Latest news with #EBRI
Business Mayor
17-05-2025
- Health
- Business Mayor
Long-term care costs can be a 'huge problem,' experts say. Here's why
Kate_sept2004 | E+ | Getty Images Long-term care can be costly, extending well beyond $100,000. Yet, financial advisors say many households aren't prepared to manage the expense. 'People don't plan for it in advance,' said Carolyn McClanahan, a physician and certified financial planner based in Jacksonville, Florida. 'It's a huge problem.' Over half, 57%, of Americans who turn 65 today will develop a disability serious enough to require long-term care, according to a 2022 report published by the U.S. Department of Health and Human Services and the Urban Institute. Such disabilities might include cognitive or nervous system disorders like dementia, Alzheimer's or Parkinson's disease, or complications from a stroke, for example. The average future cost of long-term care for someone turning 65 today is about $122,400, the HHS-Urban report said. But some people need care for many years, pushing lifetime costs well into the hundreds of thousands of dollars — a sum 'out of reach for many Americans,' report authors Richard Johnson and Judith Dey wrote. The number of people who need care is expected to swell as the U.S. population ages amid increasing longevity. 'It's pretty clear [workers] don't have that amount of savings in retirement, that amount of savings in their checking or savings accounts, and the majority don't have long-term care insurance,' said Bridget Bearden, a research and development strategist at the Employee Benefit Research Institute. 'So where is the money going to come from?' she added. Long-term care costs can exceed $100,000 While most people who need long-term care 'spend relatively little,' 15% will spend at least $100,000 out of pocket for future care, according to the HHS-Urban report. Expense can differ greatly from state to state, and depending on the type of service. Nationally, it costs about $6,300 a month for a home health aide and $9,700 for a private room in a nursing home for the typical person, according to 2023 data from Genworth, an insurer. Here's a look at other stories impacting the financial advisor business. It seems many households are unaware of the potential costs, either for themselves or their loved ones. For example, 73% of workers say there's at least one adult for whom they may need to provide long-term care in the future, according to a new poll by the Employee Benefit Research Institute. However, just 29% of these future caregivers — who may wind up footing at least part of the future bill —had estimated the future cost of care, EBRI found. Of those who did, 37% thought the price tag would fall below $25,000 a year, the group said. The EBRI survey polled 2,445 employees from ages 20 to 74 years old in late 2024. Many types of insurance often don't cover costs Maskot | Maskot | Getty Images There's a good chance much of the funding for long-term care will come out-of-pocket, experts said. Health insurance generally doesn't cover long-term care services, and Medicare doesn't cover most expenses, experts said. For example, Medicare may partially cover 'skilled' care for the first 100 days, said McClanahan, the founder of Life Planning Partners and a member of CNBC's Financial Advisor Council. This may be when a patient requires a nurse to help with rehab or administer medicine, for example, she said. Where is the money going to come from? Bridget Bearden research and development strategist at the Employee Benefit Research Institute But Medicare doesn't cover 'custodial' care, when someone needs help with daily activities like bathing, dressing, using the bathroom and eating, McClanahan said. These basic everyday tasks constitute the majority of long-term care needs, according to the HHS-Urban report. Medicaid is the largest payer of long-term care costs today, Bearden said. Not everyone qualifies, though: Many people who get Medicaid benefits are from lower-income households, EBRI's Bearden said. To receive benefits for long-term care, households may first have to exhaust a big chunk of their financial assets. 'You basically have to be destitute,' McClanahan said. Republicans in Washington are weighing cuts to Medicaid as part of a large tax-cut package. If successful, it'd likely be harder for Americans to get Medicaid benefits for long-term care, experts said. Long-term care insurance considerations The Good Brigade | Digitalvision | Getty Images Few households have insurance policies that specifically hedge against long-term care risk: About 7.5 million Americans had some form of long-term care insurance coverage in 2020, according to the Congressional Research Service. By comparison, more than 4 million baby boomers are expected to retire per year from 2024 to 2027. Washington state has a public long-term care insurance program for residents, and other states like California, Massachusetts, Minnesota, New York and Pennsylvania are exploring their own. Long-term care insurance policies make most sense for people who have a high risk of needing care for a lengthy duration, McClanahan said. That may include those who have a high risk of dementia or have longevity in their family history, she said. McClanahan recommends opting for a hybrid insurance policy that combines life insurance and a long-term care benefit; traditional stand-alone policies only meant for long-term care are generally expensive, she said. Be wary of how the policy pays benefits, too, she said. For example, 'reimbursement' policies require the insured to choose from a list of preferred providers and submit receipts for reimbursement, McClanahan said. For some, especially seniors, that may be difficult without assistance, she said. With 'indemnity' policies, which McClanahan recommends, insurers generally write benefit checks as soon as the insured qualifies for assistance, and they can spend the money how they see fit. However, the benefit amount is often lower than reimbursement policies, she said. How to be proactive about long-term care planning 'The challenge with long-term care costs is they're unpredictable,' McClanahan said. 