Even High-Income Seniors Could Face Difficult Long-Term Care Math

The retirement-savings crunch has been an ongoing problem for low- and middle-income seniors, but a new warning from investment research firm Morningstar suggests that even well-off Americans should double-check their retirement calculus.

“Very high-income, high-net-worth people can plan to self-fund long-term care costs, though I’d advise them to do the math on long-term care cost inflation before getting too comfy with the idea that they’ll have enough to do so,” Morningstar director of personal finance Christine Benz wrote this week.

Benz’s warning comes as part of a look at key statistics regarding long-term health care costs in the United States, with a few stark numbers: More than half of all Americans who turned 65 last year will need some kind of long-term care, with more women (58%) than men (47%). Among those turning 65 within the next year, 15.2% will be on the hook for more than $250,000 in health costs for the rest of their lives, while 57.5% will spend up to $25,000.

Faced with the declining availability of fixed-benefit pensions and overall retirement-savings difficulties, even financially comfortable people have limited options when it comes to a six-figure health care bill. Benz notes that long-term care insurance plans come with the potential for premium increases, while some seniors are forced to sell their homes to pay for care while still saving their investment portfolios. Meanwhile, lower-income Americans may have to rely solely on Medicaid.

“If you’re among the people who are still on the fence about what to do, the best way to make smart decisions is to go into the process armed with the facts,” Benz writes.

It’s been a busy period for retirement analysis: Earlier this week, the Wall Street Journal noted that despite general gains in retirement savings, higher-income households have reaped the most benefits, while workers who rely largely on wages for income haven’t shared in the savings surge. In addition, a consumer survey found that about half of adults aged 45 to 65 thought they’d fallen behind in their retirement plans.

Take a look at the full — and rather grim — compilation of retirement and long-term care statistics over at Morningstar.

Written by Alex Spanko

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