We’ve all played the “would you rather” parlor game of picking between hideous choices. Would you rather be the only human to survive a nuclear holocaust or … be stranded on an island with the over-tanned cast of MTV’s “Jersey Shore?” In much the same spirit, Allianz Life Insurance asked 3,200 adults (ages 45 to 75) which they feared the most: dying or running out of retirement money before they died.
It turns out that three out of five people (61 percent) say they fear outliving their retirement savings more than death itself. Ninety percent of boomers and members of the Silent Generation concur that the U.S. faces a retirement crisis, and they are getting pretty nervous about it, concludes the study, “Reclaiming the Future: Challenging Retirement Income Perceptions.”
It comes down to failure to plan
The anxiety of some respondents may be attributable to the fact that they have failed to engage in meaningful financial planning. Nearly one third (31 percent) said they are unclear what their retirement expenses will be.
When asked how much yearly income they thought they would need in retirement, they guessed $59,000 a year–but they were off by a factor of three when estimating how much they need to save to generate that much income. In response to one creatively phrased question, almost half said they felt more confident in their ability to guess the number of gumballs in a jar at the county fair than to gauge their retirement income needs.
These results don’t surprise us, as we’ve done study after study where people tell us they are fearful about income in retirement. What’s scary is they do not know how much money they’ll need.
What it means to financial advisors
There is an enormous amount of free-floating anxiety among boomers and seniors about the integrity of the U.S. retirement safety net. The future of Medicare got a lot of play during the healthcare debate; Social Security, Medicare and Medicaid inevitably will grab the center spotlight during the deliberations of President Obama’s deficit commission.
Normally, older adults filter out negative advertising and marketing messages. But the level of anxiety is so high and the drumbeat of news coverage so loud that many older Americans are scared. A lack of clarity about their own finances does not help. As an advisor, offer to help your clients reduce risk and alleviate worries by working with them to develop a long-term financial plan. To boomers, pitch the plan as a way to maintain control of their destiny (a defining generational
attribute) in times of great uncertainty.