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In fact, according to the Risks and Process of Retirement Survey Report, anew study from the Society of Actuaries (SOA), inflation is the top retirementconcern. According to the report, pre-retirees and retirees are worrying aboutkeeping the value of their assets up with inflation as well as having enoughmoney to pay for long-term care, paying for adequate healthcare and thechallenges of maintaining a reasonable standard of living after the loss of aspouse -- all of which are also impacted by inflation.
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The report identifies concerns raised from both pre-retirees and retireeson their retirement resources and offers approaches to help manage them."Today's retirement environment is much more complex than it has been forprevious generations," said Anna Rappaport, Fellow of the Society of Actuaries(FSA), MAAA, chair of the Committee on Post-Retirement Needs and Risks, andleader of the report's project oversight work group. "With generallyacknowledged gaps in many employees' retirement benefits and resources,actuaries are helping people understand the risks associated with retirementand the importance of sound management of their retirement funds."
Among today's 65-and-older population, average life expectancy forAmerican men and women is 17 and 20 years, respectively. Nearly one-third (30percent) of all women and almost 20 percent of men age 65 can expect to reach90 years old. As a result, pre-retirees and retirees are concerned thatinflation will impact the adequacy of their retirement investments and savingsby significantly contributing to their depletion. "With life expectancyreaching the highest level ever, there is a real possibility that those inretirement may outlive their assets," said Steve Vernon, FSA, MAAA, andpresident of Rest-of-Life Communications. To manage this risk, actuarialapproaches include investment strategies to preserve principal, such asinvesting in annuities, joint and survivor annuities and deferred annuitiescommencing at later ages, such as 75 or 80.
Long-Term Care and Healthcare Concerns Highlighted
The survey also revealed that pre-retirees and retirees are concernedabout their ability to afford long-term care. For example, nursing home carecosts may reach $70,000 or more per person per year. To manage this risk,actuarial approaches include strategies such as personal health and wellnesscommitments and long-term care insurance that helps pay for the cost ofseniors with care needs.
In addition, pre-retirees and retirees are concerned inflation will impacttheir ability to afford adequate healthcare. With catastrophic illness,medical costs for an over-65 retired couple not covered by Medicare can be amajor financial burden exceeding $1 million over their lifetime. To managethis risk, actuarial approaches include strategies such as medical insuranceand Medicare supplements.
Women's Concerns Higher Than Men's
Other findings of the study provide insight into the differences of howmen and women perceive retirement risks and are affected by them. Women aremore concerned than men that inflation will significantly impact theirretirement resources. Such concerns may be magnified for women who haveexperienced the loss of a spouse. "For retirees living on a fixed income, thelonger the period of retirement, the greater the impact of inflation," saidRappaport. "For this reason, women are more adversely affected by inflationthan men because of their longer life expectancy. Traditionally, women havebeen younger than their husbands; therefore, periods of widowhood of 15 yearsor more are n
