Boomers Enjoying Wealth Surge - May Get Drained by Long-Term Care Costs

Baby boomers, the generation born between 1946 and 1964, are not just enjoying sunset strolls and grandkids. They're also amassing wealth at an unprecedented rate. According to a recent analysis by the Federal Reserve, their net worth has skyrocketed by a staggering $14 trillion since the end of 2019. This translates to a median wealth of $278,000 per household, more than double the national average.

This financial surge is driven by several factors. The rising stock market, fueled by pandemic-era stimulus and low-interest rates, has significantly boosted the value of their investments. Additionally, boomers are nearing retirement, often with accumulated savings and paid-off mortgages, contributing to their robust financial position.

But the story doesn't end there. Americans over 70 hold more than 30% of the country's wealth even though they account for 11% of the population, a figure that has been steadily climbing for decades. 

Will Inheritances Be There?

This concentration of wealth within a single generation raises concerns about the potential economic impact of their eventual spending down. Based on the Federal Reserve data, Americans over 60 hold more than half of the nation's wealth, amounting to around $96 trillion. That is a lot of money.

The influx of wealth among boomers also presents opportunities. It can fuel charitable giving, new business investments, and increased demand for goods and services geared toward older demographics. Additionally, the transfer of wealth from boomers to subsequent generations through inheritance or support could potentially benefit their adult children and grandchildren.

However, due to longevity and the impact of future long-term care, some of this wealth may never be seen by other generations. Finance writer Ann Logue wrote in Business Insider that older generations are spending some of their money on themselves, including long-term care costs and increasing cost of living, without leaving much left over for their children.

Instead of an inheritance boom, the reality is that most Americans will not receive a vast fortune to ameliorate their grief.

For those anticipating an inheritance, their boomer parents may not have as much to leave behind as they initially thought. Long-term care costs are rising quickly due to increasing demand for care, higher labor costs, and other inflationary pressures. Since about half of those who reach age 65 will require some long-term care, according to the U.S. Department of Health and Human Services research, a lot of money will be spent on long-term care. 

Health Insurance and Medicare are Not Answers for Long-Term Care

Many people realize too late that traditional health insurance and Medicare provide minimal coverage for skilled long-term care and offer no support for 'custodial care,' such as assistance with daily living activities or dementia supervision, which most will eventually need. Medicaid only covers long-term care for those with minimal income or assets. Long-Term Care Insurance, which must be bought when younger and healthier, covers these costs, but it's often not an option for many older adults. 

• How Does Long-Term Care Insurance Differ From Other Types Of Insurance?

Consequently, these individuals end up spending their savings on long-term care, which diminishes their legacy and impacts their lifestyle during their remaining years.

The LTC NEWS Cost of Care Calculator illustrates the varying care costs based on location. Nationally, a 40-hour-per-week home health aide averages $4,797 monthly. The average monthly base cost for assisted living is $4,261, excluding surcharges. Meanwhile, an average private room in a nursing home costs over $9,093 per month.

Long-Term Care Insurance premiums are very affordable for many Americans if you are in your 40s or 50s. However, there are options if you are in your 60s and in good health. These options are more limited and costly for those in their 70s but are available, including hybrid policies that include death benefits and short-term cash indemnity policies. 

• Long-Term Care Insurance Cost: Factors, Considerations and Price Ranges

All too often, families ignore aging and the consequences of long-term care. Today, more people are aware of Long-Term Care Insurance options and take advantage of protecting their 401(k)s and other assets by adding an LTC policy to their retirement plan. That LTC policy will help ensure access to choice of quality care, including in-home care, safeguarding investments, and reducing the stress and burdens placed on loved ones. 

Careful planning for older adults and those still in their working years, including a family discussion of long-term care, will reduce the anxiety and help ensure that some of this wealth transfer ends up for loved ones instead of being spent for long-term care. 

LTC Insurance can be a big part of the answer to protecting these assets. Every insurance company and product type has varying underwriting rules. 

Underwriting Can Affect Ability to Get LTC Policy

Traditional Long-Term Care Insurance is the most conservative from an underwriting standpoint but the option most people consider. Partnership policies add an additional layer of asset protection. Asset-based 'hybrid' policies combine life insurance or annuities with long-term care benefits. Some of these hybrid plans are a bit more lenient with underwriting. However, they can be expensive but include a death benefit. Then, short-term cash indemnity policies have become more popular, providing needed cash benefits with broader underwriting rules. 

• What is Underwriting In Long-Term Care Insurance?

There is a lot to navigate depending on your age, health, and other factors. Be sure to seek help from a qualified independent Long-Term Care Insurance specialist who represents the top-rated insurance companies to help match you with the best options. 

Preparing in advance for long-term care offers you and your family a wider range of choices. As the American population ages, the issue of long-term care becomes more pressing. The question arises: will families be able to preserve their legacy, or will it be consumed by care costs? Beyond the financial aspect, the responsibility of long-term care heavily affects adult children and their families, with the impact being more severe in the absence of prior planning or conversation.