Americans rank inflation as top economic worry today, according to a new study from Allianz Life Insurance Co. of North America.
The Allianz Life 2017 Inflation Study was conducted in July and surveyed 1,213 U.S. adults age 18 and older.
When asked about their main economic worries today, the majority of respondents put inflation at the top of their list, with 32% saying they were either “panicked” or “very worried” about it.
Despite their worries, many of those surveyed do not have a proper strategy in place to address what Allianz says could be a “significant risk to retirement plans.”
The study found that 64% of respondents do not have a financial plan that addresses the rising cost of living in retirement. Of those who do, 51% claimed their financial “plan” to address it was to “be more frugal with money” when they retire.
“Although it may be an option for managing expenses, frugality is not a financial strategy that will mindfully and effectively address the rising cost of living throughout retirement, especially one that could last 30 years or more,” said Allianz Life Vice President of Consumer Insights Deb Repya in a statement.
The study also found that many Americans do not fully understand how inflation will impact them in the future. According to the study, respondents overestimated how much the cost of living will rise during retirement by predicting an average increase of 4.4% per year.
Even more extreme, according to the study, 31% of respondents thought the cost of living would go up between 5 and 10% per year and nearly one in 10 (8%) reported costs would increase more than 10% each year. These predictions were made despite the fact that the average inflation rate in the United States for the last 20 years was only 2.15%, according to Allianz.
The study also looked at how these worries about the rising cost of living cause worries about other components of retirement planning.
Fifty-four percent of those surveyed claimed they were either “terrified” or “very concerned” that the rising cost of living would affect their ability to pay for health care. The same concerns were expressed about long-term care (45%), housing (33%), groceries/food (29%), and travel/leisure (27%).
Nearly four out of 10 respondents expressed they were either “panicked” or “very worried” they might not be able to afford the lifestyle they want in retirement due to the increased cost of living.
—Related on ThinkAdvisor: