Nearly half of Americans ages 45-70 have no financial plans in place to protect themselves against outliving their assets and the rising cost of health care should they live longer than they expected, according to a new survey released Wednesday by the Society of Actuaries (SOA).
Additional findings show more than one-third are worried about running out of money during retirement, but only 20% plan to purchase an annuity or other form of guaranteed lifetime income to protect their assets.
"It's apparent that Americans, specifically the baby boomer generation–many of whom will be eligible for retirement the beginning of the new year–have not saved enough money for retirement," says Anna Rappaport, president of Anna Rappaport Consulting, in a statement. "With the challenges in the housing and financial markets over the past few years, coupled with the fact that people are living longer, many baby boomers are finding themselves unprepared to maintain their lifestyle in retirement.
"As actuaries, we cannot stress enough the importance of having a plan in place that addresses all of the risks individuals may face in retirement, such as spending available assets too soon, meeting financial care needs, paying for the rising cost of healthcare and adjusting financially and otherwise to the loss of a spouse," Rappaport said.
The survey also found that nearly three quarters (71%) of respondents plan to claim Social Security before the age of 70. However, actuaries like Rappaport emphasize the importance of claiming Social Security as late in life as possible to help secure more guaranteed lifetime income in retirement and help hedge against the risk of outliving assets.
Looking at other actions Americans take to protect themselves and hedge against potential future risks, the SOA survey found that 75% of Americans ages 45-70 protect their tangible assets, such as housing, through home or renter's insurance; however, only 19% plan to insure the extra costs of disability and well-being by purchasing long-term care insurance.
"While long-term care insurance may be a complex and somewhat costly product, it can act as a financial safety net should people need extensive care in their old age," says Dawn Helwig, a consulting actuary for Milliman Inc. "Purchasing a long-term care policy or combination product can help mitigate the potential risk of having to pay out-of-pocket for unexpected health-related costs down the road."