For pre-retirees, the findings from 2009 mirrored those in 2007. This includes:
- In terms of strategies to manage risk, a little more than half of pre-retirees said they already saved as much as they could.
- Less than one-quarter of pre-retirees said they do not plan to completely pay off their mortgage.
- Fifty-five percent of pre-retirees in 2009 invested a portion of their money in stocks or stock mutual funds compared to 54 percent in 2007.
- Twenty-eight percent of pre-retirees planned to retire from their primary occupation at age 65.
For retirees, the findings include:
- About one-fifth planned to move to a smaller home or less expensive area.
- Eight percent of retirees in 2009 and nine percent in 2007 planned to buy long-term care insurance.
- About three-quarters had no plans to purchase a financial product or choose an employer plan option to have a guaranteed annual level of income for life.
There is an overall misperception among retirees and pre-retirees that a strategy of "planning for the short-term" will last them through the remainder of their lives. For example, more than half of retirees (54 percent) and nearly two-thirds of pre-retirees (64 percent) agreed that if someone manages their finances well during the first three years of retirement, their money will last for the rest of their retirement.
"More long-term planning is needed for individuals, and it is imperative that they look beyond five or ten years, because that is the tip of the iceberg for many individuals nearing retirement or early into their retirement," said Anna Rappaport, FSA, EA, MBA, chair of the SOA Retirement Risk Survey and owner of Anna Rappaport Consulting. "Individuals are clearly concerned about their retirement and the associated risks, but many are still not taking the necessary actions and planning to address these issues."
Eighty-one percent of retirees and 90 percent of pre-retirees indicated they eliminated or plan to eliminate all of their consumer debt, compared to 79 percent of retirees and 89 percent of pre-retirees in 2007.
"We've found that retirees and pre-retirees continue to try to protect themselves against financial risks by decreasing debt, increasing savings and cutting back on spending," said Rappaport. "These steps are simple, but they are only a starting point. More follow-through is needed on the larger actions, such as considering purchasing a product that guarantees lifetime income or planning for widowhood and severe healthcare challenges."
The SOA report highlighted the following among pre-retirees and retirees, including a continued concern about inflation, increased worries about mortgage debt, a disconnect between perception and reality for retirement planning, a decrease in concern for long-term care, and still no general acceptance of guaranteed lifetime income through annuities or other financial tools. The specific findings include:
- Two-thirds of retirees (66 percent) and eight in ten pre-retirees (79 percent) report the recent stock market and economic downturn has affected their financial concerns about retirement.
- Six in 10 retirees and seven in 10 pre-retirees (up from six in 10 in 2007) expressed concern that the value of their savings and investments might not keep pace with inflation.
- Twenty-six percent of pre-retirees do not have plans to calculate how much inflation will affect how much money they have later in life.
- Roughly half of retirees (49 percent) and two-thirds of pre-retirees (67 percent) expressed concern about having enough money to pay for adequate healthcare.
- Retirees are now much less likely to indicate they have already completely paid off their mortgage (48 percent, down from 76 percent in 2007).
- Pre-retirees' visions for the future do not match the realities that current retirees have experienced. Pre-retirees are more likely to state they will receive income from retirement savings plans, such as an IRA, bank or investment account, than retirees are to state they actually received such income (66 percent versus 45 percent).
- Pre-retirees (planned use) are more likely than retirees (actual use) to invest some or all of their funds that provide a series of regular payments where they control how the principal is invested (67 percent versus 43 percent).
- Almost half of retirees are very or somewhat concerned about having enough money to pay for extended care at home or in a nursing home (46 percent).
"From an actuarial perspective, we recommend a deeper understanding of the specific long-term retirement risks individuals need to address for their situation," said Valerie Paganelli, FSA, EA, MAAA, owner and president of Paganelli Consulting. "There was a surprising level of inaction by individuals in dealing with major retirement issues before the economic downturn and still again two years later. Changing one's behavior is not an easy process, but individuals need to jump-start the planning process today, no matter what their age. Awareness and preparation are needed for any number of emerging risks and unexpected challenges leading up to and during their personal retirement profile."
