As Americans Age, Longer Retirements and Rising Costs Put Pressure on Financial Decision Making

Allianz Life study finds people are concerned with the impact of inflation and the cost of healthcare, but not taking action to protect their retirement security

With increased longevity resulting in retirements that can last 25-30 years or longer, Americans are revealing concerns about their ability to manage the rising cost of living as they age, according to the 2020 Retirement Risk Readiness Study from Allianz Life Insurance Company of North America (Allianz Life).

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Over half of Americans are worried inflation will make basic retirement expenses unaffordable, according to a new @AllianzLife study.

Over half (57%) of all Americans are worried inflation will make their basic retirement expenses unaffordable, and 59% believe that the rising cost of living will prevent them from enjoying their retirement. Yet, less than a quarter (24%) are discussing the impact of inflation with their financial professional, and only about two in 10 (21%) say they will use a financial product that allows for the opportunity for increasing income as a way to help address inflation.

“Everyone knows that inflation makes things more expensive over time, but few seem to appreciate that rising costs can also bring more complexity, which is particularly concerning as we age and our cognitive ability declines,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. “It is already challenging to establish and maintain reliable sources of retirement income. The additional pressure of managing increased expenses can pose a risk to financial security if people don’t have a strategy for increasing income opportunity built in to their retirement plan.”

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The Retirement Risk Readiness Study surveyed three categories of Americans to get different perspectives on retirement: pre-retirees (those 10 years or more from retirement); near-retirees (those within 10 years of retirement); and those who are already retired. In addition to general concerns about inflation, both retirees and non-retirees expressed anxiety around rising healthcare costs that may be exacerbated due to healthcare issues forcing early retirement.

More than half (52%) of retirees said they view rising healthcare costs as one of the greatest risks to their retirement security, with nearly 40% of non-retirees sharing that concern about their future expenses. Perhaps even more alarming, both groups seem to have a poor sense of what their healthcare costs are now or will be in the future. Nearly half (48%) of current retirees said they have no idea of how much they currently spend on healthcare costs and more than six in 10 (62%) of non-retirees said they have no idea of how much they will spend on healthcare in retirement.

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