Long-term Care and Caregiving: The Perspective of the Individual
By Anna M. Rappaport
Retirement Section News, January 2024
The Society of Actuaries (SOA) will soon issue a new summary report focusing on findings about personal planning and perspectives about long-term care and caregiving, and the links to housing. The SOA has been doing post-retirement risk research including consumer surveys for more than 20 years. Long-term care has always been viewed as an important element of a retirement plan. This article offers some highlights of the summary report that provides a detailed tour of long-term care issues from an individual perspective over the 20+ years of SOA research. The report focuses on several aspects of long-term care, primarily from the point of view of the individual planning for or providing long-term care. The intended audience for the SOA report includes retirement experts, plan developers and service providers, and those who serve individuals, including employee benefit plan sponsors, advisors, and financial services organizations.
Key aspects of long-term care include recognizing and dealing with limitations, the settings for and providers of support and care, and financing of such care. All of these aspects should be considered as part of retirement and general financial planning. The SOA consumer information discussed below clarifies issues and making personal decisions.
Consumer Awareness: Long-Term Care and Expected Limitations
The SOA has focused on consumer perceptions about long-term care going back to the SOA Risk Survey series that started in 2001, two Generations consumer surveys, special surveys linked to age 85+ issues and in-focus groups and in-depth interviews. The choice of risks of most concern is the core of the SOA’s consumer research program. The Risk Survey series is a series of biannual surveys of retirees and pre-retirees including some long-term care content in every survey and a special emphasis on long-term care in several of the surveys. The surveys consistently show relatively high general awareness of long-term care, but less certainty that it will happen to the respondent. There is also a poor understanding about what care costs and how it will be paid for, and relatively little planning for long-term care.
The findings show that family is a very important source of help and that people develop expectations based on what happened in their families. Notwithstanding that, families are rarely included in planning for long-term care.
The new report reviews the consumer research findings related to long-term care and caregiving. Examples of key findings are:
General awareness of long-term care and future limitations: Long-term care has been among the top three risks consistently across all the SOA research. Both pre-retirees and retirees are aware of this issue and place a high priority on it. The surveys look at change and expected limitations and generally show that respondents underestimate the likelihood of future change and therefore are unlikely to plan for it.
Planning for long-term care: There is relatively high awareness of, but little planning for, future long-term care needs. This may be partly a result of shorter term and cash flow linked planning. The SOA research shows relatively little planning is done for longer-term risks other than acute health care. There is also probably a “it will happen to someone else” feeling on the part of many people regarding long-term care as opposed to acute care.
There are gender differences about planning for long-term care. Some key issues include:
- Women are more likely to serve as a family caregiver. Women are less likely to have a family caregiver.
- Women have a longer expected period of disability and need for support.
- Women have a longer expected lifespan.
- Women are less likely to be married at older ages. They are more likely to be widowed and less likely to remarry.
Expectations about Medicare help: Medicare covers acute medical care for age 65 and over, but very little long-term care. The 2017 Risk Survey indicates that respondents over-estimate what Medicare will pay for major long-term care expenses and over-estimate the extent to which they have assets to pay for LTC. These factors point to knowledge gaps that are a barrier to better planning.
Preparedness for long-term care costs: The 2021 Retirement Risk Survey included planning and dealing with change. It found that 41% of married or partnered pre-retirees and 59% of such retirees said they were very or somewhat prepared for significant long-term care expenses. For singles living alone, 32% of pre-retirees and 41% of retirees said they were somewhat or very prepared for such expenses. The author observes that these respondents may be overly optimistic.
Consumer Information
Late-in-Life Decision Making Guide: In response to the consumer research, the SOA developed a guide that provides practical information about where to get support, and about planning for and managing care and support. Each of the sections of the report are focused on helping people when they need long-term care and support. Retirement Life stages are defined by degree of limitations: No limitations, moderate limitations, and major limitations. Four domains of retirement planning are considered, and they are intertwined. The four domains are managing finances, health, housing and transportation, and support.
Comprehensive awareness of risks: The SOA publication Managing Post-Retirement Risks (Risk Chart) brings together the range of retirement risks and provides an overview about how to manage them. The fourth edition is divided into three broad categories: Economic risks, personal planning considerations, and unexpected (or unpredictable) events. Long-term care needs are primarily covered in personal planning considerations under Changes in Housing and Support Needs: Suitability and Affordability. They are also related to unexpected events including public policy changes, health care needs, and unforeseen needs of family members.
Thinking Ahead Roadmap: A Guide to Keeping Your Money Safe as You Age: This project focuses on the management of money when one is no longer able to do this. It focuses on simplifying money management while one can do so, documenting information to make it easier for helpers, and securing help. This is a two-phase project. The SOA sponsored the research portion of this project. AARP sponsored the implementation and created the consumer website with information and tools. The project team was from the University of Minnesota and the Stanford Center on Longevity.
Financing Long-term Care Needs: This is one of 11 SOA Decision Briefs, and it reviews a variety of means of financing long-term care focused on the consumer. This publication is designed for individuals who are nearing or at retirement. It reviews different types of insurance products in the market today and their pros and cons.
Note: The Consumer Interest section of the Post-Retirement Needs and Risks page on the Society of Actuaries website includes a variety of consumer education.
