Is America Ready for Retirement and Aging?

One item that could negatively impact your income, assets, lifestyle, and legacy is the cost of long-term health care. LTC insurance can be an affordable way to protect your 401(k). Being prepared means having a solid retirement plan.

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Is America Ready for Retirement and Aging?
5 Min Read September 17th, 2017 Updated:January 23rd, 2023

The current population of the United States of America is 334,305,706 as of January 23, 2023, according to the U.S. Census Bureau's U.S. and World Population Clock. The clock is updated every second - Population Clock (census.gov)

Of that population, 38.8% are aged 35 to 64. Those ages 65+ total 16.9%. The 35 to 64 age group is the population that should be preparing for retirement, including the consequences of long-term health care.

The median household income for adults aged 35 to 64 in the 2022 American Community Survey is estimated to be $80,903. The average income for all adults over 18 is estimated to be $68,060 in 2022.

Income can vary significantly by age.

Experts remind us that averages can be deceiving. They suggest considering average (mean) income and median income. As a quick refresher, the median is the exact midpoint of a range of data, so there's an equal likelihood of falling above or below it.

An individual's mean and median incomes start off low, build steadily into our 40s, and then begin declining up to and throughout retirement. Once we retire, income tends to drop as most people depend on social security and earnings from their investments to meet their daily needs.

However, long-term health care costs will change this cash flow in retirement, burdening your family and finances. 

Are You Planning for Retirement?

Someone in their 40s and 50s should be planning for retirement to ensure a secure and comfortable lifestyle upon retirement. Planning includes determining how much to save and invest for retirement, which type of retirement accounts to use, and when to start taking Social Security and/or other retirement benefits. 

Early preparation and planning can maximize retirement income, leaving more time to enjoy retirement and travel without worrying about finances.

The two most common types of retirement plans are employer-sponsored plans, such as 401(k)s and 403(b)s, and individual retirement accounts (IRAs). Employer-sponsored plans typically offer an employer match and tax advantages, while IRAs provide a personal savings plan with unique tax advantages. Investors can also fund various other retirement plans, such as Roth IRAs, Thrift Savings Plans, and annuities.

Value of Health Savings Accounts

Health Savings Accounts (HSAs) are also available to many people through their employers. An HSA is linked to a high-deductible health insurance plan, but you keep the money for the rest of your life (unlike a flexible account where you must use the money each year or lose it.)

Use HSA to Pay for Long Term Care Insurance Premiums

An HSA is suitable for working and retired people because it provides tax-advantaged savings for medical expenses. While enrolled in a high-deductible health plan, individuals and families can save money for medical expenses in an HSA, and the funds will grow tax-free. Once retired, individuals can use funds in an HSA to pay for eligible medical expenses. 

The HSA funds are also available to offset Long-Term Care Insurance premiums and, once retired, Medicare premiums and expenses like co-pays and prescriptions.

Long-Term Care Expenses

Many people forget about health expenses. On top of medical expenses are the cost and burdens of long-term health care. A great retirement plan can be devastated by the cost of long-term care services either at home or in facilities. Many people think it won't ever happen to them. However, the facts and common sense suggest otherwise.

The cost of care is expensive and is rising rapidly; costs depend on where you live.

LTC NEWS Cost of Care Calculator - Choose Your Location

Some experts call this the cost of longevity. The older we live, the more money we need. At the same time, the longer we live, the more likely we will require help with activities of daily living (things like eating, dressing, bathing, etc.), or we will need to be supervised due to memory issues like Alzheimer's Disease.

Dementia Big Retirement Concern

According to the American Association for Long-Term Care Insurance, a national consumer advocacy and education group, Alzheimer's disease or other dementia was the leading cause of long-term health care. 

According to recent data from the U.S. Centers for Disease Control and Prevention, approximately 40% of assisted living or nursing home residents suffer from memory problems. Of those, 12.8% suffer from mild cognitive impairment, and 2.9% suffer from dementia.

Most long-term care is not delivered in a nursing home as people receive care at home, adult day care, or assisted living facilities.

Family Members Often Find Themselves as Caregivers

Many people, because of no advance planning, will have their daughters or daughters-in-law provide care. According to the AARP, this burdens these family members and their families tremendously. For those with professional care, the cost will have a considerable impact on savings (401(k), IRA 403(b), and other assets.

This is why many planners suggest Long-Term Care Insurance. These affordable plans (if you purchase before you retire) will provide guaranteed tax-free benefits for care in the setting you and your family will desire.

Most states also offer federal/state partnership policies. These partnership-certified plans provide consumers with additional "dollar-for-dollar asset protection" or what is referred to as "asset disregard." This means that the amount of your resources (assets) equal to the dollar amount of long-term care insurance benefits paid to you or on your behalf under the policy may be disregarded for determining eligibility for long-term care Medicaid benefits. It also protects your estate from any subsequent recovery by the State for receipt of Medicaid-paid services.

Few People Confident About Retirement Planning

According to the 2020 Retirement Confidence Survey, only 29% of Americans are very confident they will have enough money to live comfortably through retirement. Additionally, 38% of American workers reported having nothing saved for retirement. Thus, fewer than a third of American workers are adequately prepared for retirement.

