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Elder Law Prof Blog
Katherine C. Pearson, Editor, and a Member of the Law Professor Blogs Network on LexBlog.com

Long-Term Care and Saving for Retirement

By rmorgan

The Employee Benefit Research Institute (EBRI) issued a June 19, 2014 fast facts on What Long-Term Care Costs in Retirement Could Do to Retirement Readiness. Here is a description

A new report by the nonpartisan Employee Benefit Research Institute (EBRI) reveals that assuming 100 percent of the average expenses (based on post-retirement income) for components likely to be encountered on a regular basis (e.g., food, housing, transportation)—but ignoring the costs of  nursing home and home health care expenses—about 17 percent of those in the second-income quartile would run short of money by the 20th year in retirement, as would 5 percent of those in the third-income quartile and 1 percent of those in the highest-income quartile, assuming a retirement age of 65.

The full report,  “Short” Falls: Who’s Most Likely to Come Up Short In Retirement & When? offers the following executive summary

• This Notes article provides new results showing how many years into retirement Baby Boomer and Gen Xer households are simulated to run short of money, by preretirement income quartile.

• Under a variety of simulated post-retirement expense scenarios, the lowest preretirement income quartile is the cohort where the vast majority of the retirement readiness shortfall occurs, and the soonest. When nursing home and home health-care expenses are factored in, the number of households in the lowest-income quartile that is projected to run short of money within 20 years of retirement is considerably larger than those in the other three income quartiles combined.

• Extending the results to a maximum of 35 years in retirement (age 100, assuming retirement at age 65), 83 percent of the lowest-income quartile households would run short of money and almost half (47 percent) of those in the second-income quartile would face a similar situation. Only 28 percent of those in the third-income quartile and 13 percent of those in the highest income quartile are simulated to run short of money eventually.

The full report is available here.