Long-term care … what you see ISN’T all there is

November 7, 2018

Jean Young

Jean Young

I write a lot about the state of retirement in America, and how certain saving behavior can help set you up for success. But until recently we haven't fully addressed the elephant in the room: the cost 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 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 was active and mostly healthy. She fell and died soon after, 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 one day? 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 that bias as 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.

Kahneman said, "The world in our heads is not a precise replica of reality; our expectations about the frequency of events are distorted by the prevalence and emotional intensity of the messages to which we are exposed." It's true. You’re going to remember the amount of care Grandma Young required. 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 because it paints such a vivid picture in our minds. It's a kind of mental shortcut in which our minds veer straight to the thing we remember the most.

But believe it or not, the news about long-term care isn't all doom and gloom. It's all in how you think about it, in how you frame the discussion. 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. Factoring long-term care into our retirement planning—our health and wealth planning—is something proactive we can do to help mitigate concerns.

Let's break it down

Here's where framing the discussion of long-term care comes in. If you think about paying for long-term care for you or for someone in your family, you can quickly get overwhelmed, just as you'd get overwhelmed if you had to pay for your house in one lump sum, or for your food and clothing for the rest of your life in one lump sum.

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. Although it's still a lot of money, when you view it that 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! You can make a few assumptions—your health and family history offer hints, but we truly won't 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. Plan and save to the extent possible.

Think of long-term care as an incremental expense, not in terms of a lump-sum expense. Do something to prepare, then get out there and enjoy life.


  • All investing is subject to risk, including the possible loss of the money you invest.

Jean A. Young, CPA, is a senior research analyst with the Vanguard Center for Investor Research. Her research topics include the design of employer-sponsored retirement programs and the psychological and behavioral aspects of participant decision-making. She also is the lead author of Vanguard's annual research report How America Saves. Before her current position, Ms. Young was a client relationship manager in Vanguard's defined contribution recordkeeping business. Ms. Young earned a B.A. in business administration from Franklin & Marshall College and an M.S. in taxation from Widener University. She is a CPA.


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