Up to 64% of American Households at Risk of Failing to Maintain their Standard of Living in Retirement

The Center for Retirement Research at Boston College released a brief and an update of their National Retirement Risk Index (NRRI).  A link to the brief summary can be found here.

The NRRI shows the percentage of American Households that are at risk of failing to maintain their standard of living in retirement.  The index shows that 44% of American households are at risk.  This figure increases to 61% when healthcare costs are included, and to 64% when the costs of long-term care insurance are added.

The impact of long-term care expenses on retiree finances is highlighted.  The probability of nursing home use for individuals turning 65 in 2010 is as follows:

  • Length of stay 3 months or longer = 33%
  • Length of stay 1 year or longer = 24%
  • Length of stay 5 years or longer = 9%

The cost of long-term care is discussed in detail.  For example, a married couple with adequate resources (i.e. not reliant on Medicaid for long-term care), nursing home care currently costs approximately $77,000 per year.  The rate of inflation for nursing home costs and other retiree healthcare expenses is increasing at a dramatically different rate than many other parts of the economy.

The article highlights the need to consider incorporating long-term care insurance into one's retirement planning.

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