Data and Research March 12, 2018

Long-Term Care Needs Not Included in Future Financial Plans for Many

A study also learned that while 53% of respondents said they planned to become caregivers, many are unprepared for the financial implications of taking on such a role.

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While 56% of Americans say that saving for long-term care (LTC) is one of their top financial priorities, 73% have not planned for their LTC needs, Northwestern Mutual learned in a survey. While the focus on LTC needs followed that of saving for retirement (68%), it surpassed paying off debt (56%) and saving for a home (33%).

Among the 26% who have taken steps to plan for their long-term care, 52% included provisions in their financial plan, 42% purchased an LTC product and 35% increased their savings.

Forty-seven percent of Americans expect their spouse or partner to help them with their LTC needs, and 26% expect their children to assume the role. Nonetheless, 69% have not discussed this with their family.

“According to our data, Gen X and even Millennials are the heart of the sandwich generation and struggling with the competing pressures of caring for aging family members and their own children, while building financial security and maintaining a lifestyle,” says Kamilah Williams-Kemp, vice president, long-term care at Northwestern Mutual. “To break this cycle, it’s imperative to have candid conversations with family members about your expectations and work together to develop a realistic strategy for your future that will serve everyone’s best interests.”

The study also learned that while 53% of respondents said they planned to become caregivers, many are unprepared for the financial implications of taking on such a role. Although 57% of people who expect to become caregivers realize they will incur costs, 48% have not made any plans to cover these costs. 

While 48% said they were not equipped to provide financial support, 68% actually provided it. More than one-third, 34%, spend between 21% and 100% of their monthly budget on caregiving-related expenses. Among those expenses, $273 is spent on average on medicine and medical supplies, and $159 on food. To cover these expenses, 67% of caregivers reduced their own living expenses.

Data and Research March 12, 2018

Sponsors Using TDFs, Auto Enroll to Boost Savings

Employer contributions and loans are also prevalent, a Brightscope/ICI report says.

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Retirement plan sponsors are using a range of plan features and a diverse mix of investment options to encourage savings, a new report, The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2015, says.

Large plans have ramped up their target-date fund (TDF) offerings and most plans are automatically enrolling participants, offering employer contributions and making loans available, according to the report, created by BrightScope, a Strategic Insight company, and the Investment Company Institute (ICI). The report is based on an analysis of the Department of Labor’s (DOL’s) publication of Form 5500 data.

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“One of the strengths of the 401(k) system is that it allows employers to customize their plans to meet the needs of their unique workforce,” says Sarah Holden, ICI’s senior director of retirement and investor research. “Employers use that flexibility to offer features that can encourage participation. Employer contributions, auto enrollment, loans and diverse investment options—including target-date funds—can make it easier for participants to plan and save.”

Eighty percent of plans offered TDFs in 2015, up from 32% in 2006. In 2015, the average large 401(k) plan offered 29 investment options, of which about 14 were equity funds, three were bond funds and eight were TDFs.

The analysis also found that 90% of large plans had employer contributions. Among plans with $1 million to $10 million in plan assets, 80% had employer contributions. More than half of plans with more than $100 million in plan assets automatically enrolled participants. Among plans with more than $1 billion in plan assets, 60% used automatic enrollment. However, for plans in the $1 million to $10 million range, only 20% used auto enrollment.

Overall, 82% of plans of all sizes had participant loans outstanding in 2015. For plans with more than $50 million in plan assets, more than 90% had participant loans outstanding.

In 2015, the average total plan cost was 88 basis points down from 1.02% in 2009.

BrightScope/ICI’s full report can be viewed here.

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