In a recent survey conducted by The Society of Actuaries, U.S. retired and pre-retirees were surveyed regarding their understanding and management of post-retirement risks.
Concerns About Retirement Risk
Respondents were asked to indicate their level of concern about eight post-retirement risks. The respondents expressed high levels of concern about having enough money to pay for adequate health care. In addition, their next four concerns were:
- Depleting all of their savings
- Having enough money to pay for long-term care expenses
- Maintaining a reasonable standard of living for the rest of their lives
- Maintaining the same standard of living for their spouse/partner, if the respondent should die first (among those married or living with a partner)
Three risks that were less important were:
- Their financial ability to stay in their current home for the rest of their lives
- Leaving money to children or other heirs
- Relying on children or other family members to provide assistance
Income, health and gender
Concern about these issues, in general, is inversely related to household income and health status. Those respondents who have higher levels of income or enjoy better health tend to have lower levels of concern while those who have lower levels of income or suffer poorer health tend to have higher levels of concern. Females are more likely than their male counterparts to express concern about many of these issues. More females are likely to have experienced some of the adverse consequences of these risks, either personally or through a friend, because females have longer life expectancies than males.
Inflation
Over two-thirds of the respondents indicated that they believe inflation will have a great deal of or some effect on the amount of money they need for retirement.
Many respondents will still recall the high levels of inflation experienced during the late 1970s and 1980s. Many may recall the effects of these high levels of inflation on their parents' or grandparents' financial security. Those with a high household income will have a level of descetionary expenditure that can act as a buffer against the ravages of inflation. Those with a lower level of household income will have less available protection against high inflation. Because women live longer than men they are more likely to be concerned about inflation eroding their financial security over time.
Impact of Death of Spouse/Partner
At least half of the respondents indicate that the death of their spouse would have little impact on them financially. Similarly, more than half say that their own would have little impact on their spouse's financial situation. The remaining respondents were split about evenly between those who think their financial situation would worsen and those who think it would improve.
The fact that most respondents say the death of a spouse would not materially effect the financial well being of the survivor may indicate that many couples have not seriously considered this issue. On the other hand, but considerably less likely, it may indicate that they have arranged their financial affairs so that the first death does not create financial hardship for the survivor.
Gender
Pre-Retired female respondents are more apt than their male counterparts to indicate that they would be worse off after the death of their spouse or partner.
Females are more likely to say that they will be worse off after the death of their spouse because the male partner is more likely to be or to have been the main contributor to the financial well being of the couple during his working lifetime and after his retirement. Partnerships where both partners have full uninterrupted careers outside the home and partnerships where the female income is higher than the male are fairly recent developments. Couples in this situation are still the exception and few of them have already reached retirement.
These are some of the main concerns regarding retirement. Having a solid plan in place will help ensure that you are prepared for these and other retirement risks. It is also very important to involve your spouse/partner in every step. With the proper planning and preparation, you will have a less stressful and more enjoyable retirement!$
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