'You don't always know when you'll get sick and need care.' The biggest mistake McClanahan sees people make relative to long-term care: They don't think about long-term care needs and logistics, or discuss them with family members, long before needing care. For example, that may entail considering the following questions, McClanahan said: Do I have family members that will help provide care? Would they offer financial assistance? Do I want to self-insure? What are the financial logistics? For example, who will help pay your bills and make insurance claims? Do I have good advance healthcare directives in place? For example, as I get sicker will I let family continue to keep me alive (which adds to long-term care expenses), or will I move to comfort care and hospice? Do I want to age in place? (This is often a cheaper option if you don't need 24-hour care, McClanahan said.) If I want to age in place, is my home set up for that? (For example, are there many stairs? Is there a tiny bathroom in which it's tough to maneuver a walker?) Can I make my home aging-friendly, if it's not already? Would I be willing to move to a new home or perhaps another state with a lower cost of long-term care? Do I live in a rural area where it may be harder to access long-term care? Being proactive can help families save money in the long term, since reactive decisions are often 'way more expensive,' McClanahan said. 'When you think through it in advance it keeps the decisions way more level-headed,' she said.
CNBC
17-05-2025
- Health
- CNBC
Long-term care costs can be a 'huge problem,' experts say. Here's why
Long-term care can be costly, extending well beyond $100,000. Yet, financial advisors say many households aren't prepared to manage the expense. "People don't plan for it in advance," said Carolyn McClanahan, a physician and certified financial planner based in Jacksonville, Florida. "It's a huge problem." Over half, 57%, of Americans who turn 65 today will develop a disability serious enough to require long-term care, according to a 2022 report published by the U.S. Department of Health and Human Services and the Urban Institute. Such disabilities might include cognitive or nervous system disorders like dementia, Alzheimer's or Parkinson's disease, or complications from a stroke, for example. The average future cost of long-term care for someone turning 65 today is about $122,400, the HHS-Urban report said. But some people need care for many years, pushing lifetime costs well into the hundreds of thousands of dollars — a sum "out of reach for many Americans," report authors Richard Johnson and Judith Dey wrote. The number of people who need care is expected to swell as the U.S. population ages amid increasing longevity. "It's pretty clear [workers] don't have that amount of savings in retirement, that amount of savings in their checking or savings accounts, and the majority don't have long-term care insurance," said Bridget Bearden, a research and development strategist at the Employee Benefit Research Institute. "So where is the money going to come from?" she added. While most people who need long-term care "spend relatively little," 15% will spend at least $100,000 out of pocket for future care, according to the HHS-Urban report. Expense can differ greatly from state to state, and depending on the type of service. Nationally, it costs about $6,300 a month for a home health aide and $9,700 for a private room in a nursing home for the typical person, according to 2023 data from Genworth, an insurer. Here's a look at other stories impacting the financial advisor business. It seems many households are unaware of the potential costs, either for themselves or their loved ones. For example, 73% of workers say there's at least one adult for whom they may need to provide long-term care in the future, according to a new poll by the Employee Benefit Research Institute. However, just 29% of these future caregivers — who may wind up footing at least part of the future bill —had estimated the future cost of care, EBRI found. Of those who did, 37% thought the price tag would fall below $25,000 a year, the group said. The EBRI survey polled 2,445 employees from ages 20 to 74 years old in late 2024. There's a good chance much of the funding for long-term care will come out-of-pocket, experts said. Health insurance generally doesn't cover long-term care services, and Medicare doesn't cover most expenses, experts said. For example, Medicare may partially cover "skilled" care for the first 100 days, said McClanahan, the founder of Life Planning Partners and a member of CNBC's Financial Advisor Council. This may be when a patient requires a nurse to help with rehab or administer medicine, for example, she said. But Medicare doesn't cover "custodial" care, when someone needs help with daily activities like bathing, dressing, using the bathroom and eating, McClanahan said. These basic everyday tasks constitute the majority of long-term care needs, according to the HHS-Urban report. Medicaid is the largest payer of long-term care costs today, Bearden said. Not everyone qualifies, though: Many people who get Medicaid benefits are from lower-income households, EBRI's Bearden said. To receive benefits for long-term care, households may first have to exhaust a big chunk of their financial assets. "You basically have to be destitute," McClanahan said. Republicans in Washington are weighing cuts to Medicaid as part of a large tax-cut package. If successful, it'd likely be harder for Americans to get Medicaid benefits for long-term care, experts said. Few households have insurance policies that specifically hedge against long-term care risk: About 7.5 million Americans had some form of long-term care insurance coverage in 2020, according to the Congressional Research Service. By comparison, more than 4 million baby boomers are expected to retire per year from 2024 to 2027. Washington state has a public long-term care insurance program for residents, and other states like California, Massachusetts, Minnesota, New York and Pennsylvania are exploring their own. Long-term care insurance policies make most sense for people who have a high risk of needing care for a lengthy duration, McClanahan said. That may include those who have a high risk of dementia or have longevity in their family history, she said. McClanahan recommends opting for a hybrid insurance policy that combines life insurance and a long-term care benefit; traditional stand-alone policies only meant for long-term care are generally expensive, she said. Be wary of how the policy pays benefits, too, she said. For example, "reimbursement" policies require the insured to choose from a list of preferred providers and submit receipts for reimbursement, McClanahan said. For some, especially seniors, that may be difficult without assistance, she said. With "indemnity" policies, which McClanahan recommends, insurers generally write benefit checks as soon as the insured qualifies for assistance, and they can spend the money how they see fit. However, the benefit amount is often lower than reimbursement policies, she said. "The challenge with long-term care costs is they're unpredictable," McClanahan said. "You don't always know when you'll get sick and need care." The biggest mistake McClanahan sees people make relative to long-term care: They don't think about long-term care needs and logistics, or discuss them with family members, long before needing care. For example, that may entail considering the following questions, McClanahan said: Being proactive can help families save money in the long term, since reactive decisions are often "way more expensive," McClanahan said. "When you think through it in advance it keeps the decisions way more level-headed," she said.
Yahoo
20-04-2025
- Business
- Yahoo
3 retirement risks that older Americans often forget to budget for. How to protect your nest egg
Planning for retirement is something that's best to do throughout your career, not just when you're approaching that milestone and have a year or two left to work. Only half of Americans have tried to calculate how much money they'll need in retirement, according to a 2024 survey by the Employee Benefits Research Institute (EBRI). I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how However, among those workers who did the calculation, 52% were inspired to save more. Even if you feel confident in your ability to cover your retirement expenses, it's important to be mindful of hidden costs that could impact your retirement finances. Here are three to keep on your radar. Fidelity Investments expects the typical 65-year-old to spend $165,000 on healthcare during retirement. That may sound surprising, but even with Medicare coverage, several expenses could arise. For one thing, Medicare isn't entirely free. Most enrollees don't pay a premium for Part A, which covers hospital care. However, Part B, which covers outpatient care, charges a monthly premium, as do some Part D drug and Medicare Advantage plans. Plus, higher earners risk surcharges on their Medicare premiums. Premiums aside, there are a number of expenses that original Medicare (Parts A and B plus a Part D drug plan) does not cover, which retirees commonly need. These include dental care, eye exams, prescription glasses and hearing aids. You'll also face copays and coinsurance under Medicare that you must pay out of pocket. If enrolled in original Medicare, you can buy supplemental insurance known as Medigap to help offset those costs. But then you're looking at premiums for Medigap, too. Read more: The US stock market's 'fear gauge' has exploded — but this 1 'shockproof' asset is up 14% and helping American retirees stay calm. Here's how to own it ASAP It's a big misconception that Medicare will pay for you to live in a nursing home or cover the cost of a home health aide. Medicare's scope of coverage is typically limited to medical issues only. So while Medicare might pay for rehab or physical therapy because you broke a hip, it won't pay for a home health aide because you're getting older and need help dressing yourself and using your kitchen. Meanwhile, the cost of long-term care can be astronomical. According to Genworth, here are the annual