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Preventing Long-Term-Care Costs From Derailing Retirement Plans
How can advisors better prepare retirees for such an overwhelming liability? By Ben Mattlin
ACCORDING TO THE URBAN INSTITUTE, THE POPulation of Americans age 65 and older is on track to increase nearly 50 % in the next 15 years, to more than 80 million. That means demand for long-term care will almost certainly rise, too, and it won’ t come cheap. Advisors who fail to account for the potential drain on retirement outcomes are distorting their projections, experts warn, and setting their clients up for failure.
Yet how can advisors better prepare retirees for such an overwhelming liability?
“ Planning for retirement must include consideration of longterm-care expenses, with enough earmarked to cover at least one spouse for no less than $ 300,000 to $ 450,000,” says Amy Arnett, vice president of insurance solutions at DPL Financial Partners in Louisville, Ky.
Even if clients can’ t afford to set aside that much, a separate long-term-care allocation will only strengthen a retirement plan and protect other sources of retirement income the client would have to tap to cover the costs of ill health, she says.“ Some people think their family members will be able to step in, but, depending on the situation, care needs can quickly overwhelm what a family is able to provide— physically, emotionally and financially,” she says.
If clients are lucky enough not to need the designated funds, Arnett adds, they’ ll simply have more to pass on to heirs.
How much any particular client might actually require for hands-on personal care is impossible to predict, but they could be making these expenditures for months or even years, and most clients underestimate it, advisors say. Depending on the type of assistance that’ s required, and where the client lives, the median annual cost for care has risen to between $ 80,000 and $ 130,000, according to the most recent survey by Genworth, a leading provider of LTC insurance, and its CareScout subsidiary, which helps clients find home healthcare. By 2034, those costs will likely rise to $ 102,000 to $ 170,000, the survey projects.
Worse still, these figures rise every year at a faster clip than inflation. It’ s important to remember that Medicare doesn’ t pay for long-term care( though it might provide temporary rehabilitation assistance after you suffer a severe injury or illness). Medicaid might pay for the care, but you have to be impoverished to qualify for it.“ The issue most people have is the cost and whether they can afford it,” says Brett Bernstein, CEO of XML Financial Group in Bethesda, Md.
52 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2025 WWW. FA-MAG. COM