Long-Term Care Costs Cause Increased national retirement ris

 

Wednesday, Apr 01,2009, 3:47:19 PM   Click:

Copyright: Business Wire
Source: Business Wire
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Business Editors

COLUMBUS, Ohio - (BUSINESS WIRE) - March 31, 2009 - The Center for Retirement Research (CRR) at Boston College today released its biannual National Retirement Risk Index (NRRI) report. Today, the report added to long-term care expenses to the index calculation. This addition produced a further increase in the number of Americans who May not be financially prepared for retirement. While this factor alone increased the index to 64 percent from 61 percent reported a year ago.

"Explicit, including health care in February 2008 raised the original index of 44 percent to 61 percent," said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. And including the cost of long-term care insurance now raises the index to 64 percent. Because the costs of long-term care insurance and other health costs are rising and income from contract system, these results have raised concerns about the security of the retirement of baby boomers and future generations . "

The full report is available from the Center for Retirement Research at Boston College.

Facts about Long Term Care


Long-term care (LTC) includes medical and non medical care for people with a chronic illness or disability. LTC helps meet health or personal needs such as activities of daily living such as dressing, bathing and using the bathroom.
LTC can be provided at home, in the community, or residence in nursing homes.
1 A study by the U.S. Department of Health and Human Services (HHS) provides that persons who reach the age of 65 are likely to have a 40 percent chance of entering a nursing home. And about 10 percent of people entering a nursing home, there will be five years or more.
LTC can be expensive. A 2008 HHS report 2 shows the average costs in the United States are:
$ 187/day for a semi-private room in a nursing home
$ 209/day for a private room in a nursing home
$ 3008/month for the care of aid to the ease of life (for a one bedroom)
$ 29/hour for a home health aide
$ 59/day for care in a health adult daycare
Paying for LTC varies. According to the American Council of Life Insurers, 48 percent of Americans pay out of pocket, 41 percent receive Medicaid, 8 percent were temporary coverage provided by Medicare and only 3 percent are paying for private care long life insurance 3. People who are poor or those who eventually deplete their assets generally have to rely on Medicaid.

1 Source: http://www.medicare.gov/LongTermCare/Static/Home.asp?dest=NAV 7CHome%% 7CWhatIsLTC # TabTop, downloaded March 27, 2009

2 Source: http://www.longtermcare.gov/LTC/Main_Site/Paying_LTC/Costs_Of_Care/Costs_Of_Care.aspx, downloaded March 27, 2009

3 Source: American Council of Life Insurers (ACLI) 2005

Long-term care costs pose an additional challenge of retirement income

The potential to cover the costs of dependency at retirement poses a major challenge for households.

"Managing the costs of long-term care has become an essential element of financial and retirement planning," said Peter Golato, Senior Vice President for the country. "In these uncertain economic times, consumers are in search of the guaranteed ways to meet the needs of retirement planning and inheritance, more than ever. Fortunately, financial professionals have a variety of financial products that can be customized as part of a strategy to help them achieve their financial goals of the client. Retirees today face many issues, including the need for long-term care and the fear that inflation and living too long could greatly impact their lives in recent years, and exhaustion in May to be the heirs of the estate. "

How can the average American pay for long-term care

The statistics are frightening to be sure, and what most consumers May be surprised to learn that ordinary health insurance does not pay for long-term care. Medicare covers only LTC for a maximum of 100 days after a period of three consecutive days in a hospital, and only pays for Medicaid LTC if and when a person has almost depleted its assets. Special LTC insurance policies are more often where consumers are turning, but the cost of such a policy may be prohibitive in some cases.


"In addition to the traditional, stand-alone long-term care insurance products, there are hybrid products," said Golato. "For a reasonable cost, long-term care rider may be added to some life insurance policies, which allows the death benefit to be levied to help pay long term care costs. Any unused death benefit will be paid to heirs.

"Another incentive provided by the Government of the Pension Protection Act of 2006. From 1 January 2010, this law allows tax-free in 1035 through an exchange of life insurance, annuities or staffing policies on stand-alone long-term care policy. If the use of these funds to pay for long-term care policy, there will be no tax payable on the increased value of these assets "Golato added.

Overview of the index National Retirement Risk

The National Retirement Risk Index, developed by the Center for Retirement Research at Boston College and underwritten by a grant from the national level, is updated twice a year. The index is a measure of how the percentage of working age in many U.S. households are at risk of not being able to maintain their standard of living after retirement.

"At risk", a household would not be able to maintain its pre-retirement living standards in retirement. The amount of money people need while retired compared to pre-retirement varies, but it has been estimated from 65 to 85 percent, depending on household income and marital status. The percentage is higher if the costs of health care and long-term care are taken explicitly into account. Most retirees need less than 100 percent of pre-retirement, because they tend to pay less tax and no longer need to save for retirement.

"The index uses a projection that households should have in retirement relative to their income before retirement," said Munnell. "This" replacement rate "is then compared to a target rate that would allow a household to maintain their pre-retirement standard of living. Households with more than 10 percent of the target are considered "at risk".

