You can ease women’s long-term-care fears

Americans are in denial about their finances. Federal data show that they spend like there’s no tomorrow. Our middle class is among the most affluent in history, but many live paycheck to paycheck, their futures mortgaged to fund their increasingly expensive amusements.

Despite their spending habits, many Americans — especially women — are tormented by the notion that they will outlive their money. Securian Financial Group recently polled 400 women, ages 30 to 64, about their sense of financial well-being. We also asked about their perceptions of the financial effect of long-term care (not the insurance, but the actual care). The overall theme of their responses can be described in one word: fearful. Even respondents with annual household incomes of $100,000 or more struggled with the fear that long-term care could wipe them out financially.

These fears grow out of the ongoing public discussion about the extent to which Americans are now responsible for their own financial futures. Articles in popular media talk about The Number. Trade media talk about products that reduce longevity risk. But when we as advisers sit down with our clients, we seldom talk about one of the primary reasons why Americans need to accumulate wealth — to afford the cost of keeping themselves as healthy and physically comfortable as possible every day of their lives. Not just the first 75 or 80 years, but every day, even if they live to 110.

Perhaps advisers don’t discuss long-term care with their clients because many discussions are with men, and it’s not a top-of-mind topic for most men. Men don’t live as long as women and are therefore less likely to need professional long-term care. For many women, caregiving is the central focus of much of their lives as they raise children, nurse elderly relatives and take care of their increasingly frail husbands.

If you have been searching for a way to get female clients involved in the financial planning discussion, bring up long-term care. The Securian research shows that this is a universal concern among women, even those in households with an annual income in excess of $100,000. Only about 11% of the respondents in the Securian study fell in this income category, so the sample size is small. However, you will see the percentages are still large enough to make the results compelling.

While women in the $100,000-plus income category are more sanguine about their finances than women with smaller incomes, that’s not saying much. When asked whether they consider themselves financially well-off, only 42% in the affluent category said they did. This is a much higher percentage than for the whole group (17.2%), but considering that current U.S. median household income is around $46,000, it’s a surprise to learn that people who make more than twice that amount do not consider themselves to be well-to-do. In fact, an astounding one in five women in the $100,000-plus category agreed that “an unexpected expense of $1,000 would put me in financial hardship.” That means their margin for financial error is less than 1%. No wonder they’re anxious.

Where is their money going? You’d like to think it’s going into their retirement plans. However, nearly 40% of the high-income group agreed with the statement, “after meeting my current financial obligations, I have very little left to put away for retirement.” Additionally, more than one-third of the women in this group disagreed with the statement, “I have my financial house in order for my future.”

It appears that some of these respondents were trying to put the brakes on their spending. Nearly one fourth said they generally were on a tight budget, and 63.5% said they were “very cautious” when spending money.

Nonetheless, financial concerns were top of mind for the women in our survey. Of the $100,000-plus group, 55.4% said they “often” worry about financial security, and 51.4% said they were concerned their money would not last through retirement. Clearly, these women are agonizing over their financial futures. And we haven’t even talked yet about their sense of financial responsibility for their parents’ long-term care.

Caring for elderly parents seems to fall to daughters and daughters-in-law. According to a study by the San Francisco-based Family Caregiver Alliance, 70% of family caregivers are women. Additionally, because they live longer, 70% of nursing home residents are women, according to the National Library of Medicine in Bethesda, Md. But women are less likely than men to have the financial wherewithal to pay for long-term care. Because women take time away from their careers to care for family members and because they generally are paid less, their average lifetime income is lower than men’s. Research from the National Center on Women and Aging in Waltham, Mass., shows that family caregivers lose an average of $659,130 over a lifetime in reduced salary and retirement benefits.

The Securian study shows that 60.2% of the 400 women polled agreed that “because parents cared for their children when they were young, grown children should take care of their parents,” implying a personal willingness to care for their parents. However, they are not sure the money is there to pay for any care beyond what they personally would provide. One-third of the 183 women whose parents both are still living are concerned about the quality of care their parents will receive because of their parents’ limited finances. More than one-third, or 35.9%, are concerned for their parents because of their own limited finances.

Although a potential solution to this problem — long-term care insurance — is obvious to those of us in the financial services industry, it was not so obvious to the women in our study. Of the 400 respondents, 57.8% agreed that “long-term-care insurance is a necessity in today’s world.” But it’s not clear that they knew what long-term care insurance is. Nearly one-fourth said their parents had long-term-care insurance, yet industry statistics show only 9% of Americans have purchased it. Just as revealing is the relatively large percentage — 28.5% — who said they didn’t know whether their parents had long-term care insurance.

The “good” news is that only a small minority assumed the federal government would pay for their parents’ care. Five percent said they believed their parents did not need long-term-care coverage because Medicaid would cover their expenses should they become disabled as they age. A similarly small percentage (5.2%) held the same belief about their own eventual long-term-care expenses.

It’s no surprise, then, that the cost of long-term care is a nagging concern for women. Among respondents of all ages and incomes, 41% said their biggest fear was becoming a financial burden to their families. Even in the highest income category, more than a quarter of those surveyed expressed this fear.

People who have dealt with elderly parents’ medical crises and subsequent care know it takes a far greater toll on their personal and professional lives than they had ever anticipated. Part of this is due to a lack of planning. Of the 91 respondents whose parents required care in their final years, a whopping 84% said the decision about where care would be provided was not made until the care was needed.

As with a host of other thorny topics related to mortality, the onus is on you as the financial adviser to help couples face and prepare for the likelihood that some day one or both of them will need some form of long-term care. This presents a unique opportunity for advisers who work with client couples in which the man usually takes the lead on financial matters. By raising the long-term care issue, you are raising a topic that, according to Securian’s research, is top-of-mind more often with women than with men.

That fact alone, however, doesn’t mean women are eager to discuss it. You can get around their reluctance by advocating for those who are not sitting at the table but would be affected by the parents’ lack of preparedness. As Harley Gordon, founder of the Corporation for Long-Term Care Certification Inc. in Newton, Mass., points out in his client seminars, “You will be cared for.” But what will your lack of preparation cost your spouse and your children — especially your daughters?

By advocating for those who are absent, you will move the client’s focus from their own mortality to the well-being of the people they love most, giving you an opportunity to show them how to protect themselves from risk.

Our industry is populated with advisers who have the compassion and the ability to connect with their clients’ innermost fears and help relieve the anxiety of an uncertain future. With heightened awareness and careful planning, you can provide the products and services that solve the financial problems of retirement and long-term care. Our mission is to get these solutions to our clients so that — regardless of their gender or longevity risk — they can afford a comfortable and secure old age without posing a financial burden to the people who love them most.

George I. Connolly is president and chief executive of St. Paul, Minn.-based Securian Financial Services Inc.