Annuity Purchases Reduce Dire Financial Retirement Predictions for Baby Boomers

Written by Hersh Stern Updated Thursday, March 28, 2024

The American Health Care Association is a federation of 50 affiliated associations that represents more than 11,000 non-profit and for-profit assisted living residences, nursing facilities and sub-acute care centers. These institutions together provide care to more than one million elderly and disabled individuals nationally. The Republican polling firm Fabrizio, McLaughlin & Associates and the Democratic polling firm Penn Schoen & Berland were commissioned by the AHCA to conduct a national telephone survey of 800 adult Americans between the ages of 34 and 52 years, i.e., Baby Boomers, in September 1998. Following the announcement in early January of the President's long term care initiative, Fabrizio, McLaughlin & Associates conducted a follow-up survey.

Lack of Awareness Regarding Long-Term Care Coverage Revealed - Annuities can Fill Gap

The study shows that Baby Boomers are concerned about their retirement security but aren't saving adequately for likely long term care needs. Adults in this age group are woefully unaware about how healthcare–specifically long term care–is paid for in retirement.

Forty percent of Americans will experience their most costly purchase in life–long term care–during their retirement years. Despite this fact, twenty-seven percent of Baby Boomers think they are covered by long term care insurance, but in reality, only about 6 percent of the elderly have this type of coverage and very few Baby Boomers do.

Four out of five respondents did not know how long term care is paid for and 25 percent say they are unwilling to consider paying for any additional insurance to cover these costs. While 41 percent are willing to pay between up to $50 per month for long term care insurance, in most cases this is well below actual costs of long term care policies. According to the American Council of Life Insurance, long term care insurance policies range from approximately $30-$440 a month per individual, depending upon the age of the policyholder and the level of coverage provided.

While 68 percent of Baby Boomers know they are not financially prepared to handle long term care costs, only 15 percent correctly identified Medicaid, the government program for the poor, not Medicare, as the principal source for long term care funding assistance. Two out of three believe that they should not be forced into poverty to get government assistance for long term care, but that is exactly what Medicaid requires.

Women are particularly vulnerable to financial and emotional devastation from long term care needs, because they earn less and live longer than their male counterparts. In addition, they are the most likely caregivers when older relatives or spouses become frail or ill and need care. Forty-one percent of women interviewed who had been in caretaker roles had been forced to quit their jobs or take a leave of absence. Fifty percent said they had to cut back their working hours and give up space in their own homes to accommodate loved ones needing care.

As more women are employed full time, it becomes more difficult for them to fill the requirements of caring for aging parents and relatives. Forty-six percent said they were forced to hire nursing care to help with the tasks. The prospect of having to provide care to aging relatives and spouses can be a huge emotional drain as well as a financial hardship. But once they have cared for parents and spouses, these women must worry about themselves–who will care for them? Who will pay for their care?

Survey participants were receptive to initial proposals on long term care financing that were advanced by the Clinton Administration in January. They showed particular interest in a tax credit for caregivers and a national program to educate Medicare beneficiaries about the program's limited long term care coverage. They also favor the administration's recommendation to create a National Family Caregiver Support Program that will allow states to establish centers for "one-stop-shopping" for information and support on long term care concerns.