median costs for certain long-term care services in the U.S. for 2024: One option for defraying these costs is to buy long-term care insurance. But that might bust your budget, too. The American Association for Long-Term Care Insurance says an average $165,000 policy with no inflation protection purchased at age 55 by a single male costs $950 a year. For a 55-year-old female, that policy costs an average of $1,500. And for a 55-year-old opposite-gendered couple, the average price is $2,080 combined. Of course, the actual cost of long-term care will depend on factors such as where you're located, your age at the time of your application and the state of your health. But all told, you might spend a lot of money to put that coverage in place. In recent years, retirees and working Americans alike have experienced their share of rampant inflation. But even when inflation isn't as aggressive, it's still a hidden cost that can upend your retirement budget. Social Security benefits are, thankfully, designed to keep up with inflation. They're eligible for an annual cost-of-living adjustment tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, a subset of the more widely known Consumer Price Index. But ensuring that your savings can keep up with inflation is also critical. One way to do this is to avoid eliminating equities from your portfolio in retirement. You need some growth in your portfolio to make up for rising living costs. You can work with a financial advisor to develop an appropriate asset mix based on your income needs and risk appetite. A financial advisor can also help set you up with assets in your portfolio that generate income. These could include dividend stocks, bonds and real estate investment trusts (REITs). It could also be a good idea to delay your Social Security claim past your full retirement age, which is 67 for anyone born in 1960 or later. For each year you do, until age 70, your benefits rise 8%. And that boost is guaranteed for life. Having a larger monthly benefit gives you more leeway to tackle not only inflation, but also surprise medical and health-related expenses. So it's a move worth considering if you don't need to sign up for Social Security sooner. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
Yahoo
20-04-2025
- Business
- Yahoo
3 retirement risks that older Americans often forget to budget for. How to protect your nest egg
Planning for retirement is something that's best to do throughout your career, not just when you're approaching that milestone and have a year or two left to work. Only half of Americans have tried to calculate how much money they'll need in retirement, according to a 2024 survey by the Employee Benefits Research Institute (EBRI). I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how However, among those workers who did the calculation, 52% were inspired to save more. Even if you feel confident in your ability to cover your retirement expenses, it's important to be mindful of hidden costs that could impact your retirement finances. Here are three to keep on your radar. Fidelity Investments expects the typical 65-year-old to spend $165,000 on healthcare during retirement. That may sound surprising, but even with Medicare coverage, several expenses could arise. For one thing, Medicare isn't entirely free. Most enrollees don't pay a premium for Part A, which covers hospital care. However, Part B, which covers outpatient care, charges a monthly premium, as do some Part D drug and Medicare Advantage plans. Plus, higher earners risk surcharges on their Medicare premiums. Premiums aside, there are a number of expenses that original Medicare (Parts A and B plus a Part D drug plan) does not cover, which retirees commonly need. These include dental care, eye exams, prescription glasses and hearing aids. You'll also face copays and coinsurance under Medicare that you must pay out of pocket. If enrolled in original Medicare, you can buy supplemental insurance known as Medigap to help offset those costs. But then you're looking at premiums for Medigap, too. Read more: The US stock market's 'fear gauge' has exploded — but this 1 'shockproof' asset is up 14% and helping American retirees stay calm. Here's how to own it ASAP It's a big misconception that Medicare will pay for you to live in a nursing home or cover the cost of a home health aide. Medicare's scope of coverage is typically limited to medical issues only. So while Medicare might pay for rehab or physical therapy because you broke a hip, it won't pay for a home health aide because you're getting older and need help dressing yourself and using your kitchen. Meanwhile, the cost of long-term care can be astronomical. According to Genworth, here are the annual median costs for certain long-term care services in the U.S. for 2024: One option for defraying these costs is to buy long-term care insurance. But that might bust your budget, too. The American Association for Long-Term Care Insurance says an average $165,000 policy with no inflation protection purchased at age 55 by a single male costs $950 a year. For a 55-year-old female, that policy costs an average of $1,500. And for a 55-year-old opposite-gendered couple, the average price is $2,080 combined. Of course, the actual cost of long-term care will depend on factors such as where you're located, your age at the time of your application and the state of your health. But all told, you might spend a lot of money to put that coverage in place. In