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Larry Ellner
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Larry Ellner   My Press Releases

Don't Underestimate Retirement Risks

Published on 6/23/2014
For additional information  Click Here

Many Older Workers Underestimate Retirement Risks
while a majority of older Americans who have yet to retire claim they plan to continue to work after reaching retirement age, a minority of people who have already retired report that they actually remained on the job after the age of 65, a survey conducted by the Society of Actuaries (SOA) showed.
The survey of around 1,000 retirees and 1,000 pre-retirees between the ages of 45 and 80 conducted in August 2013 asked respondents how they decide when to retire, and how they manage their resources in retirement. The results revealed that the biggest issues of concern for retirees include inflation, paying for health care, and the risk of depleting their savings.

Although 70% of the pre-retirees polled said they plan to work longer in retirement, only 37% of the retirees said they took this approach to address retirement risks. When asked when they intend to retire, 38% of the pre-retirees said they expect to retire by ages 65 to 67, and 15% said they do not expect to retire. However, of the retirees, nearly 30% reported that they retired while under the age of 55, and another 24% said they retired between ages 55 and 59.

In addition, the survey found that of the respondents who are pre-retirees, 41% plan to stop working for pay all at once upon retirement, while 35% plan to work for pay part-time or periodically after retiring from their main job. By contrast, more than three-quarters (78%) of the retirees reported that they stopped working for pay all at once.

Of the pre-retirees who said they do not expect to retire, most cited a lack of financial resources as the reason, with more than half (55%) saying they will never have enough money to retire. However, 17% said they want to continue working for pay, while 12% said they are self-employed. The survey also showed that, when asked how long they expect to live, the median figure cited by the pre-retirees was 85 years, with just 9% saying they expect to live to age 91 or older.

When asked about their strategies for managing retirement risks, both the retirees and the pre-retirees said they plan to reduce spending, increase savings, and reduce debt. More than 90% of both the pre-retirees and the retirees indicated that they plan to eliminate all of their consumer debt. Most of the pre-retirees (93%) said they intend to save as much money as possible, and 88% of pre-retirees said they plan to cut back on spending to manage risks.

The results further showed that both the retirees and the pre-retirees surveyed have a median planning horizon of 10 years, although 17% of the pre-retirees and 18% of the retirees said their planning horizon is 20 years or more. The survey also found that just 36% of the pre-retirees have a financial plan, compared with 67% of the retirees.

Anna Rappaport, actuary and chair of the SOA’s committee on post-retirement needs and risks, observed that the survey highlighted the gap between what people who are currently employed say they are likely to do in retirement, and the decisions retirees actually make. “Many people may not be able to physically work full time into their later years, or they may be faced with unexpected risks and shock events impacting their savings and retirement income,” she said. “While there is no one solution, individuals need to plan ahead for the multitude of probabilities, from how long they could live, to how much more money they or their spouse may need to avoid outliving their assets.”
Similarly, actuary Carol Bogosian said it is “concerning” that a large share of U.S. employees do not have a financial plan before they reach retirement. “Pre-retirees are obviously concerned about retirement issues, but more financial education and planning ahead for unexpected risks are all needed,” she warned.

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