Add senior citizens to the list of Americans who are starting to experience the impact of rising inflation in retirement.
The uptick in the cost of living and other economic factors is taking its toll on seniors, adding to their concern about making retirement dollars last, according to the 2022 retirement survey from American Advisors Group (AAG), a reverse mortgage lending service.
Economic inflation is the top worry with 66% of seniors worrying that it will have a negative impact on their retirement. And widowed or divorced senior women answered at the highest rate with 72% expressing concern. Additionally, 19% of seniors said that COVID-19 pandemic has affected retirement planning.
“Many seniors in this country are discovering that their retirement plans aren’t working out as they had hoped, and inflation is only making that reality worse,” said AAG Chief Marketing Officer Martin Lenoir.
Overall, seniors did not appear to anticipate how expensive it is to retire–an observation that is playing out in real time in academic circles. In a recent interview with The American College’s professor of wealth management, Michael Finke, PhD, said that it’s never been a more costly time for an individual to retire.
“I could produce the same income stream in dividends and interest from $250,000 in retirement savings in 1992 that I could from $1 million in 2022,” says Finke.
AAG’s study found that while life is more expensive for today’s seniors, many have even less financial stability than they planned. Among the findings:
- More than one in three seniors (36%) say they have less money than they thought they would at this point in their life, with widowed or divorced senior women again answering at the highest rate of 44%;
- 53% of seniors said the cost of living is higher in retirement than they had expected and more than a third of them have less money than they planned to have at this point in their lives; and
- Nearly one-third of older Americans believe they will outlive their money.
Looking for solutions
The obvious question is where will older Americans turn to secure additional funds for the remainder of their retirement? More than one third (37%) of the respondents say they need to increase their cash flow in order to live comfortably, with widowed or divorced senior women coming in at 50%. AAG noted that products such as its reverse mortgage options could be a solution–a concept that was boosted by a recent study that found reverse mortgages can act as a risk mitigation tool for millions of retirees.
Under the reverse mortgage scenario, seniors aged 62 and older can access home equity, while also eliminating monthly mortgage payments–though they are required to continue paying taxes and insurance, among other terms.
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