Boomers Confuse ‘Affordable’ and ‘Long-Term’

Most Boomers mistakenly think the Affordable Care Act covers the costs of long-term care in retirement, a survey says. 

In its annual survey, Nationwide Financial Retirement Institute found that more than seven in 10 affluent Baby Boomers think the Affordable Care Act will cover their long-term care (LTC) costs. The survey’s figures show that Boomers’ estimates for long-term care costs dropped by more than 50% from the same survey conducted a year earlier.

Just over a quarter of Boomers (28%) know that the Affordable Care Act does not cover these care costs. Nearly half say they are worried about becoming a burden to their families, but 54% say they would rather die than live in a nursing home.

According to the survey, a majority of affluent Boomers (78%) want to receive long-term care at home, but few are planning for the costs. Many are not planning at all.

Affluent Boomers expect long-term care costs to average $36,220 annually—less than half what they estimated in 2012, when the estimate for such costs was$78,920. Nationwide says that by 2030, the year the last of the Baby Boomers will reach retirement age, the cost of a nursing home (which is just one form of long-term care) is expected to reach $265,000 per year.

According to the survey, 71% of affluent pre-retirees want to receive long-term care in their own home, but fewer than half think they will actually receive it. Two in five think they will end up in an assisted living facility, and one in 10 think they will be in a nursing home.

Opportunity for Advisers

Industry figures show many are in denial that they will ever need long-term care, so they never plan for it. However, the U.S. Department of Health and Human Services estimates that 70% of Americans over age 65 will need long-term care during their lifetime.

Nearly four in five (78%) say that when they hear the term “long-term care” they think of nursing home care. In actuality, nearly half of all long-term care happens at home, with a little over a quarter (27%) taking place in a nursing home and 24% in adult day care.

“The most common mistake a financial adviser makes is his or her approach to the discussion. When an adviser says the words ‘long-term care,’ the client often hears ‘nursing home,’” says Kevin McGarry, director of the Nationwide Financial Retirement Institute. “This often causes the client to shut down. Instead, advisers should say: ‘Let’s talk about ways we can keep you in your home longer.’ ”

“The next step is to get a fact-based estimate of what those long-term care costs may be and work to build a plan from there,” McGarry says. “Four in five advisers say they know if they can have these discussions, their clients will be more likely to stay with them.”

The drop in cost estimate could stem from the media’s focus on the Affordable Care Act and people’s misconceptions about what it covers, according to John Carter, president and chief operating officer of retirement plans, Nationwide Financial. “The reality is, we will have to fund our own long-term care costs in retirement,” Carter says.

The 2013 Health Care and Long-term Care Costs Study was conducted online in the U.S. by Harris Interactive on behalf of Nationwide Financial between September 24 and October 1. The respondents were a representative sample of 801 U.S. adults aged 50 or older with annual household incomes of at least $150,000.

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