Retirement is the top financial concern for a growing number of Americans. Why are so many people worried about retirement? Are they not financially prepared for it? Not particularly, according to research from the Society of Actuaries (SOA) and Greenwald & Associates. The problem is that even though many Americans are regularly setting aside money for retirement, concerns exist that such savings will still be inadequate to cover the myriad of potential expenses a person may face in old age.
Just a few of these possible financial hurdles include long-term care needs, adult children who cannot support themselves, divorce during retirement, and inevitable home-related maintenance and repair. Sixty-nine percent of surveyed pre-retirees said that they are already concerned about not being able to afford nursing care in a center or at home for a prolonged period of time, and 67 percent are even worried about covering more basic healthcare needs with their savings. Another 69 percent of respondents have doubts that their retirement assets will be able to keep pace with changes to their cost of living (inflation), and 63 percent fear that they may not be able to maintain a reasonably comfortable lifestyle in old age.
Retired Americans were also surveyed and these individuals displayed similar concerns about potential financial shocks, albeit to a less extent than pre-retiree (younger) respondents who are likely more worried about the long-term sustainability of the government’s Social Security and Medicare programs. One in ten of the surveyed retirees who reported that they had already experienced a financial setback said that it forced them to slash their regular spending by at least half. Moreover, 90 percent of all respondents said that they would likely respond to a large, unexpected expense in retirement by reducing their outlays, e.g. dining out less frequently, traveling less, cutting back on donations, etc.
Sources: Gallup, SOA, Greenwald & Associates, NAPA, LIMRAPost author: Charles Couch