Society of Actuaries Survey Examines Retirement Concerns and Managing Risks

SCHAUMBURG, Ill., June 29, 2016 /PRNewswire-USNewswire/ -- Inflation and paying for long-term care top the list of concerns for retirees and individuals nearing retirement, according to the Society of Actuaries (SOA). These findings are from the SOA "2015 Risks and Process of Retirement Survey," which provides insights on how Americans decide to retire and manage resources in retirement.

Pre-retirees are most concerned about long-term care and inflation in retirement (both 69 percent) followed by paying for health care (67 percent). The survey report defines pre-retirees as individuals 45 and older who are not yet retired. Retirees had the same concerns, but at different amounts; 58 percent for long-term care, 52 percent for inflation and 47 percent for paying for health care.

"There is still a disconnect between what people think they will do in retirement to manage risks, compared to what approaches retirees actually used," said actuary Cindy Levering, ASA, MAAA. To manage financial risks, nearly 70 percent of pre-retirees expect to work in retirement and 46 percent plan to delay retirement. However, just 30 percent of retirees worked in retirement and 12 percent tried to postpone retirement.

As seen in the 2013 SOA survey, pre-retirees continue to underestimate life expectancy. For the 2015 survey, a median of pre-retirees predict they will live to age 85; however, 55 percent of pre-retirees said at least one family member lived past age 90. Personal life expectancy is ten years shorter than the age of their longest-living relative, according to 37 percent of pre-retirees and 28 percent of retirees.

"More than half of pre-retirees and retirees estimated their personal life expectancy well below actuarial estimates," said actuary Anna Rappaport, FSA, MAAA, and Chair of the SOA's Committee on Post-Retirement Needs and Risks. In terms of risk pooling strategies, only a third of pre-retirees (33 percent) purchased or plan to purchase a guaranteed lifetime income product. Twenty-two percent of retirees purchased this type of product. "The gaps in planning are worse than indicated by this data as few people try to plan for the long term. The most common type of planning is based on relatively short-term expected income and expenses, such as less than five years," Rappaport noted.

The survey findings include:

• In terms of experiencing financial shocks, the most common shocks for retirees are home repairs (23 percent), major dental expenses (24 percent) and medical/prescription expenses (20 percent).
• In terms of a planning horizon, 17 percent of pre-retirees plan for five to nine years, and 19 percent plan for ten to 14 years. By comparison, 38 percent of pre-retirees have either not thought about their planning horizon or do not plan ahead.
• The leading forms of debt for pre-retirees are mortgages (52 percent of pre-retirees), credit card debt (48 percent) and car loans (40 percent).
• Nearly 30 percent of pre-retirees had $30,000 of debt, excluding their mortgage debt. By comparison, 52 percent of retirees had less than $10,000 of debt.

In addition to this survey, the SOA also released a qualitative report on focus groups in the U.S. and Canada. The focus groups studied individuals who had been retired for at least 15 years. They provided valuable insights about the experience and expectations of the retirees, how they planned and the impact of shocks on the retirees. Read more about the focus groups research.

About the Report
Developed by Mathew Greenwald & Associates on behalf of the SOA, "2015 Risks and Process of Retirement Survey" is the eighth survey series since 2001. The report results were developed from an online survey of 2,000 Americans aged 45 to 80, of which half were retirees and the other half were pre-retirees. The survey was conducted in July 2015. Harnessing this survey research, the SOA will release retirement short reports in 2016 on shocks, spending and longevity.

About the SOA

With roots dating back to 1889, the Society of Actuaries (SOA) is the world's largest actuarial professional organization with more than 26,000 actuaries as members. Through research and education, the SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal challenges. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk. www.SOA.org

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SOURCE Society of Actuaries

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