Not prepared for retirement? You’re not alone. A new study found that more than one-third of all middle class Americans don’t ever plan to retire. Instead, they believe they will be working until they die or are no longer physically able. Another third expect to work until they are at least 80, in order to have enough saved for retirement.

Working for Life

Wells Fargo conducts the same study annually and over the past few years, the long term care insuranceresults have continued to show a worse financial forecast than the previous year. About half (48%) of Americans are “not confident” that they have saved enough money for a comfortable retirement. Most people’s focus is on simply keeping up with bills, and only 13% of people say that saving for retirement is their top concern. For the majority of people (59%), “paying the monthly bills” is the top day-to-day financial concern. This number is up from 52% in 2012.

The lack of retirement planning isn’t due to a lack of worry about retirement income. Nearly half of Americans (42%) say that saving for retirement and paying the monthly bills simultaneously is just “not possible”.

Only 29% of people surveyed had a written retirement plan, and of those, 77% are “confident” that they will have enough saved, compared to only 44% of those who don’t have any type of written plan.

“This data so clearly shows what a difference a retirement plan makes in that people who have a plan have saved three times what those without a plan have saved,” said Laurie Nordquist, head of Wells Fargo Institutional Retirement and Trust. “A plan  instills confidence and gives people the discipline to stick with their objectives and reach their financial goals.”

Don’t Just Guess

The Wells Fargo Middle Class Retirement Study was conducted between July and August of 2013 and surveyed 1,000 middle class Americans between the ages of 25 and 75. Despite worries about financial stability during retirement, most people are still way off target in terms of how much they need to save. Only 22% of respondents have calculated the amount of money needed for retirement. An overwhelming majority of people (75%) simply guess.

Survey participants think they will need an average nest egg of $200,000, only $47,000 of which will be needed for health care expenses. This estimation is wildly off target, considering a recent Fidelity study placed the average amount needed for out of pocket health care costs at more than $220,000 for the average couple. 40% of respondents also said that “a large unexpected health care expense” is their greatest fear in retirement.

Given the government estimate that 7 in 10 American seniors will need long term care at some point, the possibility that you will need that type of care, whether for several months or a few years, is not far fetched. The cost of long term care, growing annually, is not even a part of Fidelity’s retirement estimate.

Take Time to Plan

Even if you don’t think you will be able to save as much as you need to, establishing long term care insurancea written plan with calculated numbers will give you a significant step up. Understanding the true financial risks of retirement will help make planning more of a priority.

“People say they don’t have a plan because they don’t have enough money,” added Nordquist. “The most important message I can impart about retirement is that planning is for everyone. It is the foundation for consistent savings, which can allow people to have the nest egg they will need in retirement and can also help people determine the role Social Security will play in their retirement.”

Long term care insurance is a retirement tool that can help you avoid the high cost of paying for long term care out of pocket. This type of care can run anywhere from $2,000 to $8,000 a month, and the amount that you pay in long term care premiums pales in comparison. Like any insurance, there is a chance you will never use it, so it’s important that you buy the right amount and don’t try to overcompensate, which may lead you to spend more money than necessary on coverage.

Take time to evaluate your personal risk and work with an independent agent who can help you compare different policies and providers, so you get a long term care insurance plan that fits your needs.

Interested in learning more? Read more about what is covered by long term care insurance.

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