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The Three Most Important Retirement Risks


The three most important retirement risks are paying for healthcare, paying for long-term care, and inflation, according to a 2011 survey released by the Society of Actuaries. Both retirees and pre-retirees ranked those three risks at the top of their lists. All three risks jumped significantly in importance in 2011, especially looking back over the last decade.

The survey also ranks several different methods Americans are using or plan to use to deal with these risks. Some of those approaches include spending less, eliminating debt, and saving more. These are all good, practical methods.

But some of the approaches show we are simply out of touch with reality. For instance, to help pay for healthcare costs, about 80% of both retirees and pre-retirees said they are maintaining healthy lifestyle habits—now. Really? If that statistic is true, then you’d certainly think the drug companies might not be advertising so much for cholesterol-lowering drugs, blood pressure drugs, diabetes treatments, weight-loss methods, etc. It seems like a month doesn’t go by when we hear about our national problem with obesity, stress-related illnesses, heart problems and so on.

Probably the biggest disconnect with reality though is the plan for pre-retirees to work long into their retirement years. About 55% of pre-retirees surveyed expect to work until at least at 65. But over 50% of current retirees indicated they retired from their primary career before age 60. The survey doesn’t indicate the reason for so many “early” retirements by current retirees. Some of those decisions may have been voluntary; no doubt some were due to health-related reasons, some due to business/economic conditions, and some due to providing care for aging parents.

But whatever the reason, pre-retirees (that’s you if you’re still working for a living) need to give some serious second thought to the idea of working longer to help pay for retirement. You can figure that 1 out of 2 people won’t be able to work as long as they would like. If you’re in the 50% who cannot, what’s your alternative plan?

As a Certified Financial Planner™, what the results of a survey like this tell me is that we, as a nation, do indeed need to be saving more for retirement. We need to have a back-up plan in case work-related income stops much earlier than we expect. Saving more now, while we can as workers, is one very practical method for dealing with this employment risk later on in life.

Start now by increasing your contributions to your employer’s retirement plan (401k or 403b) by 1% this year. Do the same again next year. If you don’t have a retirement plan at work, set up monthly contributions to go automatically from your checking account to an IRA. Increase the dollar amount every year until you reach the maximum limit. If you want to maximize your retirement readiness, these are practical steps you can take now. This survey is our retirement wake-up call. Are you awake??

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Comment   |  7 years ago from Orland, IN