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- Retirees Are Not Prepared For This One Rapidly-Rising Cost
Retirees Are Not Prepared For This One Rapidly-Rising Cost
Help from advisors is urgently needed
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Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.
Today we’re discussing how the rapidly rising costs of long-term care have create a huge gap in retirement planning, and how advisors can adapt to help their clients. And we’re taking a look at what happened in the markets, and where they might be headed next.
So, let’s get into the Industry Chatter!
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INDUSTRY CHATTER
A recent analysis by the National Council on Aging and the LeadingAge LTSS Center at UMass Boston reveals a looming crisis in long-term care affordability, necessitating a shift in how financial advisors approach retirement planning discussions with their clients.
The study found that 80% of Americans aged 60 and older are financially insecure, lacking resources to afford long-term care or handle unexpected financial emergencies. This alarming statistic underscores the urgency for financial advisors to prioritize long-term care planning in client conversations.
Gap Between Savings And Costs Is Rising
With 11,000 people turning 65 daily for the next several years, advisors must address the growing gap between retirement savings and long-term care costs. The median income for the bottom fifth of older Americans was just $18,000 in 2020, far below what's needed to live independently according to the Elder Index.
Long-term care services and supports (LTSS) represent a significant financial burden. The study reveals that 60% of older adults cannot afford two years of in-home care, with annual costs for a home health aide reaching $75,504 and a private nursing home room averaging $116,800 in 2023.
Medicaid Comes At A Huge Cost
Financial advisors should emphasize that Medicare doesn't cover long-term care, leaving families to bear the costs. While Medicaid can assist with nursing home expenses, it requires spending down assets to qualify – a crucial point for advisors to discuss with clients.
The COVID-19 pandemic has further complicated the situation, with 11% of those 65 and older losing jobs and increased widowhood creating new financial hardships. Advisors must now factor in these potential disruptions when planning for clients' long-term financial security.
How To Help
Given these challenges, financial advisors should consider:
Initiating early discussions about long-term care planning
Exploring various funding options, including long-term care insurance and hybrid policies
Considering strategies to protect assets while potentially qualifying for Medicaid
Emphasizing the importance of building emergency funds to handle unexpected health costs
Regularly reviewing and adjusting retirement plans to account for rising care costs
By addressing these issues proactively, financial advisors can help clients navigate the complex landscape of long-term care financing and work towards a more secure retirement.
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MARKET RECAP
The Federal Reserve's preferred measure of inflation, the personal consumption expenditures index, grew less than economists expected in August at 2.2% year-over-year. The data comes on the heels of the Federal Reserve's 0.5% interest rate cut issued Sept. 18, the first in more than four years.
The inflation data supports another 0.5% interest rate cut in November, RSM US LLP Chief Economist Joseph Brusuelas said in a Friday tweet. "This is what an economic expansion looks like at full employment," he said.
The S&P 500 traded at all-time highs above the 5,700 level this week.
Brainard Touts China EV Ban In Detroit
Lael Brainard, the director of the National Economic Council and a former Federal Reserve board member, spoke in favor of the Biden administration's proposed ban on Chinese electric vehicles Monday at the Detroit Economic Club, the same day details of the proposal were released.
The U.S. Commerce Department aims to block the import and sale of Chinese-made vehicles with key communications and automated driving systems on the basis of national security concerns. Additionally, a 100% tariff on Chinese electric vehicles imposed by the Biden administration took effect Friday.
"We will not allow cars driving on U.S. roads if they are using Chinese software and hardware systems," Brainard told the DEC. "We think this is very important from a national security point of view."
Meta Platforms Dives Deeper Into AI, Virtual Reality
Facebook parent company Meta Platforms Inc . (META) announced its latest Quest 3S virtual reality headset at the Meta Connect 2024 conference Wednesday along with updates to its Llama artificial intelligence platform and Ray-Ban smart glasses. CEO Mark Zuckerberg introduced a prototype for Orion, Meta's holographic augmented reality glasses.
"This isn't passthrough. This is the physical world with holograms laid on it," Zuckerberg said.
China's Stimulus Triggers Stock Rally
The People's Bank of China announced stimulus measures this week that will inject approximately $140 billion (1 trillion yuan) in liquidity into the country's banking system as well as a reduction in the mortgage rate, sending U.S.-traded China stocks and ETFs such as e-commerce giant Alibaba Group Holding Ltd – ADR (BABA) and electric vehicle manufacturer Nio Inc – ADR (NIO) higher.
Billionaire hedge fund manager David Tepper told CNBC's "Squawk Box" that he's building positions in Chinese stocks. "I didn't know that they were going to bring out the big guns," Tepper said of the country's stimulus plans.
Bernie Sanders Blasts Ozempic Cost
Novo Nordisk A/S (NVO) CEO Lars Jorgensen faced questions from the Senate Health, Education, Labor and Pensions Committee Tuesday about the high prices of the drugs Ozempic and Wegovy.
Wegovy, the weight loss version of diabetes drug Ozempic, costs $1,349 monthly in the U.S. versus $186 in Denmark, $140 in Germany and $92 in the U.K., according to the committee.
"You're making huge amounts of money in this country and you're charging us far more and you haven't given me an answer as to why," Sen. Bernie Sanders, the committee's chair, said to Jorgensen during the hearing.
The CEO said: "Anything that will help patients get access to affordable medicine, we'll be happy to look into."
THE WEEK AHEAD
Economic Data
Monday: Powell speaks, GDP numbers from the UK and Germany
Tuesday: US job openings and manufacturing numbers
Wednesday: US crude oil inventories
Thursday: US and global services Purchasing Managers' Index reports
Friday: US monthly average hourly earnings
Earnings
Click here for the full calendar of economic data and earnings reports.
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