Even with rising concerns surrounding financial security among retirees and pre-retirees, consumers are not making insurers’ jobs any easier, as buying behaviors remain stagnant.
A new survey titled “The 2011 Risks and Process of Retirement Survey” and sponsored by the Society of Actuaries (SOA) found that one-third of pre-retirees and 57 percent of retirees have a plan for financing their retirement. While greater action is not being taken, the retirement risks contributing most to increased concerns are protecting savings and investments against inflation, paying for healthcare and affording long-term care. Close behind were doubts about maintaining a reasonable standard of living, volatile interest rates affecting income and depleting savings.
For all six possible concerns listed, a majority noted each of them as personally worrisome; at least 54 percent of retirees and 63 percent of pre-retirees acknowledged each was a concern. 63 percent nearly doubles the number of pre-retirees acting on their concerns.
This survey represents the sixth biennial study of post-retirement risks and proves that doubts about retirement and maintaining financial stability were affecting the vast majority of the respondents—1,600 adults (800 retirees and 800 pre-retirees), ages 45 to 80. Yet, these perceptions have not affected the way they manage their finances.
The study suggests a shift in approach.
"Except for health coverage, insurance products such as annuities and long-term care insurance are not seen as major components of retirement planning," said Anna Rappaport, chairperson of the SOA’s Committee on Post-Retirement Needs and Risks. "As a result, many retirees continue to be at risk of running out of assets and having to rely solely on Social Security."
While recent studies have shown advisors are increasingly recommending variable annuities, SOA asserts that more meager approaches are commonplace, such as simply cutting back on spending and purchasing a product or employer option providing guaranteed income for life.
Also contributing to inactivity are short planning horizons. Significantly, more than one in three pre-retirees feel retirement will not apply to them due to finances or a desire to continue working.
"There is a major disconnect between when people say they plan to retire and when they actually do," said actuary and retirement expert Carol Bogosian, ASA and president of CAB Consulting. "The survey found half of retirees had retired from their primary occupation before age 60. And, though other studies show an increase in the percentage of people over age 65 who are employed, many who lose jobs in their 50s and early 60s experience more difficulty finding new employment than younger people."
While only small improvements have been seen in overall planning, a shift toward long-term care insurance may be occurring: In an effort to reduce costs, about four in 10 own or plan to buy long-term care insurance, while, just one in 10 indicate they have turned to or will turn to a continuing care retirement community.
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