Fidelity Investments Estimates $85,000 Needed to Cover Retiree Long-Term Care Insurance Costs

Business Editors

BOSTON--(BUSINESS WIRE)--June 26, 2008--To help Americans better plan for their healthcare costs in retirement, Fidelity Investments estimates that a 65-year old couple in 2008 will need $85,000 to insure against long-term care expenses 1.

In just 10 years, approximately 50 million Americans will be over the age of 65. More than half of these individuals will require at least one year of long-term care, and 20 percent will require more than five years of care before they die 2. With the average cost of a one-year stay in a private room in a nursing home estimated at more than $76,000 3, not preparing for these potential costs can result in personal and financial burdens for family members.

In fact, between 75 and 80 percent of all long-term care given in the United States is provided by a family member 4. New Fidelity research finds that currently there are 29 million Americans providing informal long-term care to family members, and spending an average 34 hours per week providing this care 5, nearly equivalent to a full work week.

“With the cost of certain long-term care services rising by as much as 7% per year for the last 5 years 3, retirees who don’t factor these future potential costs into their overall retirement plan, may be surprised by the financial impact on themselves or their family members,” said Joan Bloom, senior vice president, Fidelity Investments Life Insurance Company.

To illustrate the potential financial burden, Fidelity estimates that a 50-year old Baby Boomer, who is earning $50,000 annually, and ends-up providing a total of four years of long-term care to a family member, could lose more than $140,000 in wages, retirement plans, and social security over his or her lifetime 6.

“Having helped more than 100,000 caregiving families, we have found that in addition to the financial impact, these caregivers also experience great emotional and physical tolls,” said Kathleen Kelly, executive director of Family Caregiver Alliance. “For example, often those providing long-term care to a family member develop health issues of their own, and more than half report suffering from depression. Saving for and insuring against long-term care costs, and exploring community resources and organizations that may offer free or low-cost services, can help minimize the family caregiver burden.”

Long-term care insurance benefits go beyond asset protection -- insured individuals may also benefit from increased choice in the location and quality of care. And, according to a Fidelity study about retiree well-being 7, 36 percent of retirees who describe themselves as happy, state that having long-term care insurance is a major contributor to their happiness and peace of mind.

For people who decide that long-term care insurance is the right way to plan for potential long-term care costs, Fidelity recommends they look for insurance policies that offer these top six characteristics:

1)A policy premium that fits comfortably within a family’s financial means

Investors should carefully forecast their ability to pay the premiums year after year.

2)Backing by a carrier with a strong track record of paying claims

The ability to receive policy benefits depends on the integrity of the company and its history of financial strength.

3)Comprehensive coverage that covers in-home as well as facilities-based care

Families want flexibility in terms of the services they opt for when facing a long term care challenge.

4)A benefit period of at least 2, but no more than 4 years, for each person

Fidelity analyzed data on over 6 million long-term care insurance policies sold between 1984 and 2004. It found that 75 percent of all individuals would not have exhausted benefits lasting 2 years. A 4-year benefit period would have been adequate 90 percent of the time.

5)Five percent guaranteed annual benefit increase except for buyers older than age 75

Long-term care services are not immune to price inflation. To guard against this risk, those under age 75 should consider purchasing a policy with inflation protection.

6)For joint policies, a “shared coverage” provision that enables each insured person to tap the other’s benefits if necessary

This valuable flexibility is usually worth the increased cost.

“While long-term care insurance is the right solution for many people, it may not be right for everyone,” said Bloom. “Individuals will naturally need to weigh the costs of insuring against long-term care risks based on their own individual situation including their health history, income, savings and age. All Americans should at least understand the potential cost of long-term care, learn about their choices and develop a plan for how to access care and cover those costs, if needed.”

About Fidelity’s Long-Term Care Research

Data for Fidelity's Long-Term Care Research was collected between June 3 and June 9, 2008 by Synovate, Inc., an independent research firm. The study consisted of 2,000 completes with adults 18 years of age or older in the contiguous U.S.A. The sample consists of individuals selected from an online panel, and is balanced to be representative of the general population based upon region, gender, age, and household income data from the U.S. Census Bureau.

About Fidelity Investments Life Insurance Company

Fidelity Investments Life Insurance Company (FILI) and for NY residents, Empire Fidelity Investments Life Insurance Company ®, NY, NY, develop and market their own insurance products, in addition to providing access to those of other well-known insurers. These products are made available to investors through FILI’s internal distribution arm, Fidelity Insurance Agency, Inc. (FIA). FILI maintains an AA (very strong, 2nd highest) rating from S&P and an A+ (superior, 2nd highest) rating from A.M. Best 8.

About Fidelity Investments

Fidelity Investments is one of the world's largest providers of financial services, with custodied assets of more than $3.4 trillion, including managed assets of more than $1.6 trillion as of May 31, 2008. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to 24 million individuals and institutions as well as through 5,500 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, the largest mutual fund supermarket and a leading online brokerage firm. For more information about Fidelity Investments, visit www.fidelity.com.

1 For a joint long term care insurance policy issued by Genworth Financial Insurance Company on a 65 year-old couple in moderately good health. The figure represents the present value of 17 annual premium payments of $6,710. The policy would provide reimbursement benefits of at least $624,000 for long term care costs incurred by the couple. A guaranteed 5% simple inflation protection feature is included. Life expectancy is assumed to be 17 years for males and 20 years for females. No claims are assumed prior to the first death. The ability to obtain coverage depends on an individual’s health status and family history.

2Long-Term Care over the Uncertain Future: What Can Current Retirees Expect?, Inquiry, Volume 42, No. 4, Winter 2005/2006, pp. 335-350 – Peter Kemper et al

32008 Cost of Care Study (April 2008) – Genworth Financial

4Economic Value of Informal Caregiving (2004) – Peter S. Arno, PhD

5 Please see “About Fidelity’s Long-Term Care Research” on page 3 of this news release

6 The figure represents the aggregate opportunity cost for a hypothetical (age 50) family caregiver against compensation in current dollars of $50,000, retirement plan contributions, pre-tax net gain potential on invested retirement assets, and social security retirement benefit estimates during the periods when the individual is a) directly engaged in providing care to a hypothetical age 80+ family member, b) fully returned to work after 4 years of managing caregiving, and c) retired. Key methodology assumptions are a) the workplace adjustment equals 20% of lesser earned income potential during active caregiving with secondary opportunity costs associated with a missed promotion opportunity, b) employer matching of 100% of the employee's elective salary deferral up to 5% of eligible compensation, c) a 'Balanced' asset allocation mix for retirement assets both pre-retirement and post-retirement, and d) a Social Security benefit growth of 2.8% (SSA Trustee's alternate II) after factoring in lesser earned income crediting during the 4 years of caregiving and the subsequent 11 years when the caregivers retirement commences at age 67.

7Study of the Financial Well-Being of American Retirees, Fidelity Strategic Advisors, 2007

8 S&P rating reflects solid position in the variable annuity market, operating performance, capitalization, liquidity and investment quality, 01/07. A.M. Best rating reflects company’s financial strength, 01/07 Other Works Consulted Caregiving in the U.S. (2004) – National Alliance for Caregiving and AARP

Guarantees are subject to the claims-paying ability of the issuing insurance company.

Fidelity Brokerage Services, Member NYSE, SIPC

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