Here is a checklist to consider before retirement (if you are already retired, it may not be too late to complete some of these suggestions):

  1. Paying yourself first is vital to successful retirement planning. Contribute to your employer's 401(k) or 403(b) plan. If your employer provides a match, try to maximize your contribution.

  2. Rollover old 401(k) accounts into an IRA you control. Some people just leave the money in their old accounts in their previous employer's plan. You can complete a tax-free rollover and control that money in your own account.

  3. Purchase Long-Term Care Insurance to safeguard your future retirement savings. They are very affordable when purchased young when you are in better health. Premiums are based on your application AGE and HEALTH and are intended to remain level. The LTC policy will protect your assets from the financial costs and burdens of aging.

  4. Remember: It's never too late! Sure, you should start young, but if you don't, start now. Better to be too early than a day too late.

  5. Get out or reduce debt. Pay off high-interest-rate credit cards. Take advantage of low-interest rates and refinance your mortgage.

  6. Create an investment plan. Have a plan and execute the plan. Make this a priority. If you need help, seek expert advice.

  7. Figure out what your retirement expenses will be. This should include vacations, healthcare, and living expenses. Will you move? If you do move, where to? What are the tax implications of a move? It is best to think about this before it happens!

  8. What will you do in retirement? Yes, this is something to think about before you retire. Do you have hobbies? Will you travel? Recreational activities? Most experts suggest a successful retirement is one where you will be active and having fun. Volunteer with a charity, start a small business, or be involved in your church. Activity is good for your mind and body.

Planning ahead is good and is always better than crisis management. America might be ready, but the most important question is: Are you ready?

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About the Author

An LTC News author focusing on long-term care and aging.

LTC News Contributor James Kelly

James Kelly

Contributor since August 21st, 2017

Editor's Note

Do you have Long-Term Care Insurance yet? An LTC policy is an important factor to include in retirement planning because it covers the costs associated with treatments, such as nursing home care and home health care, related to injuries, chronic illnesses, and dementia.

Additionally, it is important to consider the emotional and financial burdens that can come from having to care for an elderly parent. With Long-Term Care Insurance, you can provide the care needed for you or a loved one without placing that burden on your family.

Lastly, while most people receive Long-Term Care Insurance benefits for in-home care, if you need or desire a move to a retirement living community, such as an assisted living facility or continuing care retirement community, having Long-Term Care Insurance can help to offset the much higher costs associated with that care.

When looking to the future, it is important to factor in Long-Term Care Insurance as part of your retirement plan. Most people obtain coverage in their 50s when premiums are lower and good health allows for more options and savings.

Seek Professional Help

Long-Term Care Insurance can be complicated. There are several insurance companies, different plans, underwriting differences, and pricing can vary over 100% between insurance companies. 

Getting help from an experienced Long-Term Care Insurance specialist who works with the top insurance companies will help you navigate these differences. They can ensure you are matched with the best coverage at the best value.

Financial advisors and general insurance agents usually have little experience in this area and often only work with one insurance company.

Long-Term Care Insurance Specialists vs. Financial Advisors and General Insurance Agents (Pros & Cons).

Many people find LTC Insurance affordable, especially if they are in good health. Most people obtain coverage in their 50s to take advance of lower premiums along with better health. Long-Term Care Insurance is also custom designed.

Answers to Your Questions About Long-Term Care Planning

LTC NEWS provides news, advice, and resources to help seniors, their families, and caregivers better understand long-term health care planning. LTC NEWS also provides ratings of insurance companies and reviews of different long-term care insurance policies. This can help you make an informed decision about which policy is best for you and your loved ones. All these resources can help you in your research as you prepare for your future retirement and plan for the costs and burdens of aging and declining health.

 Parent’s Health Declining? Do They Need Care Now?

Get quality care for your parent or parents if they require it. LTC NEWS can assist. We've put together a few comprehensive guides to help you along the way.

Find help locating 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.

Make sure your loved one uses their Long-Term Care Insurance if they are fortunate enough to have it. Families sometimes postpone taking advantage of the benefits thinking family members can provide care, saving the benefits for later when it is deemed "more necessary."

Delaying the use of available Long-Term Care Insurance benefits is not a good idea. The policy provides you with access to quality care when someone needs it. It also gives loved one’s time to family instead of caregivers.

These four guides can be very helpful as you try to find appropriate long-term care services for a loved one:

Today's Reverse Mortgages Can Benefit Older Families

Some people have a large portion of their savings in their homes. With the help of reverse mortgages, you can find ways to pay for quality in-home care, pay for LTC Insurance, and even assist with cash flow during retirement.

Yes, today's reverse mortgages may be the perfect way to pay for a Long-Term Care Insurance policy or even cover the cost of in-home care if you or a loved one is currently in need.

Asking an expert with your questions will help you learn more. Mike Banner, a columnist for LTC NEWS and the host of the television program "62 Who Knew," will respond to your inquiries about long-term care, reverse mortgages, aging, and health.

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

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