Yet another reason to offer voluntary benefits: Retiree long-term health needs

Plenty has been written, and numbers shared, about the care crisis in our country—and with good reason. Thanks to advances in modern medicine, people are living longer than ever before. At the same time, the costs of long-term care and access to that care are becoming more restrictive than ever. One factor that doesn’t get as much attention in that conversation is the fact that retirement savings aren’t coming close to covering those “golden years” and that picture becomes even worse when you factor in the increasingly expensive costs of long-term care. AARP sums it up best when it says: “Only a modest percentage of Americans have the wealth needed to afford whatever long-term care needs emerge in their later years.”

Retirement savings are already struggling

While it’s certainly fair to say that one of the challenges of the care crisis is that many Americans aren’t thinking about their need for care, the same can’t be said for retirement. People ARE thinking about their retirement, and if they’re thinking about retirement, they should be thinking about care. Let’s look at a few numbers to start to show why:

• $255,200 – The average retirement savings according to a recent Forbes article.
• $1,693 – The average monthly Social Security check for a retiree according to an article on Bankrate.

Those numbers alone probably point to an unsustainable plan for retirement. How long can a retiree stretch those benefits? For many, the answer is “not long enough”. A recent survey from Retirable shared that 63% of respondents don’t feel they saved enough to get themselves through retirement. Many are changing their plans for retirement or looking at a second job to make up the difference. That’s probably not quite the ideal retirement many envision for themselves.

Long-term care costs add pressure

But it’s when you start to look at the numbers for the costs and likelihood of long-term care that things get really challenging. According to the Genworth Cost of Care Survey:

• 7 out of 10 people over age 65 will require long-term care
• $5,148 – The average national cost of an in-home health aide per month
• $4,500 – The average monthly cost of an assisted living facility
• $9,000+ – The average cost of a private room in a nursing home facility

Now, I wasn’t a math major in college, but my head is spinning just trying to reconcile this data! Let’s look a little closer at the numbers. Consider your average American who’s retiring with that average savings we referenced above ($255,200). Let’s say she retires at age 65 and requires long-term care starting at age 70. If she lived in an assisted living facility, she’d run out of money by age 78. Lived at home with an in-home health aid? Age 76. Nursing home? Age 73.

What’s extra scary about this scenario? We’re not even factoring in the costs of living, let alone travel and other activities a retiree may want to enjoy. Her retirement benefits would have been shrinking in the years before she went on long-term care. So, if anything, this paints a rosier picture than the truth! Again, statistics say 70% of our age 65+ population will need long-term care at some point. Many will face bigger challenges than this—smaller retirement savings, higher costs of care and, again, we’re not even factoring in their costs of living.

Can voluntary benefits help?

The simple answer to this question is: yes. For starters, voluntary enrollment is the perfect time to educate and engage employees on a number of tools that, if offered, could positively impact their retirement (and, inevitably, care). Here are some ways voluntary benefits can help employees:

• Educate employees on care planning programs.
• Help employees get smarter about participating in the company 401(k).
• Provide general financial wellness education.

A voluntary enrollment period paired with appropriate educational resources isn’t just a chance to sign employees up for benefits—it’s also the perfect opportunity to educate employees on the wide variety of products that can help them protect their retirement and ensure they’re set up well from a care standpoint.

Pair communication with the right voluntary products

Unfortunately, there’s no silver bullet to this difficult solution. However, in addition to the enrollment process, voluntary benefits themselves can be a part of the solution for employees in a couple of important ways.

• Standalone long-term care policies are harder to find and expensive, but still available.
• Hybrid products that offer life insurance protection with care benefits are trending in the market and can help cover the costs of care and protect retirement savings.
• Newer products even pay benefits to family members who provide care to a policyholder.

On top of the more direct protection from long-term care coverage, there’s also a need for financial protection from medical costs in general. Voluntary products such as accident, hospital indemnity, or critical illness insurance also have a role to play in a conversation about planning for retirement.

The care crisis is also a retirement crisis—and we should treat it as such. Framing it in that way may be a more effective approach, as retirement is far more top of mind for employees and employers. Whether it’s seen as a “care crisis” or a “retirement crisis,” there’s a need to act. By raising awareness for employees and employers on this critical topic, we can work towards finding solutions.

Zach Iovino is a regional sales director at Trustmark Voluntary Benefits covering West Virginia as well as parts of Pennsylvania and New York.