Can Your 401(k) Survive Inflation and Future Long-Term Health Care?

Economic uncertainty and inflation can affect your retirement planning. Will you have the money you need to enjoy your future retirement? How would long-term health care expenses change your lifestyle and legacy? Being prepared for longevity is key.

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Can Your 401(k) Survive Inflation and Future Long-Term Health Care?
5 Min Read June 21st, 2022

It is hard to avoid noticing inflation. Energy costs are skyrocketing, and we see that at the gas pumps. Not only to you notice the record-high cost of gasoline when you go to fill up but in prices of almost everything. 

According to Gas Buddy, the national average for a gallon of gas has been increasing since May 2020. Inflation in all sectors of the economy and market fluctuations have added a large amount of uncertainty when it comes to the economy. Most people's retirement accounts have also taken a hit, making many people wonder if they have enough money to retire in the decades ahead.   

Inflation hit 8.6% in the May 2022 report - a 40-year high for inflation. You have to go back to December 1981 to see inflation this bad. Not only is the cost of living increasing, but with market uncertainty, people see the value of their investments drop.

Have You Changed Your Retirement Planning?

Experts say a growing number of people are scared to place money in investment accounts despite being long-term investments. Some people need the cash they had set aside for retirement, and others want to avoid the stock market. 

However, while the current state of the economy has more people concerned, they have 'stayed the course' so far. Fidelity Investments, one of the country's leading providers of workplace benefits, says account values have dropped, but savings rates continue to increase. 

Fidelity's first quarter 2022 analysis of savings behaviors and account balances for more than 35 million IRA, 401(k), and 403(b) retirement accounts shows that the 401(k) savings rate has reached record levels; however, account values have dropped due to stock market's performance.

Avoid Making Knee-Jerk Reactions

Kevin Barry, president of Workplace Investing at Fidelity Investments, says that during periods of economic uncertainty, it's important for people to stay focused on their long-term savings goals and not make knee-jerk reactions to short-term market events.

While the market's performance does impact account balances in the near term, consistent contributions and having an appropriate asset allocation are just as important for a successful long-term retirement savings strategy. Encouragingly, Fidelity's analysis found that the majority of retirement savers continued to demonstrate positive savings behavior, which will help keep them on track to reach their goals.

Kevin Barry

Most experts would agree that Americans should save more. The Fidelity report shows the average IRA has a value of $127,100 at the end of the first quarter of 2022. The average 401(k) had a value of $121,700, and the average 403(b) had a value of $107,600.

How Much Should You Save?

Ideally, if you earn $50,000 a year, you should have $300,000 in savings by age 50. If you make $75,000 a year, you should have $450,000 in savings by 50. By age 50, Fidelity suggests having at least six times your salary in savings to retire comfortably at age 67. By age 55, it recommends having seven times your salary.

Not only do most people not save enough, fewer considerable the rising costs of health care, including skyrocketing long-term health care expenses. 

Fidelity says that a 65-year-old couple retiring in 2022 will spend an average of $315,000 in health care and medical expenses. The 2022 estimate for single retirees is $150,000 for men and $165,000 for women. The estimate does not include other health-related costs, such as over-the-counter medications, dental services, or long-term health care.

Most people will have Medicare and a supplement that should address much of their future medical expenses, but dental costs and long-term health care are not covered by traditional health insurance, including Medicare and supplements. Medicaid will cover long-term care services only if you have little or no income and assets.

Long-Term Care Costs on the Rise

Inflation is also impacting the costs of long-term health care services, but costs have already been rising sharply due to increasing demand for care and higher labor costs. 

The LTC NEWS Cost of Care Calculator shows the national average cost of in-home care (based on a 44-hour week) in 2042 will run almost $8,000 a month. The expected base cost in an assisted living facility will be over $7,100 a month. Nursing homes cost more but are the least used type of care; they should run almost $15,100 a year in 2042. 

The cost of care where you live could be more. For example, in Naperville, Illinois, the average cost of in-home care (based on a 44-hour week) in 2042 will run almost $8,900 a month. The expected base cost in an assisted living facility will be over $10,100 a month. Nursing home costs in Naperville, Illinois, in 2042 should cost about $16,700 annually.

The LTC NEWS Cost of Care Calculator shows the current and future cost of care services where you live - click here and find your location.

