Retirement Planning Is Not A Single Issue

Now is the time to educate your clients about Multi-life LTCI

by Brian Vestergaard

If you’re a regular reader of financial news in publications such as this one, it’s no secret that many Americans are facing challenges in planning for a secure retirement. In fact, a combination of economic factors in recent years have changed the face of retirement.

Fewer people nearing retirement (ages 46-65) see it as a time of leisure and more Americans feel their retirement outlook has diminished in recent years, according to AARP. More people are also:

• Unsatisfied with what they’re putting away for retirement
• Anticipating having to scale back their lifestyle during retirement
• Expecting to work part time in order to supplement their retirement income

These attitudes are understandable when you consider that two-thirds of working families fall short of even the most conservative retirement savings targets. Unfortunately these are not the only risks families are facing when planning their retirement.

Retirement planning is not a single issue. It’s much more than simply choosing the amount of money you will need to save, contributing to a 401k, or figuring out how to lower your cost of living during retirement. Retirement planning is a puzzle; each piece just as important as the next.

All too often, people overlook certain pieces and fail to see the complete picture, leaving them vulnerable to the unexpected. While there are many unplanned events that can put a secure retirement at risk, failing to plan for potential long-term care expenses can quickly throw even the best plans off course.

With a little bit of extra planning, solutions like long-term care insurance (LTCI) can play a crucial role in helping people plan for the unexpected and age well, and it should be a part of your and your client’s retirement planning checklist.

A Failure to Plan is a Plan to Fail

It should be said that the true cost of long-term care goes far beyond just the dollars and cents of out-of-pocket costs.

The indirect costs can also have a drastic impact on a caregiver and a family’s physical and emotional health, career and even their relationships. But let’s take a look at how quickly unforeseen LTC demands can impact one’s retirement plans. It’s often said that LTC and caregiving happens to you – it’s not something you plan for.

Unfortunately for many families, this means an LTC event like a stroke or advancement of conditions like Alzheimer’s or dementia leaves them scrambling for care options and resources. This is when many learn that health insurance and Medicare will not cover their LTC needs, leaving them to pay out of pocket. Consider these average annual costs:

• $91,250 for a private room in a nursing home.
• $43,200 for an assisted living facility
• $45,760 for a home health aide

Based on these totals, just three years of LTC services, which is the average duration of need, would cost nearly $230,000 (based on one year of home care and two years in a nursing home). It’s easy to see how LTC demands can quickly erase a lifetime of savings and a retirement plan years in the making.

By covering the cost of unforeseen care needs, LTCI can protect one’s retirement security and extend retirement savings. Yet while 70 percent of people age 65 and older will need long-term care at some point in their lives, two out of every three Americans (age 40+) have not set aside any money to pay for long-term care. How do you reach the two-thirds of Americans who have yet to plan for LTC? The worksite market presents a great opportunity.

Why Multi-life LTCI?

Now is a great time to talk to your business clients about multi-life LTCI, as the timing is right for a broader understanding and adoption of worksite LTCI programs.

Speaking from our own success, LifeSecure ranked No. 1 in overall multi-life worksite LTCI sales in 2014 and nearly 60 percent of our LTCI sales last year were at the worksite. Worksite sales also present an opportunity for agents to reach younger buyers – an important demographic for LTCI – thanks to today’s multi-generational workforce.

Most LTCI buyers in 2014 were between the ages of 45 and 54 (25 percent) and 55 and 64 (55 percent), according to the American Association of Long-Term Care Insurance (AALTCI). Both employers and employees are looking for solutions like LTCI. Some 77 percent of Americans age 30 to 65 think they should know more about long-term care.

At the same time, more employers consider a strong voluntary benefits package essential to attracting and retaining employees.

Offering multi-life LTCI is an easy way for employers of all sizes to help their employees prepare for the financial demands of long-term care and secure their retirement. Multi-life solutions are a simple, flexible product that is a great fit for small or large employers, and everyone in between.

Employers are also finding multi-life LTCI as a great fit for their employees because:

• In many cases, it can be offered to as few as three employees
• It can be 100 percent employer paid, a voluntary benefit, or a combination of the two, and employers can often qualify for a contribution discount
• Multi-life plans are easy to set up thanks to a streamlined process that includes simplified underwriting, an abbreviated application process, and innovative web-based tools like e-signatures and online support
• Group administration is becoming easier than ever

With nearly 6 million small and mid-sized businesses in the United States, it’s easy to see the tremendous potential multi-life LTCI has in the worksite market – especially when you consider the benefits for both sides.

A Win-Win at Work

Two of the top three reasons employers add to their menu of benefits include retention and productivity, and employers with 12 or more benefit offerings are more likely to retain their workers.

But it’s not enough to simply add voluntary offerings – they must resonate with today’s diverse workforce. Whether they know it or not, your employer clients likely already have employees juggling both work responsibilities and caregiving duties for a spouse or parent.

Therefore they likely already understand the need and may be motivated by LTCI. According to AARP:

• Nearly one in five workers is currently providing care or assistance to older relatives or friends
• About 42 percent of workers have provided elder care in the last five years
• Nearly 70 percent of caregivers make work accommodations due to their responsibilities, including taking time off, cutting work hours, or stopping work entirely

The caregiving workforce is the new normal and it’s here to stay, especially considering projections that there will be fewer family caregivers available as baby boomers continue to age. This is a critical workplace issue for both employers and employees, which is why multi-life LTCI holds great value for both parties. In some instances, an employee’s parents may also be eligible for coverage.

For employers:

• Businesses stand to lose up to $33.6 billion each year in lost productivity from employees’ need to care for aging loved ones
• Employers pay 8 percent more for the health care of employees with eldercare responsibilities, which can cost an additional $13.4 billion per year
• The average annual cost to employers per full-time caregiver is more than $2,100

By protecting an employee’s family, multi-life LTCI can help employers offset some of these costs by preserving productivity, reducing absenteeism and protecting their own corporate outcomes. Multi-life programs can also impact an employer’s bottom line through federal tax advantages that vary by corporate status (C- and S-Corporations).

In addition to post-retirement protection and providing professional care for family members, some multi-life LTCI products offer employees immediate support in the form of care advisor services, which can help employees better manage the stress, demands and workday distractions associated with caregiving. These services, designed to support, educate and advocate for caregivers and their family members, help protect the interests and well-being of employees.

You can’t always plan for the unexpected, but sometimes the smallest bit of planning can have the biggest impact on a secure retirement. Especially considering the growing demand for long-term care, it’s critical for both employers and employees to understand the risks of not properly planning for LTC needs.

It’s up to agents, however, to start the conversation and show employers how multi-life LTCI provides valuable protection to their employees, their corporate goals, and why it’s a must-have component of their employee benefit offerings.

Endnotes

1 National Institute on Retirement Security, The Continuing Retirement Savings Crisis. Washington D.C. 2015.

2 Genworth, 2015 Cost of Care Survey. Richmond, VA 2015.

3 Associated Press-NORC Center for Public Affairs Research, Long-Term Care in America: Americans’ Outlook and Planning for Future Care. Chicago, IL 2015.

4 3in4 Association, www.3in4needmore.com.

5 MetLife, 13th Annual U.S. Employee Benefit Trends Study. New York, NY 2015. 6 AARP. Valuing the Invaluable: 2011 Update – The Economic Value of Family Caregiving in 2009. Washington, D.C. 2011