According to “The 2011 Risks and Process of Retirement Survey,” sponsored by the Society of Actuaries (SOA), the retirement risks that most concern both retirees and preretirees are:
- Keeping the value of their savings and investments up with inflation (69% of retirees, 77% of preretirees);
- Having enough money to pay for adequate health care (61% of retirees, 74% of preretirees);
- Having enough money to pay for long-term care (60% of retirees, 66% of preretirees);
- Being able to maintain a reasonable standard of living for the rest of their life (59% of retirees, 64% of preretirees);
- Varying income as a result of changes in interest rates (57% of retirees, 64% of preretirees); and
- Depleting their savings (54% of retirees, 63% of preretirees).
“Except for health coverage, insurance products such as annuities and long-term care insurance are not seen as major components of retirement planning,” said actuary and retirement expert Anna Rappaport, FSA, MAAA, who serves as chairperson of the Society of Actuaries’ Committee on Post-Retirement Needs and Risks. “As a result, many retirees continue to be at risk of running out of assets and having to rely solely on Social Security.”
A major concern is that many people have a shorter planning horizon than their future expected lifetime, according to the SOA. Despite this, retirees are more likely than in 2009 to say their planning horizon is at least 10 years (34%, up from 23%), while preretirees are more likely to say it is at least 20 years (19%, up from 13%). Meanwhile, more than one in three preretirees feel retirement will not apply to them due to finances or a desire to continue working.
If they were to live five years longer than expected, retirees indicated they would be more likely than in 2005 to:
- Reduce their expenditures significantly (64%, up from 53%);
- Dip into money that might otherwise have gone toward an inheritance (49% of retirees, up from 42%), and
- Deplete all of their savings (45%, up from 35%).
Preretirees show no significant change from 2005 in the consequences they anticipate, should they live five years longer than expected. In fact, only one-third (35% ) of preretirees have a plan for financing their retirement. Meanwhile, nearly six in 10 retirees (57%, up from 44% in 2005) report they have a plan for how much money they will spend each year in retirement and where that money will come from.
The survey was among 1,600 adults, ages 45 to 80 (800 retirees and 800 preretirees).
To read the full study, "The 2011 Risks and Process of Retirement Survey," visit http://www.soa.org/files/pdf/research-2011-risks-process-report.pdf.