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How the rising cost of living and cognitive decline can pose a risk to retirement security

Managing inflation over a long retirement can be a challenge, especially when you factor in aging risks.

Spending more time in retirement sounds ideal for many Americans. And with average lifespans increasing, the prospect of 20 to 30 years spent in retirement isn’t uncommon.

But with that longevity comes the need to plan for how you’ll afford to spend those extra golden years. Not only do you need enough money up front, but you’ll also need to make sure that your money keeps up with the rising cost of living.

These concerns are top of mind for many Americans, according to our 2020 Retirement Risk Readiness Study,* which found 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.

One expense that is increasing more quickly than others – and becomes especially important as we age – is the cost of healthcare. In fact, 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 future retirees sharing that concern about their future expenses.

Managing these rising costs and accounting for them in a retirement strategy can be complex, not to mention that navigating these complicated financial topics can be increasingly challenging as we age and our ability to manage complex financial matters likely diminishes over time.

That’s why, in partnership with a financial professional, building out a retirement strategy that accounts for rising costs and even provides the potential for increasing retirement income can be a smart solution.

However, when it comes to making a plan, less than a quarter of Americans (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.

Understanding these risks and making the connection between a longer retirement, the rising cost of living, and cognitive decline is the very first step in addressing inflation in retirement. Working with a financial professional, you can build out a strategy that alleviates some of the burden of navigating rising costs in retirement, so you can enjoy your golden years without the added worry.

*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.