“New research by the Employee Benefit Research Institute (EBRI) finds that retirees are not spending down their accumulated assets to fund their retirement needs—even though the risk of large out-of-pocket health care costs may be modest. The EBRI Issue Brief, “Asset Decumulation or Asset Preservation? What Guides Retirement Spending?” shows that even when assets are plentiful or when there is guaranteed income available to ensure that retirees will not run out of money, rates of decumulation are low. … ‘The evidence shows that many retirees are reluctant to spend down their assets,’ notes Lori Lucas, president and CEO of EBRI. ‘This likely has to do with all of the financial uncertainties connected with retirement. People don’t know how long they are going to live or how long they have to fund their retirement from their assets. They may also be afraid of facing catastrophic health care costs if they need to stay in a long-term care facility for a prolonged period.’”
LTC Comment (from Stephen A. Moses, President, Center for Long-Term Care Reform): How ironic. People preserve and grow their assets rather than spending them to enjoy retirement partly because they worry about long-term care costs. But Medicaid pays for most high LTC costs even for the middle class, which is why most people have not worried enough about asset preservation to buy LTC insurance. It’s a vicious downward spiral taking us into a hopeless hole when the bottom finally falls out of Medicaid.