To help address risks caused by inflation, many Americans are looking to financial products that not only provide guaranteed income in retirement, but also offer the opportunity for their income to increase, according to a new study.
Allianz Life unveils this finding in a report that explores Americans’ perceptions of the rising cost of living. While 8 in 10 respondents express interest in a product that offers income for life, a higher percentage (86 percent) say they’re interested in a product that offers guaranteed income for life plus the opportunity for income to increase over time.
Similarly, when presented with two options for guaranteed income — one that pays a higher income rate to start but has no opportunity to increase over time and one that starts with a lower income rate but offers the possibility of increases — more than three-quarters (77 percent) indicate an interest for the increasing income option.
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Also, half (50 percent) of respondents say they feel that it is “very” or “extremely important” for a product to offer the possibility for income increases over time.
“Our study revealed that many people depend on an annual pay raise to cover various increasing expenses and even build long-term savings,” says Allianz Life Vice President of Consumer Insights Katie Libbe. “Consumers facing retirement will need to explore options that create a similar income strategy by using a portion of their portfolio to obtain guaranteed income for life with the chance for increases.”
Without pay raises, rising costs bring panic
Annual pay increases are an important part of maintaining financial security for many Americans. More than two thirds (67 percent) of those surveyed say they received a pay raise at least half of the time during their working years. Yet, if faced with a frozen income that offered no chance for an increase in annual salary, 53 percent say they would be very worried or even panicked as to how they would pay for everyday expenses.
In addition to expressing concern that inflation will affect their overall retirement plans, when asked how they expect the rising cost of living will affect their retirement lifestyle, nearly one-third (28 percent) of those surveyed say they worry that they won’t be able to pay for the essentials including basic needs such as housing, food and medical care. This is an even greater concern for those with a lower income: 41 percent of people earning less than $50,000 indicate they would worry about paying for essentials.