Take Proactive Action

There are steps you can take to ensure a prosperous future retirement. Be sure to continue to fund your 401(k), IRA, or 403(b) accounts. If your employer is matching, then maximize what you contribute. Don't worry about the markets unless you are over 55 since dollar-cost averaging will address market fluctuations. 

If you don't have retirement savings, then you better start now. You are neither too young to create an account nor too late if you have not done so by now. 

If you have a Health Savings Account, consider contributing the maximum you can. If you're 55 or older, you can contribute an additional $1,000 per year to your HSA as a catch-up contribution. The catch-up contribution is in addition to the annual maximum contribution. 

Be sure to stay on a budget and watch expenses as the cost of everything is going up quickly.

LTC Insurance Can Be the Solution

Consider adding a Long-Term Care Insurance policy to your retirement planning. If you live in one of the states considering taxing people who do not own an LTC Insurance policy, you might want to act on this quickly no matter your age; otherwise, most people get coverage in their 50s.

One thing to remember is that long-term health care can dramatically affect your cash flow. The bills keep coming in, and your needs slowly progress over time. However, long-term care is more than just about finances. Sure, money is important, and you want to maintain your lifestyle and legacy. Long-term care is a family issue, not just about money. The consequences on your family can be life changing.

Your adult children often become default caregivers in the absence of any planning. Family caregivers must attempt to balance their jobs, families, and lives with the role of being a caregiver. Not only is this a physically demanding job, but it is also very hard emotionally. Long-Term Care Insurance gives the family the time to be family instead of a caregiver.

Long-Term Care Insurance provides benefits that pay for the type of care you want and deserve. You can stay in control and avoid dependency on your family. Policies cover all types of in-home services, adult day care centers, assisted living facilities, memory care facilities, and nursing homes. There are other benefits in policies that make sure you get the best care available to improve your quality of life. 

Don't forget that you cannot purchase a Long-Term Care Insurance policy with poor health. LTC Insurance is medically underwritten, and every insurance company has its own rules. Plus, premiums can vary over 100%, so be sure to speak with a Long-Term Care Insurance specialist to help you shop for the best coverage.

You can survive inflation, longevity, and declining health but don't delay. Being proactive with your planning means those golden years can still be somewhat golden.

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About the Author

Linda is a freelance writer interested in retirement planning, health and aging.

LTC News Contributor Linda Kople

Linda Kople

Contributor since October 31st, 2017

Editor's Note

You can do all the planning you want, but your retirement plans can go up in smoke if you have not considered the variables. Changes in the economy and market fluctuations can have an impact. Your health decline and need for long-term health care can substantially change your financial position. Timing is critical.

You don't know when you will need care, nor will you know when economic changes will occur. You need guarantees. The guaranteed tax-free benefits from a Long-Term Care Insurance policy will be there when you need them.

You can limit the exposure your finances will have to long-term health care expenses, access the care services you want, including care at home, and give loved ones the time to be family instead of caregivers.

Many people will put this off, thinking they have plenty of time. Don't delay. Your current health allows you the ability to plan since LTC Insurance is medically underwritten. Don't think because you are healthy, you don't need to plan. Because you are healthy today, you have the ability to plan.

People need long-term health care due to declining health, mobility problems, dementia, and the frailty of aging. Living a long time can mean you will need care - and you don't have to have an illness to need long-term care. You could be old and feeble but otherwise healthy.

The time most people obtain coverage is in their 50s. Learn how easy and affordable Long-Term Care Insurance can be, plus there are several types of plans you can consider.

Seek Professional Help Planning for Long-Term Care

Experts recommend seeking the help of a qualified and experienced Long-Term Care Insurance specialist to help you find the right coverage. A specialist will match your age, health, and family history with the right coverage at the right price. 

Long-term care is a very specialized area, and few insurance agents and financial advisors have the expertise. Find a specialist who represents the top companies as premiums can vary over 100% between insurance companies. Leading specialists will often have over 500 clients with Long-Term Care Insurance.

A specialist will save you money, and you will have peace of mind knowing they are making the appropriate recommendations - Work With a Specialist | LTC News.

