Northwestern Mutual surveyed more than 2,500 U.S. adults in October 2012 to gain insights on attitudes and motivations of Americans in relation to long-term care planning. Not surprisingly, there are some significant conflicts between beliefs and realities in terms of long-term care financing.
Americans are unprepared to pay for long-term care
Less than half of those surveyed say they feel financially prepared to live to age 75. A little more than one-fourth say they feel prepared to live to age 95. The average life expectancy in the U.S. is now 80 years old.
And while 40 percent say they're already saving for their long-term care needs, 24 percent say they don't know how they'll address their needs. More than half (55 percent) say they expect to need some sort of financial assistance to pay for long-term care.
Many Americans underestimate the cost of long-term care
When asked what they believe to be more expensive, opinions are nearly evenly split between those who think that one year of undergraduate tuition at Harvard University is more expensive than one year spent living in a nursing home (46 percent) and those who think the opposite is true (54 percent).
So which is true? The average cost of one year in a nursing home is estimated at more than $70,000. One year of undergraduate tuition at Harvard University for the 2011-2012 academic year averages between $35,000 and $48,000, depending on the course of study.
Twenty-eight percent of Americans believe their long-term care needs will be covered by Medicare or Medicaid, while another 19 percent believe their costs will be covered by their private health insurance plans. Sixteen percent are banking on not ever needing long-term care, while 14 percent say they don't need to think about it until they're a senior citizen.
Are men more prepared for long-term care needs?
In general, men tend to be more confident about their financial preparedness, with more men responding that they're financially prepared to live to 75, 85 or 95 years old across the board. Men are also more likely to already be saving for their long-term care needs (47 percent vs. 37 percent of women) and are more likely to own long-term care insurance (15 percent vs. 9 percent of women).
However, men are more likely to say they believe their long-term care needs will be covered by Medicare, Medicaid (30 percent vs. 26 percent) or a private health insurance plan (22 percent vs. 17 percent). Forty-one percent of women say none of those scenarios are accurate, compared to 31 percent of men.
Older generations are better prepared for long-term care
Americans 55 and older are more likely to report feeling financially prepared to live to 75, 85 or 95 years old and are also more likely to own long-term care insurance than younger respondents. The 45-54 age group was most likely to report that they're thinking about long-term care insurance or saving for their future long-term care needs.
Twenty percent of 18-34 year olds say they don't need to think about long-term care, that it's something only senior citizens need to think about. Americans 45 and older are more likely than younger groups to say they believe their long-term care needs will be covered by Medicare or Medicaid.
So what does all this data mean? We can infer that U.S. adults could use some more education on long-term care costs, the likelihood that they'll need long-term care in the future and the need to plan and save to pay for that care. This isn't news, but it's a problem that doesn't seem to be going away. And with younger generations brushing off long-term care as something they don't need to consider for a few decades, the number of unpaid family caregivers and the requirements on those caregivers will only continue to increase.