Baby boomers unrealistic about cost of long-term care Posted: August 18th, 2013
Baby boomers may be in for a rude awakening.
One new study found that baby boomers greatly underestimate the cost of long-term care and how long they will live in retirement. Another study found that the cost of all long-term care options continues to climb.
A survey by Harris Interactive for Nationwide Financial found baby boomers underestimated the future cost of a year of nursing home care by more than half.
More than 800 retired and non-retired Americans aged 50 or older with at least $150,000 in annual income or investable assets were asked what they thought of when they hear the term "long-term care." Three in four responded nursing home care or residential assisted living.
Costs projected to be much higher than many expect
The respondents correctly estimated that it costs an average of about $67,000 a year for nursing home care today, according to Nationwide of Columbus, Ohio. However, when asked what a year may cost in 2030 when many of those surveyed may actually need long-term care, their answer was about $111,500. That number is more than 50 percent less than the $265,000 the long-term care industry estimates.
"What a year of nursing home care costs today will not even come close to the actual cost when boomers really need it," John Carter, Nationwide Financial's president and COO, said in a press release.
Those surveyed also said they plan to live an average of only 20.7 years in retirement, while those already in retirement say they plan to live 27.1 years in retirement. The reality is that baby boomers may live 31 percent longer than those nearing retirement estimate, according to Nationwide.
Survey finds long-term care costs climbing
A recent study by John Hancock Life Insurance Co. in Boston also found that the cost of long-term care was trending upward. Over the last five years, the survey found:
- The average cost of a private room in a nursing home has risen an average of 3.6 percent a year to $258 a day or $94,170 annually.
- The average cost of a semi-private room in a nursing home has risen 3.6 percent a year as well to $227 a day or $82,855 annually.
- The average cost of a month in an assisted living facility has risen an average of 2 percent a year to $3,427 a month or $41,124 annually.
- The average cost of a home health aide has risen an average of 1.3 percent a year to $19 an hour or $29,640 annually.
"The cost of long-term care continues to be one of the most significant uninsured financial risks that an individual can face," Michael Doughty, John Hancock's executive vice president and general manager, said in a press release.
Nationwide said that many are in denial that they will ever need long-term care insurance and therefore don't plan for it. However, according to the U.S. Department of Health and Human Services, 70 percent of Americans over age 65 will need long-term care at some point.