Less Than 15% Of US Households Approaching Retirement Are Prepared
Research shows that the expected present value of lifetime uninsured health care costs for a typical married couple age 65 is about $197,0003. This includes insurance premiums, out-of-pocket costs, and home health costs and excluding nursing home care.
- A typical household has a 5-percent risk that the present value of its lifetime uninsured health care costs will exceed $311,000.
And when nursing home costs are included, the amount for a typical couple increases from $197,000 to $260,000, with a 5-percent risk of exceeding $570,000. - Estimates of the average amount a household can expect to spend on health care costs do not provide information about the risk of incurring exceptionally large expenses.
- A recent study by the nonpartisan Employee Benefit Research Institute (EBRI) revealed that Social Security was the largest source of income for those currently age 65 and older,accounting for 39.8 percent of their income on average in 2008. Pension and annuities income was 19.7 percent,income from assets 13.0 percent, and income from earnings was 25.6 percent.
At age 65, a typical married couple free of chronic disease can expect to spend $197,000 on remaining lifetime health carecosts… excluding nursing home care. There is also a 5-percent probability that these costs will exceed $311,000. Including nursing home care, the mean cost is $260,000, with a 5-percent probability of costs exceeding $570,000. Less than 15 percent of households approaching retirement have accumulated that much in total financial assets.
Financial Services Professionals face a daunting task when assisting clients approaching retirement with how much to save, and how rapidly to draw down their wealth during retirement. Professionals are needed to help access what risk clients are prepared to accept of having their assets substantially depleted by health care costs, whether they are above or below the average risk of incurring exceptionally high costs, and whether they should insure against health care costs by purchasing long-term care insurance. The American public should seek the help of Financial Services Professionals.
References and Sources:
March 2010 WHAT IS THE DISTRIBUTION OF LIFETIME HEALTH CARE COSTS FROM AGE 65?
By Anthony Webb and Natalia Zhivan
Anthony Webb is associate director for research at the Center for Retirement Research at Boston College (CRR). Natalia Zhivan is a consultant for the Boston College, Center for Retirement Research-CRR.
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Jim Robinson posted on Sunday, March 06, 2011
Tags: Long Term Care, Retirement Planning, Senior Citizen
Posted in: Senior Citizens
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