Consumer Concern Over Financial Risks of Retirement Increase

Society of Actuaries survey shows inflation, healthcare and long-term care costs continue to top list of retirement concerns 

SCHAUMBURG, Ill., January 17, 2018 – The Society of Actuaries (SOA) today released its ninth biennial Risks and Process of Retirement Survey, which identified an overall increase in consumers’ level of concern for their finances both prior to and during retirement in 2017. The survey, which explores how Americans understand, prepare for and manage retirement risks, includes responses from 1,025 current retiree and 1,030 pre-retiree adults aged 45-80.

The survey revealed that inflation, healthcare and retirement costs rank as Americans’ top retirement concerns, consistent with the 2015 Risks and Processes of Retirement Survey. Notably, a greater number of pre-retirees indicated they were “very” or “somewhat” concerned, compared to their retired counterparts for these categories. Concern also increased from 2015 across all categories.  

“Consumers face numerous financial risks as they head into retirement and financially plan for an uncertain timeframe,” said Anna Rappaport, fellow of the SOA and chair of the SOA’s Committee on Post-Retirement Needs and Risks. “I am encouraged to see pre-retirees and retirees alike taking steps to mitigate these risks, such as eliminating debt, saving money and cutting back on spending.  But I am still concerned that there is not a greater focus on long-term planning, risk management, or dealing with the major uncertainties of life.” 

Elevated concern permeates the survey results, with a significant number of retirees and pre-retirees reporting that they feel unprepared to navigate financial shocks and unexpected expenses. 61 percent of pre-retirees and 47 percent of retirees feel unprepared for expenses in retirement that could deplete their assets.  

When asked to estimate their own personal life expectancy, pre-retirees and retirees alike believe they will live to age 85, on average. This means most consumers expect to spend at least 20 years in retirement, a long and uncertain period of time to plan for financially, especially with finite financial resources to manage. Other retirees will outlive their assets, while a separate retirement concern for couples is ensuring their financial resources last for the partner that lives the longest of the two.

An approach to the financial challenges addressed in the survey can be found in a separate analysis from the SOA and the Stanford Center for Longevity(SCL). This research analyzed 292 different retirement income methods and identified a straightforward strategy that retirees can implement on their own in virtually any IRA or 401(k) plan. This strategy, called the “Spend Safely in Retirement Strategy,” produces a higher expected average income compared to other retirement strategies, keeps pace with inflation, and produces low measures of volatility. A key recommendation of the strategy is to maximize Social Security benefits by delaying the start for the primary wage earner as long as possible (but no later than age 70). For many middle-income workers, these optimized Social Security benefits may be the only guaranteed lifetime income they need. The strategy also recommends investing any additional retirement savings in low-cost target date, balanced, or stock index funds, and using the IRS required minimum distribution to determine the annual withdrawal. A white paper from the Stanford Center on Longevity provides further considerations on the Spend Safely in Retirement Strategy:

For additional retirement research from the Society of Actuaries, please visit: /research-reports/2018/retirement-risk-survey/

Survey Methodology

This research presents the results of an online survey of Americans ages 45 to 80 conducted by Greenwald & Associates on behalf of the Society of Actuaries (SOA). The purpose of the study was to evaluate Americans’ awareness of potential financial risks in retirement, how this awareness impacts the management of their finances with respect to retirement, and how Americans are managing the process of leaving the workforce. This is the ninth biennial study sponsored by the SOA that focuses on these issues.

The questionnaire for the study was designed by Greenwald & Associates, in cooperation with the SOA Committee on Post-Retirement Needs and Risks and its Project Oversight Group appointed by that committee. A total of 2,055 interviews (1,030 pre-retirees and 1,025 retirees) lasting an average of 20 minutes were conducted using Research Now’s online consumer panel, from June 20 through June 30, 2017. Respondents born between 1937 and 1972 qualified for participation in the study. An additional 203 interviews were conducted among retired widows, and results for widows are presented in the report where these results differ meaningfully from the results for retirees overall.

As in previous iterations, respondents were classified as retirees if they described their employment status as retiree, had retired from a previous career, or were not currently employed and were either age 65 or older or had a retired spouse. All other respondents were classified as pre-retirees. The questions to determine retiree or pre-retiree status were asked early in the questionnaire.

This study includes pre-retirees and retirees at all income levels. No effort has been made to oversample individuals with high levels of assets. Fewer than one in seven pre-retirees and retirees report having investable assets of $1 million or more.

The sample data are weighted by age, sex, education, and household income to match targets obtained from the March 2016 Current Population Survey (CPS).

About the Society of Actuaries

With roots dating back to 1889, the Society of Actuaries (SOA) is the world’s largest actuarial professional organization with more than 28,000 actuaries as members. Through research and education, the SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal challenges. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk. www.SOA.org