An important part of retirement saving is setting the right targets. People aren’t going to hit the target when it comes to saving for elder care, because what they think they are aiming for is so far from the actual cost.
Foster City, Calif. (PRWEB) June 24, 2014
Although the real cost averages more than $81,000, 57 percent of Americans believe that nursing home care costs less than $75,000 annually, according to a new survey conducted for MoneyRates.com. The survey also finds that 67 percent of respondents have less than $75,000 saved for elder-care expenses – including the 40 percent of respondents who have saved nothing for these costs.
Richard Barrington, CFA, senior financial analyst for MoneyRates.com, says that a misunderstanding of nursing-home and assisted-living expenses can lead to faulty retirement planning.
“An important part of retirement saving is setting the right targets,” says Barrington. “People aren’t going to hit the target when it comes to saving for elder care, because what they think they are aiming for is so far from the actual cost.”
The survey also reveals confusion among respondents in the cost difference between assisted-living care and nursing-home care. The survey responses show that Americans believe that these types of care cost about the same amount. But nursing-home care is roughly twice the cost of assisted-living care, according to 2012 data from the MetLife Mature Market Institute.
While most respondents age 55 or older correctly estimate that the average cost of nursing-home care exceeds $75,000 annually, Barrington says that this isn’t necessarily encouraging, given that younger age groups overwhelmingly underestimate the costs.
“It does not help much to recognize the cost later in life,” says Barrington. “You have a much better chance of saving the needed amount if you put aside money steadily over the course of your career.”
While men and women underestimate the cost of nursing-home care in roughly equal numbers, the problem of insufficient savings may be more acute among women. Fifty percent of the women surveyed said they have nothing set aside for elder-care expenses, compared to the 31 percent of men who said the same.
This survey included 2,000 U.S. respondents age 25 or older and was conducted in April 2014. The sampling was split evenly between men and women. The responses were collected by Op4G on behalf of MoneyRates.com.
For more details, please see the full feature on MoneyRates.com.
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