Taking a Deeper Look at Long-Term Care and Retirement Planning

This blog is part of a series by Professor David Littell, Director of the RICP^® program and Co-director of The American College New York Life Center for Retirement Income. Each post in this series will feature a video or videos from the Center offering valuable retirement income planning tips for advisors and their clients. Many of the experts in these videos are featured in the RICP^® program curriculum.

In this post, I introduce a series of videos filmed with Anna Rappaport, Chairperson of the Society of Actuaries’ Committee on Post Retirement Needs and Risks. Anna and I get into a detailed conversation on the Society’s monograph on long-term care.

The Committee initiated this project to help better understand the link between long-term care and its impact on retirement. The monograph was a collection of papers on the subject called for by the Committee and published by the Society of Actuaries. Anyone interested in retirement income planning, and specifically the issue of long-term care planning, should explore the excellent papers.

The reason the Committee decided to explore this issue is because they found that economic shocks, like a long-term care event, often are what cause a retirement plan to fail – which means that planning for these possibilities is critical to retirement security. In addition, since family members often provide the care, failing to plan can have a significant impact on the financial security of family caregivers as well.

Long-Term Care is Critical for Retirement Income Planning

In the first video, "Academics Tackle Long-Term Care Concerns," Anna lays out the case for why planning for long-term care is a critical part of retirement income planning.

She details the costs of professional care, identifying the cost of a home health care worker as $20 an hour on average, and the cost of nursing care in a private room averaging $240 a day.

Anna also discusses the costs to family members who provide care, pointing out that family caregivers that have to give up their jobs lose on average over $300,000 in lost wages and benefits. Another reality of the long-term care landscape today is that there are many institutions concerned about the issue, including state and federal governments, regulators, insurance companies, advocacy groups, health care providers, and the public. However, these stakeholders don’t always work well together to address the issues.

The video covers some survey results showing just how many Americans are affected by the issue of long-term care. Sixty percent of those over 40 years old reported having some experience with long-term care. Of that group, almost three-fourths reported having provided care.

Long-Term Care Research Highlights

The second video, "Researchers Address Long-Term Care Concerns," is the most important one to watch as Anna discusses highlights from each of the papers. It’s a quick way to get the key results and figure out which of the papers you may want to read. Some interesting highlights include a discussion of the financial impact of purchasing long-term care insurance on a plan – the results are that it helps those that want to have a 95 percent certainty that they have enough resources for retirement.

There is also an interesting discussion of how strategies that are often considered to improve retirement outcomes, such as working longer, deferring Social Security, or spending less in retirement, do not help that much when discussing the impact of a long-term care shock. Another interesting topic involves the resources necessary for older adults to age in place – pointing out that some communities do a much better job of this than others – making it an important concern when picking a retirement location for the individual who wants to remain in the community throughout their lives. She also discusses a paper that she wrote about key issues in choosing a care facility in which she uses some case studies to identify the key issues.

Finally, in the third video, "Comparing Long-Term Care Funding Methods," Anna provides a good overview of the different options for funding long-term care and discusses the advantages and disadvantages of each. This video is an excellent primer on the topic for consumers who are considering their options. It might be a good video for advisors to use to help educate their clients.