Baby boomers have mistaken ideas about the future costs of long-term care and about the years they will spend in retirement, according to a Nationwide Financial consumer survey released Monday.
When asked to estimate how much a year nursing home care will cost in 2030, the survey respondents estimated an average of $111,507. That is less than half the actual estimated costs for that year, which are $265,000, Nationwide says. Respondents correctly estimated current costs at approximately $67,000 a year.
The survey included 813 respondents 50 years of age and older who have at least $150,000 in annual household income or in investable assets.
“Nursing home costs have increased more than 4 percent annually since 1974,” said John Carter, president and chief operating officer of retirement plans for Nationwide Financial. “What a year of nursing home care costs today will not even come close to the actual cost when boomers really need it.”
Three-fourths of the respondents say they think of long-term care as nursing home care or assisted living. In fact, nearly half of long-term care is done in the home by a home health-care workers or is adult day care, Nationwide says.
Many baby boomers are in denial that they will ever need long-term care, Nationwide says, so they never plan for it. However, the U.S. Department of Health and Human Services estimates that 70 percent of Americans over age 65 will need long-term care during their lifetimes.
Additionally, Americans aged 50 or older who have not retired say 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 survey says.
“Often people who intended to work longer are forced into retirement due to health reasons or employment changes. Others may not anticipate their own longevity, especially with today’s medical advances,” Carter says. “It’s critical that pre-retirees change their current mentality of planning to live 20 years in retirement. Too often, once retired, they realize they’re facing 10 or more years of expenses ahead of them that they didn’t plan for.”
Most respondents say they have a plan for their finances in retirement, but 57 percent admit they have not taken long-term care costs into consideration, the survey says.
Only 25 percent of those surveyed say they have long-term care insurance. Others say they plan to cover the costs with their 401(k) or retirement savings (22 percent) or other personal savings (21 percent).
“It is important to start discussing long-term care planning as a family and develop a well-thought-out plan so that parents and children understand where long-term care funding will come from and both parties feel secure in the approach,” Nationwide says.