of a nursing home is expected to reach $265,000 per year, according to a Life and Health Advisor report cited by Nationwide.

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When asked their definition of LTC, three in four (75%) of the 813 retired and non-retired Americans aged 50 or older with at least $150,000 annual income said they think of nursing home care or residential assisted living. 

Respondents correctly estimated that it currently costs on average about $66,949 for one year of nursing home care, however, when asked to think ahead to 2030, they still underestimated those costs by more than half—$111,507 vs. $265,000.

“Nursing home costs have increased more than 4 percent annually since 1974,” said John Carter, president and chief operating officer of retirement plans for Nationwide Financial. “What a year of nursing home care costs today will not even come close to the actual cost when boomers really need it.”

Longevity of life only adds to boomers’ unpreparedness, especially when considering the risk of outliving one’s savings.

Having enough money to cover LTC expenses was the top concern among 65% of survey respondents. That is more than the 60% who say they are most concerned about having enough money to last through their retirement.

Most respondents have a plan for their finances during retirement, but more than half (57%) do not account for LTC expenses and less than half (47%) have sought out information about LTC.

Working longer may not even be a viable answer, notes Nationwide, as unexpected life events threaten to diminish savings, particularly medical costs associated with aging care needs.

“It’s critical that pre-retirees change their current mentality of planning to live 20 years in retirement,” Carter said. “Too often, once retired they realize they’re facing 10 or more years of expenses ahead of them that they didn’t pay for.”

To better prepare pre-retirees for a financially stable retirement, Nationwide urges discussing LTC planning as a family so both children and parents understand where LTC funding will come from and both parties feel secure in the approach.

Click here to see an infographic on the study.

Written by Jason Oliva

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  • This headline seems a little exaggerated. Long term care does not equal “retirement.” In fact, the average age when entering LTC is 79 and the average stay is about 2.5 years. In addition, the average American only pays 25 percent of LTC costs out of pocket.

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