Americans Worry About The Need For Long-Term Care But Fail To Prepare
Posted on March 23rd, 2011
As retirement savings have taken a serious hit in the last few years, the cost of long-term care services has continued to rise, causing many Americans to doubt their ability to pay for the services they may need in the future. Prudential’s recent study, Long-Term Care Insurance: A Piece of the Retirement & Estate Planning Puzzle , finds 71 percent of those surveyed are concerned about the possibility of needing extended care service. Yet, 63 percent do not have confidence in their ability to pay for this care.
“There’s no question that as Baby Boomers age and approach retirement, one critical component to their financial plan – sometimes overlooked with dire consequences – is how to protect retirement savings, income, choice, and independence from the impact of a long-term illness or disability,” according to Malcolm Cheung, vice president, Prudential Long-Term Care Insurance.
Dealing with the potential for long-term care needs requires preparation, including proper retirement planning; understanding the costs of both long-term care services and insurance; and the willingness to discuss the available planning options.
Prudential’s study points to a disturbing lack of knowledge regarding the cost and funding sources for long-term care services. On average, respondents estimated the average daily rate for a semi-private room in a nursing home at $450 – more than double the actual average of $215. And, more than one-third believe that a combination of private health insurance, Medicare, and Medicaid will cover any future extended care costs, while in reality, consumers can expect minimal coverage from all but Medicaid. The cost of insurance to cover long-term care needs is equally misunderstood. While the cost of an individual policy varies significantly by age at time of purchase, 60 percent of those surveyed well overestimated the annual cost, even for the oldest of individuals. The remaining 40 percent were so unsure they couldn’t venture a guess.
Cheung believes these misperceptions about both the role of private insurance and government programs and the actual cost of care and insurance may contribute to a failure to act. “Despite years of publicly and privately funded efforts to raise consumer awareness about the importance of planning for long-term care needs, Americans seem to understand almost all forms of insurance better than they do long-term care insurance. As a result, greater education is needed about the actual costs of long-term care and realistic funding options. The good news is that 77 percent of those surveyed in our study acknowledge they should know more.”
Given that many Americans already feel challenged about saving enough money for retirement, the unexpected costs associated with future extended care needs can add to that concern as the cost of care could erode one’s nest egg. Prudential’s research shows that those who currently have long-term care insurance are twice as likely to be “highly confident” about their ability to pay for future extended care services without depleting their personal assets or retirement savings. This finding points to the peace of mind achieved by incorporating long-term care insurance into a comprehensive retirement plan.
For more details concerning consumer attitudes, knowledge, and experience relative to long-term care services and insurance, see Long-Term Care Insurance: A Piece of the Retirement & Estate Planning Puzzle.
Prudential Financial, Inc.
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