The retirement funding crisis that the boomers are facing is a walk in the park compared with the long-term care (LTC) crisis that is creeping up on us.
The joke in our house is that when the boss – my better half – got an LTC policy and we added up the cost, I got a shotgun.
For a 60-year-old couple, the annual cost of an LTC policy can run as high as $5,637 per year or $469 per month. The average Social Security benefits check is only $1,300 per month. Where’s the rest coming from?
Premiums have increased annually by double digits and have gone up as much as 90% in one year.
And from the consumer’s perspective, the worst part of the insurance side isn’t the premiums; it’s that if you don’t use your coverage, you get nothing back. Zilch!
Let’s face the facts: For the majority of boomers, LTC insurance is a pipe dream. The way things are shaping up, elder care will either be provided by family members or not at all.
But the cost of LTC insurance is only the beginning. It isn’t working for the insurance companies either.
Since 2012, half of the top insurers have left the business. In 1999, there were more than 100 companies selling LTC policies. By 2016, 80% of sales were made by fewer than 12 companies.
If you have $2.5 million in liquid assets, planning professionals say you don’t need LTC coverage. You should be able to cover your LTC expenses.
I don’t know the exact percentage of boomers who have that much money, but I am willing to wager it isn’t enough to make a dent in the problem.
And this is not just an American problem. One-third of China’s population will reach retirement age by 2050. And the Chinese have a novel idea for dealing with part of their problem…
The insurance industry in China is building retirement care facilities. To gain access, you have to buy a single premium life insurance policy worth $300,000 (I assume the beneficiary is the facility) and pay a monthly fee of $2,000.
For this, you get an apartment and care as required. Apparently, these facilities also provide buffet meals, mahjong tournaments and folk song singalongs.
Two-thousand dollars a month – that’s a lot of mahjong and folk songs available to only a small percentage of the approximately 460 million Chinese people expected to retire by 2050.
It’s hard for most of us in our 50s and 60s to imagine living to 2050, but many of us will. And at some point, we will require either in-home or institutional care. As things stand now, virtually no one will be able to pay for it.
The only solution I see is to save what you can, stay as healthy and mobile as you can (for as long as you can), and be nice to your kids. Unless there’s a solution out there that I’m unaware of, they’ll probably be our care providers.