recent years, retirees and working Americans alike have experienced their share of rampant inflation. But even when inflation isn't as aggressive, it's still a hidden cost that can upend your retirement budget. Social Security benefits are, thankfully, designed to keep up with inflation. They're eligible for an annual cost-of-living adjustment tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, a subset of the more widely known Consumer Price Index. But ensuring that your savings can keep up with inflation is also critical. One way to do this is to avoid eliminating equities from your portfolio in retirement. You need some growth in your portfolio to make up for rising living costs. You can work with a financial advisor to develop an appropriate asset mix based on your income needs and risk appetite. A financial advisor can also help set you up with assets in your portfolio that generate income. These could include dividend stocks, bonds and real estate investment trusts (REITs). It could also be a good idea to delay your Social Security claim past your full retirement age, which is 67 for anyone born in 1960 or later. For each year you do, until age 70, your benefits rise 8%. And that boost is guaranteed for life. Having a larger monthly benefit gives you more leeway to tackle not only inflation, but also surprise medical and health-related expenses. So it's a move worth considering if you don't need to sign up for Social Security sooner. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Yahoo
15-04-2025
- Business
- Yahoo
4 dangerous assumptions that could hurt your retirement
Here are four dangerous assumptions that could hurt your retirement. Assumption #1: Stock and bond market returns will be robust If you're estimating what your portfolio will return over your holding period, think twice before plugging in strong returns. Stocks' long-term gains have been pretty robust. But there have been stretches in market history when returns have been lower; in the 2000s, for example, the S&P 500 actually lost money on an annualized basis. That was because stocks were pricey at the decade's outset. Though stock prices aren't in Armageddon territory now, they're also not cheap. What to do instead: Lower your market-return projections and your planned withdrawal rate. Prudent investors should ratchet down their market-return projections somewhat, just to be safe. Morningstar research found that 3.7% is a safe starting withdrawal percentage on a balanced portfolio over 30 years. But there are also ways to lift that number, including employing some variability in spending. Assumption #2: Inflation will be benign The past few years illustrate the peril of assuming that consumer prices will remain in a steady state. When inflation rears its head, retirees need to withdraw more than anticipated from their portfolios just to maintain their standards of living. What to do instead: Consider inflation hedges in your retirement portfolio. Use longer-term inflation numbers to help guide planning decisions: 3% is a reasonable starting point. And to the extent that you can, customize your inflation forecast based on your actual consumption baskets. For example, allotting more for healthcare costs and less for spending on housing. The possibility that inflation could run higher during your retirement also argues for laying in inflation hedges in your retirement portfolio. And it argues against holding too much in fixed-rate investments whose return potential is negative once inflation is factored in. Assumption #3: You will work past age 65 The financial merits of working longer are irrefutable: continued portfolio contributions, delayed withdrawals, and delayed Social Security filing. So, it comes as no surprise that older adults are pushing back their planned retirement dates. Yet many workers ultimately leave the workforce earlier than planned, according to EBRI research. This is partially owed to enlarged portfolio balances, but health considerations, unemployment, or untenable physical demands of the job can also play a role. What to do instead: Be ready to fall back on other measures. While working longer can deliver a three-fer for your retirement plan, it's a mistake to assume that you'll be able to do so. If you've run the numbers and it looks like you'll fall short, you can plan to work longer while also pursuing other measures, such as making lifestyle changes and increasing your savings rate. At a minimum, allow for the possibility that your income may not be as high as it was in your peak earnings years. Assumption #4: You will receive an inheritance There can be a disconnect between what children expect to receive and their eventual windfalls. Increasing longevity, combined with long-term-care needs and costs, means that even parents who intend for their children to inherit assets from them may not be able to. Adult children who expect an inheritance that doesn't materialize may be inclined to overspend and under save during their peak earning years. And by the time their parents pass away and don't leave them the windfall they expected, it could be too late to make up for the shortfall. What to do instead: Communicate about inheritances early. If you're incorporating an expected inheritance into your retirement plan, it's wise to begin communicating about that topic as soon as possible. ____ This article was provided to The Associated Press by Morningstar. For more personal finance content, go to
