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Retirement: Long-term care for Baby Boomers ‘quickly becoming a crisis,’ expert says

Carson Group Managing Partner of Wealth Solutions Jamie Hopkins joins Yahoo Finance Live to discuss risks Baby Boomers and other generations face when saving for retirement, long-term care concerns, and demographic shifts affecting retirees.

Video Transcript


- On today's installment of Retirement Ready, we're focusing on those Americans who are nearing retirement, or in some cases, have already began their retirement, the baby boomers. Carson Group Managing Partner of Wealth Solutions, Jamie Hopkins, joins us now for this segment brought to you by Fidelity Investments. Jamie, nice to see you. According to the Bureau of Labor Statistics, boomers have not saved nearly enough. Are we facing-- are they facing a retirement crisis ahead?

JAMIE HOPKINS: Well, great to see you. And this question gets asked all the time, are we facing a retirement crisis in this country? And one of the things-- I'm actually much more bullish on this-- I don't know that we're facing a crisis as a country. But I will tell you, individuals are facing that crisis.

What we're really talking about when we look at those average savings numbers is that we have individuals that don't have enough saved to get by without things like Social Security and Medicare, which are all over the news right now, and some of the debt limit conversations. Those are super important parts of this. But Americans are also super resilient.

Look, we haven't saved enough for retirement ever in the history of mankind. So that's one thing always to put back in perspective. We've actually seen people's net worth go up more in 2021 than any other year we've seen in the United States in one year. So there are good things happening out there, but there are really big risks.

And when you talk to individuals, they are super stressed out right now. Inflation is not as big of a problem for workers-- I know that's a little shocking-- than it is for those baby boomers just in or near retirement, because what inflation that we're seeing, the high inflation in the last year, what that does is it permanently increases that cost of retirement. So high inflation early on is actually worse than it is to get high inflation later in retirement.

We don't talk about that a lot out there, but that sequencing of inflation on a retiree's portfolio and spending is really big impact. So it's kind of a scary thing. You can't fully control it. But right now, there are some reasons to be concerned if you don't feel like you saved enough. You're hearing all the conversations about Social Security and Medicare, and you're seeing that high inflation.

- And we're talking about the problem of saving, but also when people retire when they become of advanced age, a lot of long-term care patients are not able to find the workers they need to be able to help them. And I can only see this problem increasing. What are some of the initiatives and some of the strategies at various firms and companies that are meant to deal with this problem, with this growing problem, and accelerating one?

JAMIE HOPKINS: The long-term care problem we have is one where I worry about. This is very quickly becoming a crisis. So you go back to 2010, we had seven workers for every one person, potential workers, I would say, family members to provide care for somebody who would need that care. This is not something that's evolving over a 40 year period.

We're going to four to one by 2030. That's just around the corner now. We're closer to that number than we are the seven to one. And the reason is family dynamics changed. They moved away. We had smaller families. And all of a sudden, we're having people who are living longer needing more at home care, but the caregivers just aren't there.

The reality is, people are not buying long-term care insurance right now, so we don't have the funding mechanism to even really go out and buy this. We're becoming very reliant on self-care and Medicaid, which is putting a strain on some state budgets. Now, there's lots of ways to do long-term care planning. That's not just insurance. It's earmarking funds. It's deciding who you want to have provide you care, even having that conversation with your family members.

A lot of people never get to that, but that's the primary way that people get long-term care is their kids, their spouse, their grandkids start providing that care typically, in an unpaid fashion. And there's actually a lot of research that shows that harms that person's work and productivity too, because they're taking on that family care-giving responsibility. It's a huge concern out there.

There are a lot of proactive things you can do. As I mentioned, insurance, earmarking funding, building in a ladder portfolio from your savings, so later on you have some more income. And a lot of people do sell their homes to fund whether you're moving into a nursing home, or assisted living facility, but that doesn't always solve the problem. We still have to worry about the type of care, how we're going to receive that care, and the dignity of life that we want to have when we might need that care.

- Jamie, when the boomers see the predictions daily, hourly of a recession, they hear that the markets may drop a full 10% this year, what's your advice? To shut that out, or how to prepare for it?

JAMIE HOPKINS: Yeah, you definitely can't shut that out completely. The reality is, if you have a longer time horizon for investing, you can take more risk. You could ride through some recessions. If you are a baby boomer, you're right about to enter retirement, you're right in retirement, those are actually that five year period right around retirement are the riskiest time period really from an investment and withdrawal perspective. We call that sequence of returns risk. You get bad returns early on, you're generating your retirement income from that portfolio by selling off a part of it. That's a super risky time period.

So there are good kind of research and statistics that say you should actually de-risk right around the beginning of retirement. So if you are one of those baby boomers, and not just because you're worried about it because the math actually helps support it, that you de-risk a little bit right there. And you can actually move back up into the market, something we call a rising equity glide path in retirement. So you can actually get riskier as retirement goes.

That goes against that old adage of just keep buying bonds as you get one year older. The math and research historically hasn't supported that as the best retirement income withdrawal strategy. But for some people, they feel more comfortable with it so they do risks throughout all of retirement.

But I'd say, be very careful there, careful with your cash. If you feel better for the next two or three years and you're right around retirement, holding that bond ladder portfolio to provide that income, that can be a really smart strategy. You might not want to do that for 30 years, but for five years can be a really good strategy.

- All right. Good advice there. Jaime Hopkins, good to see you. Enjoy the weekend, sir.