70% Chance a 65-Year Old will need Long Term Care – if You’re Married, it’s Higher

70% of individuals 65 years old will need some form of long term care during their lifetime.[i]  For those 70% requiring long term care, the average total cost is estimated at $266,000.[ii]  About 25% of households have no retirement savings at all, and the median savings for those who do is less than $75,000.[iii] 

When we think about how much to save for retirement – we inevitably attempt to gauge how many more years we think we’ll live.  While no one can perfectly predict this, we can start making educated guesses with life expectancy tables.   However, when it comes to planning for two married people’s lives, the math changes a bit.

Life Expectancy and Retirement Planning For Couples

The Wall Street Journal recently published an article that takes into account another aspect to retirement planning (Click HERE for Article).  Assume that our 65-year old man and woman from above are married.  According to the WSJ article, the 65 year old husband has an 80% chance to live another decade and a 41% chance to live another two decades.  The 65 year old wife has an 82% chance to live one more decade and a 53% chance to live two more decades.  Notice that the individual likelihood that the husband or the wife live 20 more years is 41% and 53% respectively – about a 50/50 proposition or worse.  However, the chance that either one of the husband or the wife live 20 more years is 83%!  Think about that from a retirement savings perspective.  It’s a better than 3 in 4 that one spouse will need resources for more than 20 years.  Vanguard has published an easy to use calculator (Click HERE) to calculate this for you and your spouse.

Application to Long Term Care Risk

We know that the risk of long term care seriously disrupts retirement savings.  Especially for the healthy spouse who must live on what assets remain after long term care expenses.  But using the same approach above, we realize that the likelihood of at least one spouse requiring long term care

Instead of one person with a 41% chance and one person with a 53% chance (who, together had an 83% chance of at least one of them living 20 years), we have two people with a 70% chance of requiring long term care.  That creates a better than 90% chance that one of the spouses will require long term care.

These statistics point to the important need of planning for the costs of Long Term Care, especially since Medicare does not cover these costs.  This can be accomplished a number of ways:

1. Develop an investment plan to cover long term care costs.
2. Purchase a long term care insurance policy or a life insurance policy that can be converted to a long term care benefit.
3. Talk to an elder law attorney about qualifying for Medicaid and protect your assets for the benefit of your family.  When considering Medicaid, its important to talk to your attorney well before the need arises (at least 5 years, preferably more).  Asset protection strategies are limited when an individual has an immediate need for long-term care services – don’t wait.

[i] Genworth, “Annual Median Cost of Long Term Care in the Nation. 2015

[ii] US Dept. of Health and Human Services, ASPE Issue Brief, Table 3B, 2016

[iii] EBRI, Retirement Confidence Survey 2013