Reality Check: Most Americans are Unprepared for When and How Retirement Will Happen

Allianz Life Study Finds that Lack of Preparation for Early Retirement Poses Significant Risks

Key Findings Snapshot:

  • Half of Americans retired earlier than expected, with the vast majority doing so for reasons outside of their control, yet many non-retirees still believe they’ll retire on their own terms.
  • 65% of non-retirees believe they will work at least part time in retirement when in reality only 7% are doing so.
  • Six in 10 non-retirees said running out of money before they die is one of their biggest worries.

MINNEAPOLIS – April 13, 2020 – Perceptions about when retirement will start and what it will look like are much different from the experiences of people already in retirement, according to the new 2020 Retirement Risk Readiness Study from Allianz Life Insurance Company of North America (Allianz Life®).

Although many non-retirees believe they will retire on their own terms, either because they will be financially ready (46%) or they want to “have fun while they still can” (35%), most are in for a surprise as they may deal with an unexpected start to their golden years. Half of Americans said they retired earlier than expected, with the vast majority doing so for reasons outside of their control, including unanticipated job loss (34%) and healthcare issues (25%).

“Many Americans are in need of a wake-up call about the very real possibility that their retirement start date might not be when they want it to be, particularly given the recent turmoil,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. ”Even those who consider themselves to be financially stable and on track for retirement need to plan for the impact an earlier-than-expected start date can have on their retirement years.”

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 differences in when and why they say they will retire, there is a significant disparity between retirees and non-retirees when it comes to expectations compared with the reality of what those retirement years might look like – and how they will be financed.

“As recent events have proven, when it comes to planning for the future, life often provides challenges that can derail our expectations,” noted LaVigne. “Those who anticipate and plan for life’s unexpected events are more likely to develop a retirement plan that provides the flexibility to change course without too much disruption to long-term financial security.”

Expectations Versus Reality

Expectations about working in retirement are also vastly different than reality. Nearly two-thirds (65%) of non-retirees think it is likely they will work at least part time in retirement, but only 7% of retirees are currently working at least part time.

In fact, the closer people are to retirement, the less enthusiastic they are about the idea of extending their employment. When asked if they would rather retire at age 55 and have their basic expenses covered in retirement or work until age 75 and live more extravagantly in retirement, less than a quarter (23%) of retirees said they would prefer to work longer (versus 33% of near-retirees and 48% of pre-retirees).

Significant Saving Concerns

Lack of clarity about when retirement may start and how time will be spent could have a significant effect on retirement income and whether or not retirees’ money will last as long as they do. This is a concern shared by both pre- and near-retirees as more than half (55%) of non-retirees said they are worried they won’t have enough saved for retirement and six in 10 said running out of money before they die is one of their biggest worries.

But these worries aren’t translating into action. Forty-two percent of those within 10 years of retirement said they are currently unable to put away any money for retirement (versus 34% of pre-retirees), and almost one-third (32%) of near-retirees say they are way too far behind on retirement goals to be able to catch up in time (versus 30% of pre-retirees).

When asked about the top financial choices they are making or planning to make, less than a third (32%) said saving enough in a retirement account, 12% said setting long-term financial goals and only 6% said making a formal financial plan with a financial professional.

Lack of Retirement Income Planning

“One way that non-retirees – particularly those who are closer to retirement – can manage risks associated with early or unexpected retirement is to add a source of guaranteed retirement income to their strategy,” said LaVigne. “Yet, incorporating financial products that offer guaranteed retirement income isn’t top of mind as a potential solution.”

Less than one-third (30%) of non-retirees say they currently have a source of guaranteed income in their portfolio to help them meet retirement goals. While nearly four in 10 (39%) say they plan to purchase a guaranteed income product in the future, only 3% view it as a top priority.

“Addressing retirement income early in the planning process is a smart way to help prepare for potential surprises in your retirement plan,” added LaVigne. “Having a strategy that covers basic expenses can help build confidence to manage any risks that come your way, no matter when you have to put your plan into action.”

*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 USA with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k.

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.