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The Hidden Retirement Risk: Planning for Long-Term Services and Supports

When I first meet people to begin working with on their retirement planning are generally focused on the pursuit saving, investing, and a plan to generate income. Individuals who have diligently saved throughout their lives often find themselves on track with their retirement plans, provided that we use general assumptions for rate of return and safe withdrawal rates.

However, there are still a few aspects in their planning often overlooked:

1. Higher than anticipated inflation and/or taxes.

2. Sequence of returns risk: experiencing a bear market at the beginning of retirement.

3. The potential need for Long-Term Services and Supports (LTSS) as we age.

Today, I‘d like to speak to the third important point.

The Potential Need for Long-Term Services and Supports (LTSS)

This issue brief, published by the HHS Office of the Assistant Secretary for Planning and Evaluation in January 2021, sheds light on this critical aspect of retirement planning.

Aging Population

One key finding from the brief is that a significant portion of older adults, regardless of their lifetime earnings, are likely to develop serious LTSS needs after reaching the age of 65. More than one-half of older adults are projected to experience these needs, with nursing home care being a common requirement. This demand is driven, in part, by the aging of the baby boomer generation, particularly those aged 80 and older, who are most likely to need LTSS.

Financial Concerns

The financial implications of LTSS are substantial. Medicare and traditional health insurance typically don't cover standard LTSS expenses, and relatively few older adults are covered by private long-term care insurance (LTCI). As a result, those needing LTSS often have to pay for these services out-of-pocket. This can put a strain on their financial resources, and some may eventually enroll in Medicaid if these costs exceed their income.

The Need is Real

Perhaps one of the most striking findings is that many people do not believe they will ever need LTSS, despite the statistics suggesting otherwise. Better planning for LTSS, both by families and policymakers, is essential, especially given the projected increase in the population ages 80 and older.

Protecting Your Needs

What I generally do, as part of my financial process, is determine what a potential need for LTSS could be for a client based on their current state of residence. Genworth has a neat calculator for this. From there, we look at the potential impact on their finances.

Of course, the option is to cover the needs out of your existing assets. But I find this option, which is generally the default option, is selected too quickly and without proper consideration. For instance, this type of care usually happens when you’re a few years from life expectancy and you may not be in the right state of mind to make decisions at that point. This burden of designing, implementing, and paying for a plan of care usually falls on the children. Without proper planning, this can lead to undesired consequences.

Life Insurance and Long-Term Care

Life insurance companies have come up with a clever way to help people transfer this risk, that they were previously, as early as a few years ago, not available to do before. Still, there are a handful of carriers offering traditional coverage, while many more offer a combination of life insurance and long-term care insurance.

For example, if you live a long life and never need the care, your family will get close to 100% of the premiums paid via a death benefit. Also, the premiums can be guaranteed and limited to a lump sum payment or simply a few years of payments.

If you look at the projected cost of long-term care, it could be daunting. I tell my clients not to consider purchasing an insurance policy to cover the entire cost, but a portion. That way, the family knows there’s at least some planning in place. Plus, these carriers generally provide you with a care coordinator to assist with the process of designing a plan of care.


Understanding the potential need for Long-Term Services and Supports is a critical aspect of retirement planning. As we age, the demand for these services is likely to grow, and better planning is essential to ensure financial security in our later years.

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