Billy Joel famously sings that only the good die young, but a recent study shows it’s really the poor who are dying young.
Older people who earn less than $20,000 a year die nine years sooner on average than those who earn $120,000 or more, according to a study by the National Council on Aging (NCOA) and University of Massachusetts Boston’s LeadingAge LTSS Center. Middle-income seniors who earn around $60,000 die three years earlier, according to the study.
With income inequality growing and more seniors falling into poverty each year, this is an ominous sign for the largest surge of Americans turning 65 daily in history, experts said. But with proper planning, it doesn’t have to be, financial advisers said.
“There’s no ‘too young’ of an age to plan,” said Brian Davis, a San Diego-based financial adviser with Northwestern Mutual. “I have clients in their 20s talking about long-term planning.”
On the other end, “it’s also never too late,” he said.
Seniors are the only age group that saw a rise in poverty in 2024, Census Bureau data show. That’s more than 9.2 million older Americans.
Not only have seniors had to grapple with elevated inflation since the pandemic, but they are also dealing with expensive caregiving costs, some experts said.
Long-term services and support (LTSS) “remains one of the most significant and common financial shocks: More than half of adults 65 and older will need these services for less than two years, and 14% will require this care for more than five years,” the report said. “Just one year of a private room in a nursing home costs more than $100,000.”
LTSS consists of personal assistant services, adult day care, home emergency response systems, homemaker services, institutional care, nursing homes and assisted living homes.
Very little to none of these are covered by Medicare or traditional health insurance, and prices have generally risen by more than inflation, according to a Genworth and CareScout study measuring costs of long-term care services.
“We make plans to buy a house, send our kids to college, and even to retire, but few Americans plan for future long-term care needs,” said A. Lynn White, chief executive of CareScout Insurance.
◾No matter what age, start with an adviser to help create a customized plan.
“Meet as early as possible to make sure retirement years (are) adequately funded,” said financial adviser Jessica Nino at Edward Jones. “If you’re closer to 50 years old, you’ll want to maximize all tools available right away.”
She suggests contributing to a 401(k) to get company matches, a Roth IRA to take advantage of tax-free withdrawals later, and/or a triple tax-advantaged health savings account (HSA).
HSA contributions are made before tax, grow tax deferred and if used for qualified expenses, distributions are tax-free. “It’s like a Roth IRA, but there’s no tax upfront,” she said.
◾Build emergency savings. The research report noted 80% of American households age 60 and older would not be able to withstand a financial shock, such as a divorce or health setback, making savings in cash or cash-like securities important, Davis said. Don’t let one setback derail the rest of your life, experts said.
◾Plan for long-term services and supports (LTSS). Consider traditional long-term care insurance or a hybrid plan that allows you to use the money for LTSS if you need it or leave it as a tax-free death benefit to your heirs, advisers said.
NOTE: Buying a hybrid plan too early may have you paying a lot of premiums but too late may be too expensive, Nino said. Ideally, buyers are healthy and between 40 and 55 years, she said.
◾Have a family meeting. More often, adult children are becoming the sandwich generation, caught between supporting their own kids and parents at the same time. To prevent that or make it easier, parents and adult children should have frank discussions about what type of care mom and dad may need and what resources are available, Nino said.
Decisions about the family home, for example, can be made in advance, she said. They could decide if they want to “sell (the) house when parents are alive and have to pay capital gains on the appreciation, or sell it once the parent passes away and pay no capital gains, or rent out the house and use that money to pay for mom and dad, or the kids pay out of pocket and keep the home in the family.”
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.