If you are like many people you contribute money to your employer’s 401(k) plan. You may also place money in an IRA as well. Perhaps your employer offers a defined pension. We all work hard to afford an enjoyable and long retirement. With life expectancy increasing it becomes even more important to not only put away money for your ‘golden years’ but to protect your retirement savings as well.
One of the biggest risks to our retirement savings is Long Term Health Care costs. The financial costs and burdens of LTC will impact your savings, your lifestyle and that of a spouse and family. People require Long Term Health Care due to illnesses, accidents and the impact of aging. As you age memory loss looms large.
The Alzheimer’s Association says 1 in 3 seniors will die with some form of Alzheimer’s or dementia. In 2015, more than 15 million caregivers provided an estimated 18.1 billion hours of unpaid care. This happens since many people don’t have enough or exhaust their savings requiring a spouse or family member to become a caregiver. The burden on these unpaid caregivers is physical, emotional and financial. Usually, this care is provided by a daughter or daughter-in-law. This ‘Sandwich Generation’ is burdened as it impacts their own family.
The average worker who takes time off to provide care for an aging parent sacrifices more than $300,000 in lost wages and benefits over a lifetime, says Sandra Timmermann, a gerontologist and director of the MetLife Mature Market Institute as quoted in a Kiplinger’s article.
“You lose the accumulation of the money you could earn; you lose your 401(k) match; you lose your benefits and health insurance; and you may not be able to find a job again when you want to get back into the workforce,” she says.
An AARP survey said 55% of these caregivers admitted to being overwhelmed. That same survey said 68% used some of their own money will help provide care and 39% said they became financially strained themselves due to taking time off work, family leave or other issues.
The U.S. Department of Health and Human Services says if you reach the age of 65 you will have a 70% chance of needing some type of Long Term Health Care Service before you die. Knowing these facts having a plan that addresses this risk is key to a balanced retirement plan.
Merrill Lynch suggests purchasing Long Term Care Insurance in order to protect assets and avoid placing your children from becoming part of the ‘Sandwich Generation’ dilemma. They say to keep in mind that it costs less to buy Long Term Care Insurance when you’re younger since premiums are based on age and health at the time of application. The time to plan for this is before a crisis starts and when everyone is still in good health.
In fact, most people who are purchasing LTC insurance are doing so as part of their retirement planning. You can’t wait until a health or age issue hits you.
More than 5 million Americans are living with Alzheimer's disease according to the Alzheimer’s Association. Without the development of medical breakthroughs that prevent, slow or stop the disease, by 2050, the number of people with Alzheimer's disease could reach 13.8 million. Previous estimates suggest that number could be high as 16 million. by 2050, the number of people with Alzheimer's disease could reach 13.8 million. Previous estimates suggest that number could be high as 16 million.
In 2013 over $34 billion dollars in out-of-pocket costs are paid due to just Alzheimer’s. Medicaid, the medical welfare program, paid $35 billion. The American Association for Long Term Care Insurance (AALTCI) says in 2015 LTC insurance paid over $8 billion in just one year in claims, many of those due to memory loss. That number is expected to climb as people with LTC policies age.
Experts suggest seeking the help of a specialist in Long Term Care Insurance to make sure you have the correct benefits and pricing based on your age and health.