I write a lot about the state of retirement in America and how certain saving behaviors can help set you up for success. But until recently we hadn’t fully addressed the elephant in the room: the costs of health care and long-term care in retirement. In our recently published paper, Planning for Health Care Costs in Retirement, my colleagues and I address both of those topics. Today I thought I would focus on long-term care.

Every time we present the paper at conferences or to groups around Vanguard, people approach me afterward with stories, mostly tragic, about their personal life experiences with long-term care. It’s made me think a lot about my own family’s experiences.

A tale of two grandmothers

My grandmothers’ lives present a tale of two extremes.

Grandma Young—Lucille—worked as a secretary for Kraft, which was rather unique at the time. Lucille viewed my grandfather’s salary as “their” money; however, her salary was “her” money to spend as she desired. She loved to travel, and she spent “her” money on the annual trips my grandparents took.

Lucille was diagnosed with Alzheimer’s disease at age 72 and required around-the-clock care that my Grandfather Young—Lyman—provided in their home. She lived for two years before succumbing to the disease. Imagine the cost of her care had it not been for my grandfather. While I never heard him complain, I wonder about the toll it took on him.

At the opposite extreme was Grandma Baker—Ella Margaret—a real pistol! Ella Margaret was a scratch bowler. She also volunteered at the Ida Benderson Senior Center in Syracuse for as long as I can remember. In fact, back in the day, if she didn’t answer her phone, I always knew I could find her at the senior center.

Grandma Baker lived independently until she was 96, and she was active and mostly healthy. She fell and died soon after reaching that remarkable age, never needing long-term care. It’s a very different story than Grandma Young’s.

Whizzy what? 

I wonder—will I be a Grandma Young or a Grandma Baker? Will I suffer Alzheimer’s and end up in a nursing home someday? Will there be a Grandpa Young to take care of me? I have no way of knowing.

The most troubling long-term-care stories seem to stick with us. So, when we talk about long-term care, we tend to jump to the worst-case scenario.

Daniel Kahneman—the Nobel Prize-winning pioneer in the field of behavioral economics—said that we often jump to conclusions on the basis of limited evidence. He coined a term to define that bias: WYSIATI (wiz-ē-ŏt-ē)—what you see is all there is.

Because the worst-case scenario is so emotionally intense and makes such an indelible impression, we tend to think that’s the norm. We’re not good at putting these situations into context. In fact, after reading this blog post, you’re probably going to remember the amount of care Grandma Young required. And you’re going to remember the amount of care other people in your life have needed as well.

You’re only human, after all 

It’s human nature to automatically recall the worst-case scenario, but the news about long-term care isn’t all doom and gloom. When you’re thinking How can I prepare for the possibility of long-term care?, how you frame the discussion is what matters. At Vanguard, we want to frame the costs of long-term care in a model that can help people take action, not scare the heck out of them.

Here’s the reality: Our research shows that half of us will never need paid long-term care, and just 15% are likely to incur costs of $250,000 or more. The rest of us will fall somewhere in between.*

Concentrating solely on the worst-case scenario—the big scary numbers—isn’t useful to anyone, as Stephen Weber notes in his blog post about health care costs in retirement.

Saving as much as you can for as long as you can and not panicking about the “what ifs” is the best way to factor long-term care into your health and wealth planning.

Let’s break it down

If you think about paying for long-term care for yourself or for someone in your family, you can quickly get overwhelmed, just as you would if you had to pay for your house in one lump sum, or cover your food and clothing costs for the rest of your life all at once.

But that’s not how it works. We pay for those things a little at a time—a monthly mortgage payment, a weekly grocery bill, a monthly clothing budget. When you think of breaking down the cost of long-term care as an annual expense, rather than as a lump sum—that big scary number—it helps you better understand how much you might spend each year during retirement, so you can begin to plan for that.

For example, our research found that 26% of retirees can expect some long-term-care costs of up to $100,000.* If you break that down over the course of 10 years, that’s $10,000 a year, or just over $833 a month. For context, households run by people age 65 and older spend an average of $1,322 a month on housing.**

Although $100,000 is still a lot of money, when you view it this way, it doesn’t seem quite as overwhelming.

What you see ISN’T all there is

In the end, we can’t predict if we’ll be a Grandma Baker or a Grandma Young—or if we’ll have a Grandpa Young! We can make a few assumptions—our health and family history offer hints—but we won’t truly know until the future becomes the present for us. What we can do is begin to factor the potential costs of long-term care into our retirement planning and make incremental progress toward our goals. Me? I’m going to do all I can to stay healthy, active, and engaged.

And even though it may go against everything you’ve heard and what you think you know, try to put long-term care in perspective. Prepare as best you can. Plan and save to the extent possible. Then get out there and enjoy life.



**Figure includes property taxes, insurance, utilities, repairs and maintenance, and household supplies. Source: https://www.nerdwallet.com/article/lets-get-real-what-an-average-retirement-costs