"This estimate assumes that people work to age 65 and annuitize all their financial assets, including receipts from reverse mortgages in their homes," Munnell said. "More realistic assumptions regarding the retirement and the reluctance of people to annuitize the 401 (k) balance sheets or on housing equity to the percentage of workers' at risk 'much higher. "

Tips for avoiding the pitfalls of retirement planning

Golato said financial professionals can help their clients better prepare for retirement and rising costs - particularly health care - by offering the following advice:


Living healthy now can reduce medical costs in retirement

"In retirement planning, health is a precious asset that is often overlooked but can have a significant impact on the golden age, especially as people live longer and thus more support health costs, "said Golato." Americans must ensure they take into account the health costs in retirement planning and, in addition, they are now taking action -- such as good diet, regular exercise, and check-ups - to maintain their best health possible later. "

National Better Health, a subsidiary of Nationwide, is a leading provider of health and productivity management solutions aimed at reducing health care costs, increasing productivity and improving the quality of life for employers and their employees.


Workers must take responsibility for their financial health

Golato said workers should take personal responsibility for their retirement planning, beginning with assessing their financial situation. He recommended to seek professional help consumers with financial matters such as planning for retirement.

"Finance professionals are not only for the rich," said Golato. "Hiring a licensed, qualified investment professional whose business and personal styles suit your needs is a wise decision for most households. Nationwide has a group of financial professionals the Consumers can consult free of charge. They can call our Consumer Solutions Center at 888-543-3756, or send an e-mail to lifepln@nationwide.com.

"There are many investment products available today, either through an employer, bank, credit unions and so on. A financial professional can help consumers sort the myriad choices to find what best suits their needs, "he added.


Take advantage of online resources

"There are plenty of online help, planning, like Nationwide Financial's free, online RetirAbility Check," he said.

RetirAbilityCheck ® (www.nationwide.com / rscore) is an interactive resource that provides users with a score - called R-Score SM - to illustrate how financially they are on track for retirement. It was developed to assist in the task of planning. RetirAbilityCheck is based on data from the index.

"The National Retirement Risk Index indicates the retirement situation will be worse over time," he says. "It is important for all people, including young Americans just entering the market work to have a solid retirement income plan. Making small changes added over time. Gradually reducing debt while increasing 401 (k) investment can help workers get on the right path to financial security in retirement, "said Golato." The key is to start today. "

"Nationwide is proud of its role as sole insurer of the national index of retirement risk," said Golato. "In the next two decades, 77 million baby boomers will reach retirement age. As Americans face declining traditional pensions, modest 401 (k) balances, the greater the life expectancy and lower expectations of Social Security, our goal is to provide solutions, including education, to help people prepare for and live in retirement. "

About Nationwide

Nationally, based in Columbus, Ohio, is one of the largest diversified insurance and financial services in the world. Nationwide ranks # 108 on the Fortune 500 .* The company provides a full range of financial services and insurance, including auto, motorcycle, boat, homeowners, life, commercial insurance, administrative services, annuities , mortgages, mutual funds, pensions, long-term savings plans and health and productivity services. For more information, visit www.nationwide.com.

RetirAbilityCheck ® is provided for educational purposes only and is not intended as advice. Any investment involves market risks, including possible loss of principle. Neither national nor any of its representatives give legal or tax advice. Please consult your tax or legal advisor for such guidance.

Nationwide Investment Services Corporation, member FINRA. In MI only: Nationwide Investment Svcs. Corporation.

Nationally, the Nationwide framemark and On Your Side are federally registered service marks of Nationwide Mutual Insurance Company. RetirAbility Check, R-Score andNationwide improve health are service marks of Nationwide Mutual Insurance Company.

* Fortune Magazine, April 2008

Tips for a healthier life and rich retirement for the improvement of health


Stop Smoking: According to the Surgeon General, tobacco use remains the No. 1 cause of preventable disease and death in the United States. Quitting smoking reduces the risk of some types of cancer and heart disease, in order to leave now can add years to your life and dollars to your bank account.
Stay active: small changes to incorporate into your exercise routine can often lead to large payments. Taking up jogging as a hobby and buying a treadmill are more credible than the investment strategies that immediately put additional funds in your 401 (k).
Eat healthy: Improving diet can reduce the likelihood of injury or heart disease, diabetes and osteoporosis, all of these conditions put on your health and retirement savings, in particular gradually become more serious .
Enjoy the health and welfare benefits: the employer sponsored health coaches are not only a role in maintaining health but are valuable resources for saving money with their emphasis on supporting long-term patients. If your company offers programs, take advantage! Often companies provide additional incentives such as deposits to a savings account, health or a cash payment for registration.

On the health and wealth Talk: Discuss finances and health with your family and work with your financial planner to ensure the health care costs are included in your savings strategy.

About Nationwide Better HealthSM

Nationwide Better HealthSM, a subsidiary of Nationwide ®, is a leading provider of health and productivity management solutions aimed at reducing health care costs, increased productivity and improved quality of life for employers and their employees. National health improvement is the first company to truly integrate the best collection of health and productivity services available today, including health and wellness and disease, disability, absence, medical and maternity management, while using the health assessment, work-site screenings, lifestyle health coaching services, online tools and customized communications strategies to achieve better results classroom to improve the health and productivity at work. The company offers to work together and independently to address both sides of the cost equation: increased efficiency of health and productivity programs and better health and well-being health care to reduce costs. For more information, call 866-404-6924 or visit www.nwbetterhealth.com.