Long-term Care Costs and The National Retirement Risk Index

Even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, the National Retirement Risk Index (NRRI) has shown that 44 percent will be ‘at risk.’ ‘At risk’ means they will be unable to maintain their standard of living in retirement. When health care costs were included explicitly, the percentage of households ‘at risk’ increased to 61 percent. Our previous analysis of health care costs, however, did not consider possible expenses for long-term care towards the end of life. This brief explores how the need for long-term care could affect the NRRI. This brief is structured as follows. The first section recaps the original NRRI and the NRRI with health care costs explicitly included. The second section describes the nature of long-term care, the likelihood of a household member needing such care, and the financing alternatives available. The third section explores how the challenge posed by long-term care is different for households of different types and wealth levels. The fourth section models the impact of long-term care on the NRRI. The final section concludes.