NEW YORK - Long-term-care costs continue to threaten retirees' assets and lifestyles, yet few retirees understand how LTC insurance works, according to research released last month.
A financial adviser specializing in long-term-care insurance drives home the necessity of the coverage by showing clients how LTC costs can eat up one of their most coveted possessions: their real estate.
"The current cost for one month of nursing home care - $5,840 - roughly equals the selling price of an acre of rural farmland," said Cameron Truesdell, chief executive of LTC Financial Partners LLC in Kirkland, Wash. "That's the land rural families have spent a lifetime acquiring and cultivating."
He obtained the monthly figure from the latest "MetLife Market Survey of Nursing Home and Home Care Costs," published by New York-based MetLife Inc., which concluded that the average annual cost for a private room in a nursing home is $70,080.
For suburban and urban clients, Mr. Truesdell uses similar comparisons to illustrate the impact of LTC costs on homes, which he says are devoured "square foot by square foot" instead of "acre by acre."
Even clients who know about the potential problems of LTC costs are often unaware of or are confused about one of the prime solutions: LTC insurance.
About 70% of 621 Americans ages 30 to 69 knew that rapidly rising health-care costs in the recent past had hurt their prospects for a comfortable retirement, according to a report by Newark, N.J.-based Prudential Financial Inc. And 90% of 1,023 pre-retirees ages 55 to 64 were concerned that such costs could exhaust their retirement savings, the report noted.
But only about 20% of pre-retirees had a sound understanding of LTC insurance, and nearly half needed help understanding the coverage and options, the report pointed out.
"It's more important than ever to educate consumers on how LTC needs can affect their financial security in retirement," said Vivian Banta, vice chairman of Prudential Financial.
Adding to the urgency is the fact that medical and lifestyle advances are increasing the number of people in the group most likely to need care.
"The elderly population - many of whom could require LTC services - will more than double in the next 25 years to over 70 million," said Andy Mako, vice president of Prudential Financial's LTC-insurance business.
A key point of confusion is that many older people incorrectly believe that health coverage, disability insurance and Medicare cover LTC expenses, according to a survey by the Washington-based AARP.
Half will need care
Among the report's other findings was that pre-retirees with under $100,000 in retirement savings needed the most help (64%) with their LTC needs, while those with more than $500,000 in savings needed the least help (27%).
Also, 20% of respondents anticipated needing nursing home care within the first 10 years of retirement, and 40% thought they would need care after the first 10 years. The reality is that about half will require such care at some point in their lives, according to USAA Life Insurance Co. in San Antonio. Approximately 35% of U.S. adults had bought or were considering buying LTC insurance, USAA found.
"If you're not protected by insurance, you've got to figure that for every month you're laid up, there goes another acre or more," Mr. Truesdell said. "Get the right type of LTC insurance, and get it fast."