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Backwards financial planning and long-term care

Kelly Kowalski, Cliff Noreen, and Bronwyn Shinnick

Posted on June 17, 2021

ltc consult

Imagine having spaghetti and meatballs for breakfast and a bagel for dinner. How about saying “goodbye” instead of “hello” when you greet someone or wearing your shirt and pants inside out?

Flipping such daily customs are among the many ways to celebrate yaD sdrawkcaB lanoitaN (National Backwards Day), which encourages us to do things in an opposite manner. Reversing small traditions and habits can be fun and even enlightening by helping us see things in a new light.

Financial planning has a parallel to Backwards Day: How many people plan — or rather don’t plan — for long-term care (LTC) needs later in life.

The MassMutual Long Term Care in America Study finds that 80 percent of those polled say they have enough savings to meet their LTC needs and 83 percent assert that LTC insurance products cost too much for the benefits they provide. Three in four (77 percent) believe that they will die before needing care or are unlikely to need care.1

Most financial professionals say this is backwards thinking. And unlike the harmless antics associated with Backwards Day, taking the opposite approach to planning for LTC can be costly both financially and emotionally.

Long-term care is typically defined as a variety of services and support to help people with Activities of Daily Living (ADLs) over an extended period of time. These activities include bathing, dressing, eating, using the toilet, caring for incontinence, or transferring.

The facts are simply that the longer you live, the more likely you are to need long-term care at some point. Consider that 70 percent of Americans age 65 and older eventually require some form of long-term care, with expenses potentially running into six figures, according to the U.S. Department of Health and Human Services (HHS).2 Adults age 85 and older are much more likely to need long-term care than those who are 65-74, especially support from a paid professional, the HHS reports.

Meanwhile, you are likely to live longer than you may anticipate. The average lifespan for Americans was 78.7 years (76.2 for men and 81.2 for women), before the COVID-19 pandemic, the National Center for Health Statistics (NCHS) reported in 2020. 3

But the odds are that you will beat those numbers if you’re in reasonably good health. That’s because the average life span figure takes into account the total population, including those who do not live to the traditional retirement age of 65. People who reach that milestone typically live much longer. For instance, the average life expectancy for a 65-year-old in 2020 was 19.5 years or to nearly age 85, according to the NCHS.

So how do most Americans address the realities of living longer and needing assistance as they age? They typically do the opposite of what is needed.

But, being unprepared has its costs. Indeed, 78 percent of Americans ages 45 to 70 significantly underestimate, overestimate, or cannot fathom a guess about the annual cost of a nursing home. One in 4 people will spend more than $50,000 in lifetime out-of-pocket expenses for LTC, according to the American Association of Retired Persons (AARP).4 More than half of those age 65 and older will need care for more than a year and 1 in 3 will need help for more than two years.

While the costs of LTC vary widely by location, the AARP pegs average expenses for a year of care in a semiprivate room in a nursing home at $88,800. The low is Texas at $54,800, and the high is Connecticut at $150,200.

Those facts underscore the need to consult a financial professional and develop a plan to help protect against potential extended care needs in the future.

Fortunately, there are flexible options to plan for LTC expenses, including insurance products, depending on your financial circumstances and goals, age, health and other factors. You can start by reviewing your retirement plan with a financial professional to determine if you have enough savings built into your current plan to account for LTC, need to put more money aside, or obtain insurance protection.

How you cover LTC expenses can also depend upon whether you can realistically receive care from a family member, friend, or a professional caregiver at home, or if you need more extensive support at a nursing home or care facility. A financial professional who understands the dynamics of LTC will ask about your support network, relative health and well-being, lifestyle goals, and other circumstances that may determine how you handle long-term care expenses.

It starts with getting professional guidance. Because doing the opposite of what is typically expected may be fun on Backwards Day, but definitely not when anticipating your LTC needs. Undertaking careful, realistic planning can help you move forward with your retirement plans and life.

Discover more from MassMutual …

Misconceptions and long-term care

Is extended care part of your retirement future?

Keeping caregiver costs contained


1The MassMutual Long Term Care in America Study, 2020

2 Department of Health & Human Services, “What is the Lifetime Risk of Needing and Receiving Long Term Services and Support?,” April 4, 2019.

3 National Center for Health Statistics, “Mortality in the United States, 2018, National Center for Health Statistics, Data Brief No. 355,” January 2020.

4 AARP, “5 Things You Should Know About Long-Term Care Insurance,” March 1, 2018.

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