Promises to save money or manage debt perennially appear on New Year’s Resolution lists across the nation. With the lessons of the Great Recession still fresh, as many Americans review their financial plans for 2011 and beyond they are more concerned than ever with rebuilding their portfolios, protecting their savings and better analyzing their long-term financial risks. One such risk is the impact of the cost of long-term care.
"Financial stability has always been a top priority for American consumers, as everyone’s New Year’s Resolution list shows," said Mark Konen, President, Insurance & Retirement Solutions of Lincoln Financial Group. "But in today’s economy, financial concerns take on new complexity. A new Lincoln Financial Life Stages Survey: Long-Term Care shows that consumers recognize the importance of financial planning for their future, but are not aware of funding options that may be available to cover unanticipated costs — like those stemming from long-term care."
The new consumer study shows that nearly two-thirds (65 percent) of Americans believe it is important to plan for the possibility of needing long-term care, but only 44 percent have taken steps to protect themselves, mainly by increasing savings.
The Lincoln Financial Life Stages Survey: Long-Term Care confirms that Americans are concerned about demographic trends forecasting a dramatic rise in the number of people needing long-term care in the next decade. Federal data show the cost of long-term care can easily exceed $60,000 a year — an expense that is not covered by traditional programs, such as Social Security or Medicare and one that would quickly drain the average U.S. family’s savings of $120,000.
The study of more than 1,000 Americans shows while most understand the financial risks associated with long-term care, they are expecting savings, investments and entitlement programs to fund any future needs:
- 75 percent said they would use savings.
- 56 percent said they would be willing to sell their homes.
- 41 percent said they would be willing to refinance their homes.
- 21 percent said they would be willing to go into debt.
- 18 percent said they would be willing to declare bankruptcy to qualify for government aid.
Stand alone long-term care insurance ranked seventh as a likely source of funding.
"Consumers seek more flexible solutions when planning for their futures," Konen said. "They are hesitant to risk investing their money in limited protection. They want long- term care if it becomes necessary, but also want to protect their assets if it does not."
The Impact of Experience
Among consumers who had overseen the long-term care of a loved one, 83 percent said their loved one’s lifestyle had changed significantly to pay for the care. But the impact was not limited to the loved one. In more than one fifth of cases, people overseeing the care of a loved one reported that they personally helped to pay for it. Of this group:
- 93 percent of care overseers used their own income to help pay for care.
- 72 percent personally provided care in the loved one’s home.
- 53 percent took the loved one into their own home to provide care.
- 48 percent used their own savings to help pay for care.
Because of their experience, this group was more likely to protect themselves against the cost of long-term care. As a result, 47 percent of this group said they "feel more confident" that they are protected, compared to 34 percent of those with no direct experience.
"As Americans live longer and healthcare costs continue to rise, the issue of long-term care takes on greater importance," said Lou Moore, a financial planner with Lincoln Financial Advisors Corp. "The emotional burden of taking care of a loved one is difficult enough without having to also worry about the financial impact. The good news is there are funding options that can provide the flexibility consumers need when planning for an unexpected event."
"Long-term care is a complex financial issue which requires careful planning well in advance," said Will Fuller, President and Chief Executive Officer of Lincoln Financial Distributors. "Advisors play a critical role in helping consumers consider all of their funding options for a potential long-term care event."
About the Survey
The Lincoln Financial Life Stages Survey: Long-Term Care surveyed 1,002 adult, middle-class Americans, 40 to 70 years old. Respondents had investable assets of $100,000 or annual household income of $100,000 (or both). The survey respondents were evenly split: about one third had overseen the long-term care of a loved one, about a third knew someone who had overseen the long-term care of a loved one and a final third had no experience with long-term care. The study results contain a margin of error of +/- 3.10 percentage points at the 95 percent confidence level. To see more about the Life Stages Survey: Long-Term Care go to www.LincolnFinancial.com/Surveys.
About Lincoln Financial Group
Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. With headquarters in the Philadelphia region, the companies of Lincoln Financial Group had assets under management of $150 billion as of September 30, 2010. Through its affiliated companies, Lincoln Financial Group offers: annuities; life, group life and disability insurance; 401(k) and 403(b) plans; savings plans; and comprehensive financial planning and advisory services. For more information, including a copy of our most recent SEC reports containing our balance sheets, please visit www.LincolnFinancial.com.