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Retirees Less Worried About Financial Risk Than Younger Americans

Practice Management

As the pandemic passes the two-year mark, there seems to be an emerging gap in the financial security of younger Americans compared with their retired counterparts, new survey findings suggest. 

Americans who have yet to retire and are still balancing careers, family and saving are feeling more worried about their financial future than they did at this point last year and are significantly less confident than current retirees. 

In fact, nearly two-thirds (63%) of non-retirees said they fear running out of money more than death, versus less than half (46%) of retired respondents, according to Allianz Life’s 2022 Retirement Risk Readiness Study. The firm 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. 

The latest findings also reveal that 68% of the pre-retirees polled said they feel confident in being able to financially support their future goals—down from 75% who said so  2021. In contrast, 89% of retired respondents said they feel confident about funding their future financial goals. 

Retirees are also less worried than pre-retirees about a number of retirement concerns, including: 

  • having enough money to do what they want in retirement (28% versus 64% of pre-retirees); 
  • the cost of living increasing and being able to afford necessities (33% versus 69% of pre-retirees); and 
  • running out of money before they die (31% versus 65% of pre-retirees). 

Meanwhile, only 42% of retirees said they retired earlier than expected, down significantly from 68% who said so last year. 

“While it’s encouraging that many retired Americans were able to weather the financial storm caused by the pandemic, it’s equally concerning that so many pre-retirees did not escape unscathed,” notes Kelly LaVigne, Vice President of Consumer Insights at Allianz Life. “The reality is, financial aftershocks from the pandemic are still ongoing, so both groups need to make sure they are taking the necessary steps to mitigate risks to their retirement security.” 

Financial Fatigue

The 2022 survey also identified how pandemic-induced fatigue has caused poor financial decisions. During the pandemic, more than a third (34%) of non-retired respondents said they took money out of investment accounts (i.e., 401(k)s, IRAs) in favor of cash, and 39% said they reduced the amount of money they were putting into retirement accounts. In addition, 54% said they were spending too much money on non-necessities, with most saying they regret the decision. 

Despite these actions, non-retired respondents do have a desire to improve their financial decision-making, particularly those who are further from retirement. Nearly half of pre-retirees (48%) said they would like to make a formal financial plan with a financial professional. The same amount said they are interested in purchasing a financial product that provides a guaranteed source of retirement income.

Inflation Concerns Persist

One concern that continues to plague both retired and non-retired Americans is how rising costs will affect their finances. Nearly 8 in 10 (78%) expect inflation to get worse over the next 12 months. What’s more, 59% who are still in the workforce said their income is not keeping up with the rising cost of living, and 40% of retirees said their retirement income is not keeping pace. 

Non-retirees are particularly concerned about inflation affecting their ability to pay for necessities (57%) and save as much for retirement as they should (66%). They also are concerned that inflation will make the retirement lifestyle they envision unobtainable (61%). 

While only about half (52%) of retirees said they have a plan to address the rising cost of living in retirement, non-retired Americans apparently are feeling the most pain.

To address these challenges, non-retirees noted that they have or expect to: 

  • find a job that pays more (53%); 
  • reduce spending on necessities (52%); 
  • dip into savings to make ends meet (49%); 
  • stop or reduce education savings (52%); and 
  • stop or reduce retirement savings (45%).

“Regardless of whether they are retired or still in the workforce, all Americans are challenged by inflation right now and need to develop strategies that ensure their income keeps up with rising costs,” added LaVigne. “While changes to spending habits can help in the short term, it’s important that people take measured steps, such as adding a source of guaranteed income that can help to protect their finances without sacrificing retirement security.” 

The survey was conducted in February 2022 among a nationally representative sample of 1,000 individuals aged 25 or older in the U.S. with an annual household income of $50,000 or more (single) and $75,000 or more (married/partnered) or investable assets of $150,000.