Most Americans do not feel financially prepared for advanced age

By Maryalene LaPonsie on May 15th, 2012

Most Americans don't feel financially prepared to live into their 80s and 90s. What's more, only a small majority feel financially ready to reach their 70s.

Those two findings from the Northwestern Mutual Longevity & Preparedness Study could highlight a looming crisis for future seniors, as longevity data indicates the average person can expect to live well into his or her 70s.

Americans feeling uneasy about the future

For the study, Northwestern Mutual asked people to indicate how financially prepared they felt to live to the ages of 75, 85 and 95. Respondents were asked to base answers on their current financial plan.

While a small majority felt comfortable with the prospect of living to age 75, fewer were certain they were financially prepared to live much longer than that. According to the survey, the following percentages of individuals reported being ready to live into advanced age:

  • 56 percent felt financially prepared to live to age 75
  • 46 percent felt prepared to live to age 85
  • 36 percent felt prepared to live to age 95

Men were more likely than women to feel financially prepared. But even among men, only 43 percent felt ready to reach age 95.

In addition, Americans between the ages of 24 and 29 were significantly less likely to feel prepared for their advanced years than those who are currently age 60 or older. Only 29 percent of Americans in the younger demographic felt prepared to reach age 95, while 52 percent of older Americans believe they are in good financial shape to live into their 90s.

Using life insurance to prepare for old age

Data from the Centers for Disease Control and Prevention indicates the overall average life expectancy of Americans is currently 78.2 years. For men, life expectancy is 75.7 years, while the average woman can expect to live to 80.6 years.

"With longevity comes an increased need to proactively manage your personal finances, which includes a solid risk management strategy," said Greg Oberland, Northwestern Mutual executive vice president, in a press statement.

Life insurance policies are one way couples can plan for the future. The Society of Actuaries finds that for couples age 65 or older, there is a 50 percent chance one spouse will live to age 94. In 10 percent of couples, one individual will reach age 100.

The death benefit from a life insurance policy can be used to help support the surviving spouse during his or her remaining years. While term life may be affordable life insurance for younger individuals, it can become cost prohibitive for those who are nearing retirement. Whole life offers guaranteed coverage and also builds cash value. This value can be borrowed against and may provide another financial safety net for those who live to an advanced age.

Maryalene LaPonsie
Maryalene LaPonsie has been writing professionally for more than a decade on topics including education, insurance and personal finance. She holds a Bachelor's Degree in Political Science from Western Michigan University.

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