Paying for long-term care can force seniors to spend sizable portions of their savings, and for seniors whose most valuable asset is their home, these costs threaten to deplete nest-egg savings.
About 70% of Americans when they are over age 65 will need some form of long-term care, according to a PBS interview with Dr. Bruce Chernof, president and CEO of the SCAN Foundation—a non-profit public charity focused on senior issues.
Although home prices have been signaling a steady improvement, the number of underwater homes in many parts of the country might leave older homeowners scrambling to pay for the nation’s long-term care crisis.
And most families are not well-prepared, particularly right now, because we’ve gone through this incredible economic downturn. And for many seniors who’ve been living on a fixed income, whatever savings they’ve had have not kept up and/or are not delivering the kind of day-to-day income that they need to live.
People are actually spending their savings, because, for example, they’re not generating enough income off their savings.
The other observation that’s really important is that for many seniors, their most valuable asset may be their home. And home prices in many parts of the country—while they’re starting to improve—are still underwater.
And so that really important nest-egg that might have been a reserve is less strong today than it was a few years ago. So the likelihood for spending down goes up dramatically. And not just for folks who are close to being poor, but for middle-income folks who just aren’t prepared for the enormous cost that long-term care can bring.
Chernof, who was recently appointed to a Congress-created commission devoted to addressing the nation’s long-term care crisis, suggests that a good defense to securing savings is a proactive planning approach.
Chernof also suggests that the nation’s healthcare crisis should cannot rely solely on the shoulders of Medicaid, as the program only “picks up the tab” once seniors have depleted large portions of their savings.
Written by Jason Oliva