Retirees, Pre-Retirees Increasingly Concerned About
Financial Security, Paying for Healthcare
More retirees reporting they have already cut back
on spending and moved assets to increasingly conservative investments
May 16, 2011 – Senior citizens are living longer
and spending more time in retirement than every before, but this is
causing many to worry they will out last their savings. About 40 percent
of retirees and half of those about to retire, say this anxiety has
grown worse with the sluggish economy. The good news is many are taking
action to protect what they have, says a new report from the Society of
The report, The Impact of the Economy on
Retirement Risks, looks at retirement planning based on findings
from the 2009 Risks and Process of Retirement Survey Report, also from
The newly released report addresses factors
affecting retirement security, including the effects of delayed
retirement, equity investments and portfolio management, changes in
spending habits, and new approaches to quantifying adequacy of
retirement wealth. Respondents were evaluated on their awareness of
retirement risk, how their awareness has changed since the recession,
and how they have adjusted the management of their finances as a result.
Keeping Retirees up at Night – Key Concerns and
Impact on Planning
The economic downturn made many respondents feel
the need to take steps to improve their financial situation. While only
one-quarter of retirees (23%) feel they have to go back to work,
two-thirds of pre-retirees (64%) indicate they now feel they need to
However, working longer may not be feasible for
many people approaching retirement due to job losses and the difficulty
of finding work in the current tough job market. More than four out of
10 people end up retiring earlier than planned.
"One consequence of the recession that our report
reveals 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 actuary and 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
While concern about retirement risk has remained
stable among those already retired, pre-retirees have been more affected
by the economic turmoil of 2007-2009.
Both retirees and pre-retirees expressed concern
about maintaining the value of their savings and investments with
inflation (58% of retirees very or somewhat concerned, versus 71% of
Half of retirees and more than six in 10
pre-retirees also expressed concern about having enough money to pay for
adequate health care (49% of retirees, 67% of pre-retirees), and their
income varying from changes in interest rates (52% of retirees, 62% of
Despite these concerns, only a small minority of
retirees (17%) and pre-retirees (25%) 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. Many individuals nearing
retirement were affected in a more acute and urgent way than most other
segments of the population," said actuary Steve Vernon, who writes and
consults on retirement planning.
"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."
Real Estate – A Key Retirement Asset
Declining housing values are another issue related
to the economic downturn and recovery that have impacted both retirees
and pre-retirees. Housing is a major asset for many Americans nearing
retirement age, and many have little retirement savings beyond whatever
pensions they have plus the equity in their homes.
The economic downturn had serious implications for
retirees with large mortgages, or those who had planned to sell their
house to help finance retirement – but now either can't or won't. Only
roughly two in 10 retirees (16 percent) and pre-retirees (20 percent)
have already used or plan to use equity in their home to help finance
their retirement, according to the report.
Except for outright sale of their homes and
downsizing, options for the use of such equity to help finance
retirement are not part of the plan for most retirees. Those who do plan
to tap into their home equity, plan to do so by selling their home (45
percent of retirees, 56 percent of pre-retirees). They are much less
likely to access this equity to help finance retirement through a home
equity loan (20 percent of retirees, 9 percent of pre-retirees), a
reverse mortgage (12 percent of retirees, 9 percent of pre-retirees), or
a new mortgage (5 percent of retirees, 0 percent of pre-retirees). To
complicate matters, retires are less likely than they were in 2005 to
have paid off their mortgage going into retirement (48 percent down from
Strategies for Retirement Saving in the Aftermath
of the Downturn
Eliminating consumer debt by paying off credit
cards and loans is the strategy retirees and pre-retirees say they most
often use or plan to use to manage retirement risks (81% of retirees,
90% of pre-retirees).
There is an increase in the percentage of retirees
reporting they have already cut back on spending (56 percent, up from 48
percent since 2007), and moved assets to increasingly conservative
investments (43 percent, up from 33 percent).
"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," said Vernon. Employers, employees and
retirees need to better prepare themselves and the generation ahead for
the challenges of providing for a secure retirement."
Actuaries bring a complex future into focus by
applying unique insight to risk and opportunity. Known for their
comprehensive approach, actuaries enable smart, more confident
About the Society of Actuaries
The Society of Actuaries is an educational,
research and professional organization dedicated to serving the public,
its members and its candidates. 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 problems. The SOA's vision is for actuaries to be the leading
professionals in the measurement and management of risk.
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