Will We Outlive Our Money?

Finances. They can be one of the most emotionally charged and difficult conversations to have with an aging loved one and even our spouse. Money is connected to so many facets of our lives. As we age and plan for retirement and beyond, it can feel like there are more questions than answers. How will we pay for long term care? Can we keep the house? Will our savings be enough? Should we get long-term care insurance? How much care should we plan for and what will it cost?


While many baby boomers are thinking about retirement, according to LongTermCare.gov, less than 1/3 of Americans 50+ have begun saving for long term care. What is striking is that when social security was enacted in 1935 and the retirement age was set at 65, the average life expectancy was just 62. Now, data suggests that if we reach 65 it is likely we will live to 85 years old. We are living 20-30 years past traditional “retirement age” and two common questions come to mind: “How will we pay for this new found longevity?” and “Will we outlive our money?”

Health Care Costs & Retirement Readiness

While never fun, a reality check now may change the way we spend and save our money ensuring a better future for ourselves and our loved ones. Planning for the future begins by adding a couple line items to our traditional out of pocket expenses for retirement, namely long term care and healthcare costs. Fidelity Investments estimates that a couple age 65 retiring in 2013 will need $220,000 out of pocket to pay for medical expenses. That assumes that this couple is using Medicare and that there are no long-term care costs.

If this healthcare cost estimate doesn’t include long term care costs, then what do we mean by Long Term Care? When we talk about long term care, we are referring to a range of services that address personal care needs such as daily functional care (bathing, dressing, toileting, eating) as well as assistance with the everyday tasks such as housework, taking medication, managing money, caring for pets, shopping for groceries, transportation, and engaging in social activities.

One of the great myths is that Medicare will cover long term care costs. Our healthcare system divides care into three main categories: acute, chronic, and long term care. While Medicare may cover a short stay in the hospital after a stroke (acute care) or diabetes management (chronic care) it does not cover long term care such as medical and social services needed to live independently or facility care that may become necessary due to physical or mental limitations.  

Will We Really Need It?

Aflac workforce did a survey of some 4,000 U.S. workers and found that only 13% of people believed that long-term care would affect their families. In reality, according to LongTermCare.gov, someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years. What is striking is 69% of people use long-term care services of some kind for an average of 3 years. It is important to look at your household retirement fund holistically as both individuals may need long term care. If you are lucky enough to not need assistance, your spouse still may. Crafting a retirement savings plan and budget that relies on your household having no long term care needs is a huge gamble.    

Average Costs

What makes planning for long term care so difficult is that it is both complex and unpredictable. Every person ages so differently and there are many variables in the cost of care such as duration of care, type of care needed, geographic location, facility vs home care needs and professional services needed. Below are the average costs nationally and in Washington State from the most recent market survey of long-term care costs done by MetLife in 2011. For a state by state listing of the findings click here: http://www.npr.org/2012/04/27/151303609/the-cost-of-elder-care

Published on December 31, 2013.