The nerds have spoken.
Inflation and paying for long-term care top the list of concerns for retirees and individuals nearing retirement, according to the Society of Actuaries (SOA).
The SOA’s report, titled “2015 Risks and Process of Retirement Survey,” finds 69 percent of pre-retirees are concerned about long-term care and inflation in retirement, followed by paying for health care (67 percent). The survey report defines pre-retirees as individuals 45 and older who are not yet retired. Retirees had the same concerns, but at different amounts; 58 percent for long-term care, 52 percent for inflation and 47 percent for paying for health care.
“There is still a disconnect between what people think they will do in retirement to manage risks, compared to what approaches retirees actually used,” actuary Cindy Levering said in a statement.
To manage financial risks, nearly 70 percent of pre-retirees expect to work in retirement and 46 percent plan to delay retirement. However, just 30 percent of retirees worked in retirement and 12 percent tried to postpone retirement.
Pre-retirees also continue to underestimate life expectancy, predicting they’ll will live to age 85; however, 55 percent of pre-retirees said at least one family member lived past age 90. Personal life expectancy is 10 years shorter than the age of their longest-living relative, according to 37 percent of pre-retirees and 28 percent of retirees.
“More than half of pre-retirees and retirees estimated their personal life expectancy well below actuarial estimates,” added actuary Anna Rappaport, Chair of the SOA’s Committee on Post-Retirement Needs and Risks.
In terms of risk pooling strategies, only a third of pre-retirees (33 percent) purchased or plan to purchase a guaranteed lifetime income product. Twenty-two percent of retirees purchased this type of product.
“The gaps in planning are worse than indicated by this data as few people try to plan for the long term. The most common type of planning is based on relatively short-term expected income and expenses, such as less than five years,” Rappaport noted.
The survey also found:
- In terms of a planning horizon, 17 percent of pre-retirees plan for five to nine years, and 19 percent plan for ten to 14 years. By comparison, 38 percent of pre-retirees have either not thought about their planning horizon or do not plan ahead.
- In terms of experiencing financial shocks, the most common shocks for retirees are home repairs (23 percent), major dental expenses (24 percent) and medical/prescription expenses (20 percent).
- Nearly 30 percent of pre-retirees had $30,000 of debt, excluding their mortgage debt. By comparison, 52 percent of retirees had less than $10,000 of debt.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
