Threats abound for baby boomers heading into (or already living in) retirement. Housing-related costs are one high-ticket expense that can have a heavy-handed effect the quality of retirement life. Unfortunately, that's not the only risk many near-retirees will face.
The same Harvard study that describes the burden of housing costs on many boomers highlights the potentially huge cost of care for the aging, as well as the important role family members play in long-term care.
Let's take a closer look at the potential implications so you have a better idea of whether your retirement security is at risk.
Most housing is not senior-friendly, and upgrades are expensive
Most housing units are less than ideal for older people because they lack the accessibility features that make a house safe and easy to live in as people grow older. While simple things like lever door handles and no-step entries don't get a second thought when you're younger, these features can make a big difference in how easily you can can retire in place.
Many accessibility upgrades, of course, are relatively affordable, but they can add up quickly, depending on a person's needs. Fortunately, for those who are financially burdened but need some upgrades to their homes that they cannot afford, several state and Medicaid programs, as well as the VA, offer support for those who qualify. Reverse mortgages can also be used for such upgrades, while renters with a disability may qualify for access to housing that has the necessary features.
How much need is there for safer and more accessible housing? A lot, considering that falls accounted for $30 billion in medical costs in 2010, and falls in the home were the No. 1 cause of injury among those over age 65. However, accessibility in the home is only part of the solution.
As people age, their mobility is also at risk of becoming more limited. Many neighborhoods across the U.S. don't have access to public transit, which can limit retirees' access to shopping, healthcare, community facilities, and religious and social groups. As people become more isolated, they are at greater risk of depression and declining health due to reduced physical activity and social interaction.
Family as caregivers and the childless dilemma
Family members play a critical role in providing care for those with disabilities or limited mobility. Fully two-thirds of those receiving long-term care at home receive all of that care from a family member. Less than 10% of those who are disabled and living in a private home rely solely on paid in-home care. However, there is a distinct possibility that this number could grow substantially for younger baby boomers.
Only about 8% of those aged 65 and older don't have children, but the childless rate doubles to 16% for people between 50 and 59. That means about 10 million of the youngest baby boomers don't have children to support them as they age.
Compounding this problem is the fact that as people grow old, they are more likely to be single. The percentage of single Americans grows from about 25% among those aged 50-60 to 40% among those aged 70-79. Almost 60% of those over 80 live alone.
A large portion of this group could face serious hardship in retirement as they age without the safety net of children for care.
But are childless people better prepared?
A 2009 University of Wisconsin-Madison research paper showed that not only did married couples with no children have a higher median net worth than couples with children, but net worth declined as the number of children increased. This seems logical enough, considering that the costs of raising kids rise every year and are now near $250,000 (excluding college tuition), according to the U.S. Department of Agriculture. Furthermore, the UW-Madison paper also points out that the more kids someone has, the later into their prime income years they will be supporting them.
There are tax breaks and assistance programs to help offset some of the costs of children, but children still have a significant financial impact. How significant? If a married couple were to invest the average yearly cost of raising a child -- about $13,600 -- in a low-cost S&P 500 index fund each year for 17 years, they would end up with just over $400,000, given a modest 5% rate of return. Invested over 30 years, it would balloon to a cool million -- a substantial safety net for those who don't have children and need long-term care in old age.
That's good news for childless savers, because long-term care doesn't come cheap.
According to the Harvard study, the median cost for 30 hours of weekly homemaker services is about $2,500 per month, while a home health aide costs about $2,600. For those who can't remain in their own home or require care around the clock, assisted living and nursing home services can exceed $6,000 per month. And while children cannot usually provide the medical care that the aging may need, access to long-term care in the home, provided by family or a professional, often means more time spent living independently before it becomes necessary to enter a care facility.
The good news?
Childless or not, those who enter retirement with as much savings as they could manage will have the biggest safety net to fall back on, especially if you become disabled or the home you plan to retire in requires substantial upgrades as you age. Having children and family to help care for us as we age is nice, but it's still no promise for our future independence.
Further, many of those who are most at risk still have time to save and invest. With life expectancies surpassing 80, even someone near 60 can continue to invest at least a portion of their income with a decades-long horizon. If you're concerned you may come up short in retirement, there's no time like today to take steps to close that gap.
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