US Retirees Face Long-Term Care Costs That Could Jeopardize Savings

A recent survey reveals that 45% of US households may experience financial shortfalls during retirement.

By Thea Felicity

Oct 14 2024, 11:03 AM EDT

US-HEALTH-VIRUS-WEDDING — Linda Delk (L) and Ardell Hoveskeland arrive to pick up flowers for their wedding at Annandale Florist, which only does outside pickup because of the coronavirus pandemic, in Annandale, Virginia on May 27, 2020. - "You may remove your mask and kiss the bride." Two American septuagenarians, who met at the start of the pandemic, were wed on Thursday after passing the side-by-side containment test. "Normally we would still be dating," said Linda Delk, 72, with her hand shaken in the hand of Ardell Hoveskland, 78. But the new coronavirus has accelerated everything. ANDREW CABALLERO-REYNOLDS/AFP via Getty Images

Financial retirement plans by US retirees are at huge risk due to cost-related concerns linked to health.

In the US, where inflation rarely goes down, healthcare costs are a major issue. This, unfortunately, can affect all citizens with or without thousands of savings to their name.

In a CNBC survey, 31$ of US retirees are concerned about their future due to health or illness conditions, which was followed by healthcare costs at 15%, with 14% fearing that they will run out of money. The same report showed that an updated retirement model indicates that 45% of US households are prone to financial shortfalls during retirement.

Investing in a workplace retirement account takes into account other factors, in addition to healthcare costs, like spending and investing. Above all, what can impact retirement funding the most is life expectancy.

Biggest Financial Risk in US Retirement Funds

The CNBC survey further shared that because of life expectancy, there are now long-term services and supports that can contribute to financial shortfalls. Retirement experts explained that costs associated with long-term care can be catastrophic, especially if needed for more than a couple of years.

These lengthy expenses include aides, live-in nurses, and nursing home stays, which can create a spending pattern known as the 'retirement smile.

According to the Social Security Association, retirement funds are outside the coverage of Medicare, which means this will be taken out of the equation by upcoming US retirees.

Financial Experts on Retirement Savings

According to Yahoo Finance, financial experts suggest US retirees rely on family members for long-term care with Medicaid. This will allow them to at least cover a portion of expenses that will otherwise speed up the depletion of retirement funds.

However, not everyone has an actively-working family member. Here's where planning with savings comes in. It's best to calculate the average duration and costs associated with long-term care and prepare for potentially six-figure expenses while still working. Financial planners often recommend building a financial cushion to account for these unpredictable costs, such as income-generating assets.

Lastly, it's highly suggested to consider long-term care insurance. Recently, VCPost shared that current businesses can ramp up their insurance for employees, which means it's easier to access them now than before.

Overall, you gain financial security in case the unpredictable happens. However, keep in mind that it's advisable to secure a policy in your 50s to lower premiums and avoid disqualification due to health issues.