As Americans Age, Longer Retirements and Rising Costs Put Pressure on Financial Decision Making

Allianz Life study finds people are concerned with the impact of inflation and the cost of healthcare, but not taking action to protect their retirement security

Key Findings Snapshot:

  • Over half (57%) of Americans are worried inflation will make basic retirement expenses unaffordable
  • 48% of current retirees and 62% of non-retirees have no idea of how much they currently spend or will spend on healthcare in retirement
  • Less than a quarter (24%) of Americans are discussing the impact of inflation with their financial professional

MINNEAPOLIS – Oct. 26, 2020 – With increased longevity resulting in retirements that can last 25-30 years or longer, Americans are revealing concerns about their ability to manage the rising cost of living as they age, according to the 2020 Retirement Risk Readiness Study from Allianz Life Insurance Company of North America (Allianz Life).

Over half (57%) of all Americans 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. Yet, less than a quarter (24%) are discussing the impact of inflation with their financial professional, and only about two 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.

“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,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. “It is already challenging to establish and maintain reliable sources of retirement income. The additional pressure of managing increased expenses can pose a risk to financial security if people don’t have a strategy for increasing income opportunity built in to their retirement plan.”

The Retirement Risk Readiness Study 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 general concerns about inflation, both retirees and non-retirees expressed anxiety around rising healthcare costs that may be exacerbated due to healthcare issues forcing early retirement.

More than half (52%) of retirees said they view rising healthcare costs as one of the greatest risks to their retirement security, with nearly 40% of non-retirees sharing that concern about their future expenses. Perhaps even more alarming, both groups seem to have a poor sense of what their healthcare costs are now or will be in the future. Nearly half (48%) of current retirees said they have no idea of how much they currently spend on healthcare costs and more than six in 10 (62%) of non-retirees said they have no idea of how much they will spend on healthcare 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 healthcare issues and more than a third (34%) of those who have yet to retire say healthcare issues are one of the most likely reasons they may have to retire earlier than expected.

“Healthcare 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,” noted LaVigne. “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. It’s crucial that Americans start to make the connection between aging and inflation risks, so they are better protected for the future.”

*Allianz Life conducted an online survey, the 2020 Retirement Risk Readiness Study, in January 2020 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k. Increasing income potential is provided through either built-in or optional riders at an additional cost.

About Allianz Life Insurance Company of North America

Allianz Life Insurance Company of North America, one of the FORTUNE 100 Best Companies to Work For® and one of the Ethisphere World’s Most Ethical Companies®, has been keeping its promises since 1896 by helping Americans achieve their retirement income and protection goals with a variety of annuity and life insurance products. In 2021, Allianz Life provided additional value to its policyholders via distributions of more than $10.6 billion. As a leading provider of fixed index annuities, registered index-linked annuities and fixed index universal life insurance, Allianz Life is part of Allianz SE, a global leader in the financial services industry with approximately 150,000 employees in more than 70 countries. Allianz Life is a proud sponsor of Allianz Field® in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.