Integrating Long-Term Care into Retirement Planning
Providing for risks is a major part of retirement planning, and long-term care is a major risk area for which most people do not have insurance. The potential for changing circumstances including decline in physical and mental capability and loss of family or friends for support are important life factors in retirement planning. Planning for long-term care involves different types of issues at different times during the life cycle and in different circumstances.
Earlier in life planning for long-term care is generally about financing and providing adequate resources if long-term care is needed at some point later in life.
Planning later-in-life (or after one starts to have limitations) is about how and where one will get support and/or care and who will provide it. It is also about assembling a support system. Support may be needed as soon as there are limitations, but insurance benefits are not payable until certain requirements of capability are met.
A significant part of retirement planning is also deciding where to live. Some types of living arrangements are compatible with limitations and others are not. Some include support integrated into the living arrangements. The persons who need care will consider moving to where access to family or friends who will help is available. The persons providing care will consider moving closer to be near the people they plan to help.
Retirement planning should also include recognition of family members. Many people find that helping parents (or other family members) is a major part of retirement for several years. It also may change assets otherwise available for retirement and may limit activities such as travel. Cross-generational family relationships can work both ways (older to younger or younger to older) and are an important element in the SOA research.
The report summarizes research about planning for long-term care and the financial characteristics of long-term care costs. A key issue is that while few people have a major long-term care expense, it can be very costly for those who do and thus lead to a shortfall of money in retirement. These studies discuss situations that happen infrequently but have large impacts. One of the most important findings in these studies is that funding for the average is not satisfactory, because those people who have large expenditures will then often deplete assets and run out of money.
The Family and Help Needed at Ages over 85
The SOA as part of its post-retirement risk work examined the situation of retirees at different points during retirement. A series of research projects focused on individuals aged 85 and over. That research is summarized in Retirement Experiences of Individuals Age 85 and Over (2019). A critical part of the findings was the importance of family in helping people at higher ages and the challenges present for those without family. A separate report Family is Important for Retirement Security (2020) summarizes the SOA research on family as a part of retirement security and management.
The research offered insights into when people needed help and the type of help needed. It also offered insights into financial management, methods of security help with daily tasks and alternatives chosen when it was too much for family. The Late-in-Life Decision Guide mentioned earlier provides a path for building an aging plan to respond to late-in-life challenges.
The finding indicated that many people reported needing help at older ages, with the need often increasing with age. Of concern in terms of how to deal with these issues is that wide variations existed in whether help is needed, what help is needed, how much, when and for how long, especially since the person’s situation can change dramatically and frequently.
Blended family issues: More and more families are blended families, and their situations vary. Blended families are second or later partnerships where one or both partners have children or other close family type relationships from prior partnerships. The report summarizes the questions about blended families and points out the need for further research.
Recognition of Diversity
Note that the SOA has focused on diversity and related retirement issues on several topics. The most recent SOA consumer surveys used oversampling to study race and ethnicity. There have also been essay calls focusing on both race and ethnicity and LBGTQ+ issues and retirement planning. These topics are beyond the scope of the summary report.
Conclusion
The report provides some summary conclusions from the overall review of the research:
“The need for long-term care is a major retirement risk, but one that has a very large cost for a few people, moderate costs for many and no cost for some others. Managing the risk needs to consider this distribution of care needs and not just averages. The SOA consumer research on retirement risks shows that concern about long-term care is consistently one of the top three retirement risks, but this does not translate into advance planning for much of the population. For many individuals, planning is short-term, cash-flow focused and not risk focused.
“Knowledge and action gaps around long-term care risk are part of a larger group of gaps in knowledge and planning. Many people overestimate what Medicare will cover when care is needed, and they may underestimate the cost and burden of care. Most individuals will eventually need some care, and fewer than 1 in 5 will need extensive care for a long period. A small minority buy private long-term care insurance, and that market is in turmoil. Family and friends are the major caregivers, but they are usually not included in planning. Family help can be supplemented by paid help, but there is a growing shortage of caregivers.
“There is a need for individuals to plan more for the changing needs occurring and the support required late in life when they are likely to develop limitations. Most individuals prefer to age at home, but ‘home’ can be a variety of different places. Some senior housing has support built in. There are important links between housing choices and how well they work for people with limitations.
“An overlooked impact of long-term care is the impact on the caregiver. Increased attention has been paid to this issue recently and the SOA has increased its focus on this issue as well. The caregiver who supports a spouse, parent, or other family member over a period of years often pays a heavy price in lost wages, retirement benefits, impact on health, and out-of-pocket spending.
“The issues related to long-term care can be viewed from the perspective of the care recipient, the caregiver, public policy, the financial services industry, the health care delivery system, the housing industry, etc. This report focused on SOA research and the individual. It also pointed out diverse needs in different situations and some areas for further research.
“The report also includes a focus on the future and provides a very brief overview of areas for change in the long-term care financing. It also focuses on issues related to the caregiver and the impact on the caregiver. The report offers a comprehensive window into a very complex topic and a wide variety of SOA research.”
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.
Anna M. Rappaport, FSA, serves as chairperson of the Committee on Post-Retirement Needs and Risks. She can be reached at anna.rappaport@gmail.com.