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Many Worried Inflation Will Make Retirement Unaffordable

Practice Management

New survey results reveal that Americans are increasingly concerned about their ability to manage the rising cost of living as they age. 

According to the 2020 Retirement Risk Readiness Study from Allianz Life, nearly 6 in 10 (57%) respondents are worried inflation will make their basic retirement expenses unaffordable, and 59% believe that the rising cost of living will prevent them from enjoying their retirement. 

In spite of that, less than a quarter (24%) are discussing the impact of inflation with their financial professional, and only about 2 in 10 (21%) say they will use a financial product that allows for the opportunity for increasing income as a way to help address inflation. 

Allianz surveyed three categories of Americans to get different perspectives on retirement: pre-retirees (those 10 years or more from retirement); near-retirees (those within 10 years of retirement); and those who are already retired.

In addition to concerns about inflation, both retirees and non-retirees expressed anxiety around rising health care costs that may be exacerbated due to health issues forcing early retirement.  

More than half (52%) of retirees said they view rising health care costs as one of the greatest risks to their retirement security, with nearly 40% of non-retirees sharing that concern about their future expenses. 

Both groups also seem to have a poor sense of what their health care costs are now or will be in the future, the study notes. Nearly half (48%) of current retirees said they have no idea of how much they currently spend on health care costs and more than 6 in 10 (62%) of non-retirees said they have no idea of how much they will spend on health care in retirement. 

This has the potential to be even more problematic as a quarter of respondents who retired early said they did so due to health care issues and more than a third (34%) of those who have yet to retire say health care issues are one of the most likely reasons they may have to retire earlier than expected, the study further observes.  

“Health care is one area where costs seem to be rising at a faster rate than other expenses with no end in sight, so it’s definitely concerning that a majority of people don’t have a good sense of what those expenses are,” says Kelly LaVigne, vice president of Consumer Insights at Allianz Life. “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.”

The survey was conducted in January 2020 with a nationally representative sample of 1,000 individuals age 25 and over in the contiguous U.S. with an annual household income of $50,000+ (single) / $75,000+ (married/partnered) or investable assets of $150,000.