Millions of households with adults over 60 lack the financial resources to weather a financial shock, like a significant long-term care need, health issue, or loss of income due to divorce or widowhood, according to a recent survey.
High inflation and rising costs are why 80% of households with adults over the age of 60 — or 47 million households — were found to be at risk of falling into economic insecurity, a National Council on Aging (NCOA) survey said. Forty-five percent of older people had household incomes below what they needed to afford basic living needs, according to the survey.
And while older Americans said they would prefer to age in place, 60% said they could not afford two years of in-home long-term services and support, the survey said. Additionally, most adults surveyed could only afford up to two years of nursing home care in a semi-private room or four years in an assisted living community.
“Although the need for services both in the short- and long-term remains a reality for many older Americans, most do not have the financial resources to afford either,” NCOA said.
If you’re struggling to save for retirement in today’s economy, you could consider paying down high-interest debt with a personal loan at a lower interest rate, which can help you lower your monthly payments. Visit Credible to compare options from multiple lenders at once and choose the one that’s the best for you.
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Many of the adults surveyed held their financial assets in their home’s property value, the survey said. However, cashing out on this investment might only benefit a small segment of the respondents.
“If annuitized, home equity could theoretically act as a potential buffer in the event of a financial shock,” NCOA said.
Still, only 18% of adults aged 62 and older stood to benefit from using their home equity to pay for long-term care, NCOA reported, citing another analysis. The rest don’t have enough home equity to make a difference in long-term care costs.
“…This observation of current older adults having property assets that may help weather financial shocks is an important consideration in the conversation regarding the economic stability of future generations,” NCOA said. “With fewer young adults owning property compared to the Baby Boomer generation at their age, it is unclear how property ownership will transition in the coming decades and how this will impact the ability to absorb financial shocks for future older adults.”
A separate survey said that 60% of adult children bearing the brunt of the financial expenses tied to their parents’ aging saw home equity as a solution to fund these costs.
If you are interested in taking cash out of your home, you could consider a cash-out refinance. You can visit Credible to compare multiple mortgage lenders at once and choose the one with the best rate for you.
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One of the biggest financial shocks older adults face is the rising costs of long-term care services and supports (LTSS), the survey said. For example, the price of a private nursing home room increased by 15.4% from 2013 to 2018, and the cost of at-home care services rose by 15.1% over the same period.
“As Medicare does not absorb the shock of LTSS costs, this financial risk is often faced directly by older adults and their families or by social safety net programs such as Medicaid,” NCOA said.
Here are some steps you can take to prepare for long-term care costs:
Discussing your desires for long-term care with your family is a crucial step to making a detailed financial plan.
Many people don’t realize that Medicare doesn’t cover long-term care costs. Taking out a long-term care insurance policy or adding a long-term care insurance rider to your life insurance policy could help cover these costs.
If you are retired or are preparing to retire, paying down debt with a personal loan can help you reduce your interest rate and monthly expenses. You can visit Credible to compare multiple personal loan lenders at once and choose the one with the best interest rate for you.
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