With age comes wisdom supposedly, but even as more Americans are living longer they are not financially prepared for their retirement years and also lack life insurance.
According to the Centers for Disease Control, the average American’s life expectancy has increased to 75.7 years for men and 80.6 years for women. Of those age 65 and coupled, there is a better-than-even chance one partner will live to age 94, and one-of-10 couples will have a partner that lives to 100 or more.
Unfortunately, a new study finds that while Americans are living longer, almost half are concerned that they are not financially prepared to live into their 70s, 80s and 90s.
Can’t afford to live…
The “Longevity & Preparedness Study,” conducted by Northwestern Mutual, asked people how financially prepared they feel to live to age 75, 85 and 95 and revealed that only slightly more than half (56%) feel financially prepared to live to the age of 75. Fewer than half (46%) feel financially prepared to live to age 85; and only about one-third (36%) feel prepared to live to age 95.
“These findings underscore that there is room to further educate clients—not only with respect to increasing longevity, but also more broadly about the value of long-term planning,” said Greg Oberland, Northwestern Mutual EVP. “So we, as an industry, must emphasize that the plan is as important as the goals. And that plan is like a roadmap that helps clients stay on course.”
According to the research:
• Women on average live five years longer than men and feel less financially prepared to live longer lives.
• Men regardless of age are significantly more likely than women to feel financially prepared to live to age 75 (65% vs. 48%), 85 (55% vs. 37%), and 95 (43% vs. 30%).
• Younger Americans (25-59) feel less prepared than older Americans (60+) to live to 75 (47% vs. 79%), 85 (37% vs. 66%), and 95 (29% vs. 52%)
“No matter what age you’ll live to, it’s important to protect the dollars you’ll eventually depend on to provide an income in your retirement years,” Oberland said.
Can’t afford to die…
The findings of the “The Insurance Barometer Study,” an annual study conducted by the Life and Health Insurance Foundation for Education and the Life Insurance and Market Research Association to better understand the public's opinions, attitudes and behaviors regarding life and health insurance are separate but consistent with the “Longevity & Preparedness Study.”
The study found that almost one-third of respondents believe they need more life insurance; that number includes 20% of current policyholders and about half with no coverage.
The two excuses most cited for not purchasing adequate amounts of life insurance are that it is too expensive (83%), and that they have other financial priorities (85%).
Respondents were asked to estimate the annual costs of a 20-year level-term life policy for a 30-year-old and wildly over shot, guessing the cost at $400. Younger adults, those most likely to qualify for preferred pricing, overestimated the actual cost of $150 by a factor of seven.
“Our research has suggested for years that consumers believed they couldn’t afford life insurance, yet they had no idea how much it actually cost,” said Robert Kerzner, president and CEO of LIMRA, LOMA and LL Global. “This is the first study that clearly quantifies the wide gap in consumers’ understanding on the affordability of life insurance.”
The cost of basic term-life insurance has fallen by about 50% over the past 10 years, offers Marvin Feldman, CLU, ChFC, RFC, president and CEO of the LIFE Foundation.
“We know these misconceptions are hindering people from taking steps to get the coverage they need. In essence, life insurance is falling down the priority list,” Feldman said.
According to the study, many are more concerned with paying their mortgage or rent (31%), or losing money on investments (26 %) than with buying life insurance. Interestingly, saving for retirement continued to be the top financial concern (50%).
As the U.S. economy recovers, insurers have an opportunity to help consumers rethink their investment and retirement strategies to ensure they have enough money set aside to maintain the life they’re accustom to and to fund new plans, Feldman observes.
“We want companies and producers to better understand the consumer attitudes and perceptions that are contributing to the gap in coverage that exists today so that they can better respond and help us educate the public about the importance of financial protection and taking personal financial responsibility,” Feldman said.
Technology can play an important role in those educational efforts by creating direct access to quality information and pricing.
“We need to engage younger generations —who live online—more creatively, using the platforms and technology they use in their day-to-day lives, to convey this information so that they know that they can afford the life insurance their family needs,” Kerzner said. "While we have seen some insurers begin to advertise the price of their products in their marketing materials, and others place quoting tools more prominently on their websites to better educate consumers, all insurers should take a look at how they can make it easier for consumers to access this vital information and better understand the real cost of life insurance."
Chris McMahon is the senior editor at Insurance Networking News, a SourceMedia publication.
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