What’s keeping retirees up a night? According to data from LIMRA, more than half of seniors are worried about possible tax increases as well as cuts to Medicare benefits and Social Security.

In February, the organization surveyed retirees between the ages of 55 and 79 with household incomes of $35,000 or more on their top concerns regarding public policy, market risks and health care costs. Topping the list of “major concerns” that would have an impact on their living standard in retirement were tax hikes, cited by 60 percent. Next up was a reduction in Medicare benefits (58 percent); cuts to Social Security (55 percent); and inflation (50 percent).

Rounding out the list were: a prolonged stock market downturn (44 percent); health care costs (43 percent); decline in interest rates (37 percent); prescription drug costs (35 percent); long term care costs (35 percent); and the possibility of outliving assets came in last at just 21 percent.

Matthew Drinkwater, associate managing director, retirement research at LIMRA, said he wasn’t surprised by the results. “For one thing, we know that retirees don’t want to hear about cuts to Medicare or Social Security or tax increases as a budget balancing option,” he said.

Given these results, Drinkwater recommended that advisors address these concerns with clients as part of an overall risk management approach. “Retirees can’t change public policy or prevent it from being changed. But they can protect themselves by working with their advisors to plan for these things holistically,” he said. “The advisors need to have plans that are robust enough to work in crisis times. If the client has major concerns about Social Security, well, that means they have concerns about inflation-protected lifetime guaranteed income. That fact should be on the table when an advisor is talking to their client.”

While he thinks it would “be political suicide to just nail seniors with all of these cuts” and that any changes to those programs would be gradual, Drinkwater said that increases to state and local taxes are more likely due to those jurisdictions budgetary pressures. “So advisors could try to diversify assets across taxable, tax-deferred and tax free-investment types,” he said.

Other research reveals just how anxious retirees are today. Using a survey of consumers done in April by eNation, a national online research service, LIMRA extrapolated the results from nearly 150 retirees. When asked, “I worry that my taxes will increase,” 67 percent agreed.

When queried whether they were confident they would be able to live the retirement lifestyle they desired, 43 percent agreed. Compare that percentage to a 2009 survey LIMRA conducted in which 62 percent agreed. LIMRA based its results on nearly 400 retirees with at least $100,000 in investable assets.

In another interesting finding, earlier this year, 26 percent agreed with the statement “Compared to what I thought a year ago, I now need to go back to work.” That’s a slight increase from the 2009 LIMRA study in which 25 percent agreed.

For more on what seniors think, see our special senior issue in July.

Maria Wood is the managing editor for Senior Market Advisor.