Affluent Boomers Fear Long-Term Care Could Derail Retirement

But only three in 10 have addressed the issue.

Nearly two-thirds of affluent Baby Boomers believe long-term care could jeopardize their well-being in retirement, yet only three in 10 have made a plan to address the issue, according to a survey conducted for John Hancock Insurance. More than half (54%) of Boomers without a long-term care plan said they would be interested in speaking with an adviser about it, and approximately four in 10 said they would likely buy long-term care insurance in the future.

“The need for long-term care continues to pose a significant, largely unprotected financial risk for Americans, especially generations nearer to retirement,” says Michael Doughty, president of John Hancock Insurance. “The good news is that there appears to be some appetite for talking to an adviser and closing the coverage gap. By understanding where Boomers currently are in preparing for the future and getting a picture of how they might be approached, we may be able to help them alleviate some of their most significant concerns about retirement.”

Only half of all Boomers and 44% of pre-retiree Boomers have developed a formal financial or retirement plan. Those with advisers are more than twice as likely to have a formal financial or retirement plan—62% vs. 26%.

The survey also found that Boomers are not very knowledgeable concerning long-term care, with the average respondent answering only seven out of 11 questions about it correctly. What they are least familiar with is the cost and average length of stay in a nursing home, as well as the possibility of needing long-term care at an early age.

NEXT: How experience shapes familiarity

Those who have seen family or friends receive care scored higher on the long-term care quiz. Currently four in 10 Boomers have had a family member or friend need long-term care for three months or more. The recipient is typically a parent or in-law, and, in half of the instances, the respondent acted as the caregiver.

Although two-thirds recognize the fact that they might need long-term care in the future, many are in denial that they ever will. However, the acceptance of this possibility rises when the respondent has seen a family member or friend need to enter a nursing home, or when they have acted as a caregiver themselves.

Two-thirds of Boomers (67%) think it is important that their adviser initiate a conversation about long-term care, and 24% think it is very important.

Asked how they would pay for long-term care, 41% of Boomers said insurance, 27% said out of pocket, 11% said as a rider on a life insurance policy, 8% said they would rely on family members to take care of them, and 7% said they would spend down assets to qualify for a Medicaid-approved facility.

“With the gap in long-term care coverage that exists, and with Baby Boomers being open to getting advice, there appears to be a clear opportunity for financial advisers to help Boomers better understand their long-term care needs,” Doughty says.

John Hancock’s survey mirrors another recent survey, by Lincoln Financial Group, which found that less than 40% of consumers have discussed long-term care with their advisers.

Greenwald & Associates conducted the survey among 1,003 adults between the ages of 50 and 68 in February for John Hancock. Working Boomers were required to have household assets of at least $100,000 and assets of at least $150,000; retired Boomers needed to have assets of at least $500,000.