Baby Boomers unprepared for the reality of retirement
Baby Boomers, retiring at a rate of roughly 10,000 per day, may have unrealistic notions about what their future longterm care needs could do to their bank accounts.
When a recent Nationwide Financial consumer survey asked for an estimate of how much a year of nursing-home care will cost in 2030, the Baby Boomers who were surveyed guessed an average of $111,507. The actual estimated costs – $265,000 – are more than double that, Nationwide says.
That extreme underestimate indicates many of those Baby Boomers may be unprepared to handle the costs of long-term care and could end up relying on Medicaid to pay for it, which isn’t the best option, says Chris Orestis, a senior health-care advocate and CEO of Life Care Funding (www.lifecarefunding.com).
“One problem is that people wait until they are in the middle of a crisis before they start trying to figure out long-term care options and how to pay for them,” Orestis says. “Long-term care is expensive.”
Medicaid certainly can help, Orestis says, but it’s best to avoid going that route if at all possible. Here’s why:
• Lack of personal choice. Most forms of home care and assisted living are paid for privately, which means you must have resources other than Medicaid to pay the monthly out-of-pocket expenses. But when people go on Medicaid they lose their ability to choose what kind of care they want and where they will go, Orestis says. Usually, instead of home care or assisted living, a person on Medicaid goes into a nursing home and in most cases will share a room with another patient.
• Becoming impoverished. Medicaid was created to be a last resort and that’s exactly the way families should view it, Orestis says. To qualify, you need to be below the poverty line, which means you will need to spend down your assets to get there.
• State budgets are strained. Because of all those aging Baby Boomers, the number of people needing long-term care is growing, escalating the long-term funding crisis. Political leaders want people to remain on private pay as long as possible because Medicare and Medicaid can’t keep up with the growing demand for long-term-care services, Orestis says.
A better option available to many people is to convert their life-insurance policy into a longterm care benefit plan, he says. Seniors can sell their policy for 30 to 60 percent of its death-benefit value and put the money into an irrevocable, tax-free fund designated specifically for their care, Orestis says.