Because seniors are living longer, they are more concerned than ever about inflation, interest rates and rising healthcare costs, a survey by the Society of Actuaries found.
Forty-nine percent of pre-retirees and 38% of retirees said they are much more concerned about their financial situation in retirement than they were prior to the economic downturn.
Seventy-one percent of pre-retirees are very or somewhat concerned their savings and investments will be eroded by inflation, and 58% of retirees have this concern.
In addition, 67% of pre-retirees are worried they will not have enough money to pay for adequate healthcare, and 49% of retirees have this fear.
Two-thirds of pre-retirees, 64%, said they will have to work longer, and 24% of retirees said they will have to go back to work. But the reality of high unemployment is making finding work difficult, and 40% of pre-retirees end up retiring earlier than planned.
“One consequence of the recession is the real disconnect between when current non-retiree respondents said they expect to retire, versus the earlier ages at which current retirees are actually retiring,” said retirement systems expert Anna Rappaport. “It’s important for upcoming retirees to realize they may spend more time in retirement than they are planning for, and will need to fund those extra years. A higher level of financial literacy and careful planning is critical for those whom working longer is not an option, and for those who will have to rebuild and grow their retirement savings.”
The survey definitely showed that both retirees and pre-retirees could use the help of a financial adviser, as only 17% or retirees and 25% of pre-retirees said they feel an increased need for professional financial advice as a result of the recession.
“The recession was a devastating financial event that affected the lives of many Americans,” said actually Steve Vernon. “Many individuals nearing retirement were affected in a more acute and urgent way than most other segments of the population. Unlike those still working for many years to come, individuals nearing retirement have minimal time, if any, to make financial adjustments and rebuild their nest egg after the adverse conditions of the last few years.”
The survey also found that many Americans have scant retirement savings and were planning to sell their home to boost their nest egg, but declining home values have impacted pre-retirees and retirees alike. Thus, only 16% of retirees and 20% of pre-retirees have already used or plan to use equity in their home to help finance their retirement.
Eventually, however, 45% of retirees and 56% of pre-retirees plan to sell their home.
Asked how they plan to manage retirement risks, the most common answer is paying off credit cards and loans, with 81% of retirees and 90% of pre-retirees reporting they had taken this strategy. This is followed by 56% of retirees cutting back on spending, up from 48% in 2007, and 43% of retirees moving into more conservative investments, up from 33% in 2007.
“The recession should have served as a wake-up call, yet our report demonstrates that for too many pre-retirees, planning horizons are much shorter than their remaining life expectancy, with the majority failing to plan for the financial consequences of living beyond that point,” Vernon said. “Employers, employees and retirees need to better prepare themselves and the generation ahead for the challenges of providing for a secure retirement.”