Planning Tools and Resources Available on LTC NEWS

Planning for the future is never easy, but long-term health care planning can be very complicated and comes with many emotions. Getting the right tools and resources will make the process much easier.

One of the goals is to reduce the stress and anxiety usually placed on your family at the time of crisis. LTC NEWS can be beneficial in providing you with important information for you to consider.

LTC NEWS has put in place several resources, including:

You might have questions and LTC NEWS provides the answers for many of the most asked questions here - Frequently Asked Questions | LTC News. Find all the resources available on LTC NEWS - Resources for Long-Term Care Planning | LTC News.

Does Mom or Dad Need Help Now?

If your family is already in crisis and you need to find help and the right care services for mom or dad, LTC NEWS can help. We have put together several comprehensive guides to help you in your process.

Start by reading our four guides -  

If your loved one is lucky enough to own a Long-Term Care Insurance policy, be sure they use it. Sometimes families wait, thinking they can save the benefits for a rainy day. Waiting on using available Long-Term Care Insurance benefits is not a wise idea. 

Get Assistance in Filing a Long-Term Care Insurance Claim

Many insurance companies have issued Long-Term Care Insurance policies over the years. Filing a claim can sometimes be complicated unless you know what to do or get expert help and assistance. 

Don't allow the claim process to stop you from using the benefits available in an LTC policy. Quality care obtained early will help provide a better quality of life and reduce the risk of a deep decline and facility care. 

If you need help in starting the process of a Long-Term Care Insurance claim, LTC NEWS can help. LTC NEWS provides free assistance with no obligation to help you or a loved one complete the claims process with a Long-Term Care Insurance policy. We have teamed up with Amada Senior Care, who will do all the work - free with no obligation. 

Get help finding quality caregivers or long-term care facilities and get recommendations for a proper care plan, whether a person has a policy. - Filing a Long-Term Care Insurance Claim | LTC News

Advantages of Reverse Mortgages 

Today's reverse mortgages for those aged 62 and older could be an ideal resource to fund a Long-Term Care Insurance policy OR even provide money to pay for care if you, or a loved one, already needs help and assistance. You might be eligible at younger ages as well. 

Some people have much of their savings invested in their homes. With today's reverse mortgages, you can find ways to fund care solutions, care itself, and even help with cash flow during your retirement. 

Learn more by asking questions to an expert. Mike Banner, LTC NEWS columnist and host of the TV Show "62 Who Knew" will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages. 

- Just "Ask Mike." - Reverse Mortgages | LTC News.

Share Your Knowledge - Be A Guest Contributor for LTC NEWS

LTC NEWS is open to contributors to share their stories with the world. 

You can write a story or ongoing column for LTC NEWS. You can write about many topics, including aging, caregiving, health, lifestyle, retirement planning, and long-term care, to name a few.

Be sure to write for our core target audience of adults aged 40 and older. Our audience is worldwide; however, our primary target is the United States, Canada, the United Kingdom, Australia, and other English-speaking nations. 

Improve your website or blog's SEO and gain exposure and traffic at the same time by being a contributor to LTC NEWS. 

You can even promote yourself, your business, and your website or blog. However, it must have editorial content exclusive to LTC NEWS and not just an advertisement. It can include links to other sites, and you can share the article link once published on your website or social media.

Email your story idea or article: - LTC News Contributors | LTC News

LTC NEWS - Your Marketing and Advertising Partner

Use LTC NEWS to drive traffic to your website and help you attract people interested in your products and services. Plus, you can improve your website's SEO so more consumers can find you when they search for your products and services.

There are various marketing options available with LTC NEWS. Traditional advertising, sponsored content articles, strategic alliances, and more are available. 

Learn more about how LTC NEWS can help you market your business, drive traffic, and improve SEO - Advertise With Us | LTC News.

Shared Links

LTC NEWS offers a 'helpful links' page so readers looking for additional information can find them easily. You can get a dofollow link to your website on LTC NEWS in exchange for a dofollow link on your site.

Let's work together and help consumers who search for us on the web - Site Request | LTC News.

You can also affordably purchase a dofollow link to your website or blog on LTC NEWS. Just contact the advertising department.

Sharing News with LTC NEWS 

Include LTC NEWS in your press release distribution. If your group, organization, business, political committee, etc., have news to share, send it to LTC NEWS. Email -  

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