WOMEN AT RISK: THE DISABILITY- SURVIVAL PARADOX

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1 WO AT RISK: THE DISABILITY- SURVIVAL PARADOX THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Dr. Bob Pokorski Vice President & Medical Director Individual Life Insurance Retirement planning can be a complex road to navigate for most people. Women, however, have a unique set of challenges when it comes to retirement planning simply because, on average, they live longer than men and tend to outlive their spouses and partners. That means they may have to plan farther into the future and even plan for a life without a partner. Life expectancy at birth in American women increased dramatically over the last century, from a low of 8. years in 1900 to a record high of 81. years in Women Continue to Live Longer Than Men Life expectancy at birth in American women increased dramatically over the last century, from a low of 8. years in 1900 to a record high of 81. years in Improvements in female life expectancy during the early 0th century were due to better nutrition and public health; control of infectious; diseases, and reduction in infant, maternal, and childhood mortality. In the latter half of the century, life expectancy increased mainly because of higher living standards, an increase in healthy behaviors, and improved treatment of chronic diseases. Women Are More Likely to Be Disabled The flipside to increased longevity is that women are more likely to have a severe disability than men. For example, at ages 70 to 7, one in three (%) women have a serious disability, compared with only one in four (%) men. 1 Arias E., et al. United States Life Tables, 01. National Vital Statistics Reports. November 8, 016, Vol. 6, No. 8 Table 19, p. 6. U.S. Department of Health and Human Services, National Center for Health Statistics. Global Health and Aging. National Institute on Aging. U.S. Department of Health and Human Services. nih.gov/research/publication/global-health-and-aging/living-longer. Accessed December 19, 016. Institute for Health Metrics and Evaluation. GBD Heatmap. gbd-heatmap. Accessed December 19, Ed. 0/017 Exp. 08/16/018

2 Not only are women more likely than men to be disabled, they are disabled for longer periods of time. In the largest study of its kind, researchers at Yale University found that women were consistently more disabled, and for longer periods of time, largely because they were more disabled at the beginning of the study and were less likely than men to die. 1 The Ws of Chronic Illness Care Disability is at its worst when we need chronic illness care because we can no longer care for ourselves. Chronic illness care is a complex issue, but the principal issues can be addressed via a discussion of the Ws of chronic illness care: WHO WILL NEED CHRONIC ILLNESS CARE? Five in ten people who are age 6 will deal with a chronic illness or disability later in life, such as Alzheimer s disease, a serious stroke, or crippling arthritis. Women are more likely than men to need chronic illness care. 6 WHY WILL CHRONIC ILLNESS CARE BE NEEDED? Chronic illness care is often needed for two reasons: 1. inability to perform the activities of daily living (ADLs), including bathing, continence, dressing, eating, toileting, and transferring in or out of a bed or a chair, and. needing supervision because of cognitive impairment, such as Alzheimer s disease or other causes of dementia. WHERE WILL CHRONIC ILLNESS CARE BE PROVIDED? Chronic illness care has always been provided mainly at home by families; this is where we want to live if care is needed later in life. Three in four (7%) people are cared for at home, about one in seven (1%) is in an assisted living facility, and one in ten (10%) is in a nursing home. 7 Gill TM, et al. Comparisons Between Older Men and Women in the Trajectory and Burden of Disability Over the Course of Nearly 1 Years. JAMDA. April 01, Vol.1, p Favreault M, et al. Long-term Services and Supports for Older Americans: Risks and Financing. ASPE Issue Brief. Department of Health and Human Services. July 01, p., 9. 6 Pokorski R and Berg BW. Overview of Recent Research on Longevity Risks in Retirement and Some Practice Considerations for Life Insurance Planning. Journal of Financial Service Professionals. September, 01, Vol. 68, Issue, p Freedman VA, et al. Disability and Care Needs among Older Americans. The Milbank Quarterly. Vol.9, No., August 6, 01, p.17.

