Americans today can live 25 to 30 years in retirement, and this increased longevity has many concerned about their ability to manage the rising cost of living as they age.
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Fifty-seven percent of Americans in a survey released Monday by Allianz Life said they worried that inflation would make their basic retirement expenses unaffordable, and 59% believed that the rising cost of living would keep them from enjoying retirement.
Yet only 24% of respondents said they were discussing the effect of inflation with their financial advisor, and just 21% said they would use a financial product that gave them the opportunity to increase income as a way to address inflation.
“Everyone knows that inflation makes things more expensive over time, but few seem to appreciate that rising costs can also bring more complexity, which is particularly concerning as we age and our cognitive ability declines,” Kelly LaVigne, vice president of consumer insights at Allianz Life, said in a statement.
Allianz Life conducted its latest retirement risk readiness study in January among 1,000 Americans 25 and older divided into three categories: those 10 years or more from retirement, those within 10 years of retirement, and retirees. Respondents had annual household income of $50,000 or more if single, or $75,000 or more if partnered, or had investable assets of $150,000.
Health Care Costs
Besides their general concerns about inflation, both non-retirees and retirees expressed anxiety around rising health care costs that may be exacerbated by health issues that force them into an early retirement.
Fifty-two percent of retirees said rising health care costs were one of the biggest risks to their retirement security, and nearly 40% of non-retirees shared that concern about their future expenses.
Perhaps even more alarming, Allianz Life said, both groups appeared to have a poor sense of what their current health care costs were or what they would be in the future.
Forty-eight percent of current retirees said they had no idea of how much they currently spend on health care, and 62% of non-retirees could not say how much they would spend on health care in retirement.
Allianz Life said this lack of awareness could be even more problematic as a quarter of respondents who retired early said they did so because of health issues, and 34% who had yet to retire said health issues were one of the most likely reasons they might have to retire earlier than expected.
“As we age, our ability to manage complex financial matters is likely to diminish over time, so it makes sense to plan ahead as much as possible and prepare for any surprise expenses,” LaVigne said.
“It’s crucial that Americans start to make the connection between aging and inflation risks, so they are better protected for the future.”
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