Findings From the Committee on Post-Retirement Needs and Risks

Anna M. Rappaport

Some key findings from the Society of Actuaries’ (SOA’s) Committee on Post-Retirement Needs and Risks public attitude research include:

  • Knowledge gaps: There continue to be gaps in planning and the use of shorter planning horizons at retirement than are recommended for comprehensive planning.
  • Many retirees prefer not to spend down their assets. They prefer to live on their regular income and try to adjust their expenses.
  • Some retirees prefer dealing with things as they happen rather than building a plan to deal with risks. Planning often tends to be limited to “predictable” cash flows, where such cash flows include regular periodic expenses. Expenses that can be expected, even though retirees may not specifically know when or how the expenses might happen, are often not part of a retiree’s planning.
  • Where people plan for retirement expenses, a com approach is to focus on short-term cash flows. People are much more likely to plan for medical premiums than for uncovered medical expenses. In the 2015 focus groups with longer-term retirees, it was surprising to learn that home repairs and dental expenses were unexpected expenses for a number of the participants.
  • The top concerns with regard to post-retirement risks are inflation, health care expenses and paying for long-term care. These top concerns have been found consistently over repeated iterations of the survey, although the priority of concern changes. This is the eighth biennial survey. Given the extent of Medicare and other acute health care insurance coverage, and the relative infrequency of long-term care coverage, there is a disconnect between the results and the level of risk retirees face.
  • Pre-retirees continue to be more concerned than retirees about most risks.
  • Pre-retiree expectations do not line up well with retirees’ actual experiences. There are two areas where pre-retiree expectations and retiree experience consistently have been out of sync. In the 2015 survey, retirees retired at a median age of 60, substantially earlier than age 65, which is the median age at which pre-retirees say they expect to retire. There is a similar finding in several of the surveys. Working in retirement is another area where expectations of pre-retirees differ from the actual experience of retirees. While many pre-retirees say they expect to continue working longer, most current retirees have not actually done so. Both of these areas are troubling because they encourage people to “underplan.”
  • The top risk management strategies being used are similar to what was found in prior surveys, including reductions in spending, increasing savings and paying off debt. As in prior years, risk protection products other than health insurance are not used very often. These strategies help with cash flow but do not address major unpredictable expenses.
  • Retirees and pre-retirees seem to have relatively little concern about some important risks such as fraud. Even where people accept that a risk is important in society, it is not uncommon for them to think that it will not happen to them.

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