3 WHEN WILL CHRONIC ILLNESS CARE BE NEEDED? The need for chronic illness care increases rapidly with age, from about one in sixteen (6%) people age 6 to 69, to slightly more than half (%) at age 90 and older. 8 Many of us will need chronic illness care late in life, but there s more to the story. Care will be needed not only when we re old, but when we re old and living alone. The likelihood of living alone increases with age, mainly because people outlive their spouses or partners. This is especially true for women. For people late in retirement who are age 8 and older, about three in ten (9%) men live alone compared with more than half (%) the women. 9 LIVING ARRANGETS OF COMMUNITY-DWELLING PEOPLE AGE 6 AND OLDER Values in chart may not total 100% due to rounding. Chart View Table View WO WO WO LIVES ALONE 18% 0% % 0% 9% % LIVES WITH SPOUSE LIVES WITH CHILDREN/ OTHERS 7% % 68% 7% % 1% 11% 18% 10% % 19% % WHAT DURATION OF CHRONIC ILLNESS CARE WILL BE NEEDED? The duration of chronic illness care is similar for men and women for short and medium durations. Of those individuals who need chronic illness care, about one in six (18% of men, 19% of women) will need care for less than one year, one in fourteen (7% of men, 8% of women) will need care for 1 to 1.9 years, and about one in nine (11% of men, 1% of women) will need care for to.9 years. However, important gender differences occur for longer care durations. One in ten (10%) men and about one in six (18%) women will need chronic illness care for five years or more. For those who need care, the average duration of care is projected to be. years for men and. years for women. 10 In other words, women will need care for more than a year longer than men. 8 Drabek J, et al. Measuring the Need for Long-Term Services and Supports. ASPE Research Brief. Department of Health and Human Services. July Medicare Current Beneficiary Survey. Demographic and Socioeconomic Characteristics of Noninstitutionalized Male and Female Medicare Beneficiaries, by Living Arrangement and Age, 01. October 0, 01. Table 1.b, p.6; Table 1.c, p Favreault M, et al. Long-Term Services and Supports for Older Americans: Risks and Financing. ASPE Issue Brief. Department of Health and Human Services. Revised February 016.

4 Women Are More Likely to Be Widowed One of the consequences of lower female mortality is a greater likelihood of widowhood, even early in retirement. At ages 6 to 7, for example, one in five (1%) women are widowed, compared with only one in sixteen (6%) men. 11 At ages 8 and older, the differences in marital status are striking. More than seven in ten (7%) women are widowed, compared with only four in ten (8%) men. While these percentages are impressive, the absolute numbers and the duration show why widowhood takes such a toll on older women. At ages 8 and older, there are more than three widows for every widower, and one study estimated that about one-third of women born in the 1960s and 1970s will be widowed for more than 10 years. 1 Because women generally live longer than men, they need to save more for health care costs that will be incurred during retirement. The Growing Concern Over Health Care Costs Because women generally live longer than men, they need to save more for health care costs that will be incurred during retirement, and health care costs are a growing concern. According to a recent study by Prudential, two-thirds (66%) of women surveyed are concerned with being able to keep pace with rising health care costs, and believe it s a very important longterm goal. However, only 9% of women surveyed are very confident it s a goal they will meet. 1 The Employee Benefits Research Institute estimated that a 6-yearold woman who retired in 01 would need to save $89,000 to have a 0 percent chance of having enough money to pay for health insurance premiums and out-of-pocket health care expenses later in life. 1 In contrast, a man would need to save only $68,000. If a woman wanted a 90% chance, she would need $10,000, compared with $1,000 for a man. 11 U.S. Census Bureau. America s Families and Living Arrangements: 01, Table A1. November Financing Long-Term Services and Supports for Individuals with Disabilities and Older Adults: Workshop Summary. Johnson R. IOM (Institute of Medicine) and NRC (National Research Council). 01. Washington, DC: The National Academies Press, p Prudential Financial Experience & Behaviors Among Women. 1 Fronstin P, et al. Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Unlike the Last Few Years, the News Is Not Good. Employee Benefit Research Institute. October 01, Vol. 6, No. 10.

5 There are several reasons why these estimates may be too low for many women. First, $89,000 provides only a 0 percent chance of having enough money for health insurance and health care expenses. Second, the estimate of $89,000 doesn t include money to pay for chronic illness care, which is often needed at older ages. And third, future retirees can expect to pay a greater share of out-of-pocket health care costs because of financial stresses on Medicare and cutbacks to employer-sponsored health insurance for retirees. 1 The Big Questions Women Face The good news is that women are living longer, healthier lives. But that also means women will need to consider several important questions when planning for their financial future. For example: If I do need chronic illness care, what kind of care do I want? How much of my assets do I want to pass on to my heirs? How can I ensure that I don t spend all of my assets on chronic care? Who will be able to provide care for me? My children? My spouse or partner? Where do I want to receive care? At home? In a nursing facility? The sooner you know the answers to these questions, the sooner you can start to prepare. Planning Checklist Here are some tips and suggestions that can help you get started: Talk to a financial professional about your financial plans. Plan to save more than you think you ll need. Think about the assets you want to leave to your heirs. Talk to your children and spouse or partner about your expectations of them if you become chronically ill. Think about where you ll want to receive care should you become chronically ill. Write a living will that spells out how you want to receive care should you become chronically ill. Life insurance is issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Prudential, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities. All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. Policy guarantees and benefits are not backed by the broker/dealer and/or insurance agency selling the policy, nor by any of their affiliates, and none of them makes any representations or guarantees regarding the claims-paying ability of the issuing insurance company. 017 Prudential Financial, Inc. and its related entities.