By Chris Metinko, March 20, 2014
NEW YORK (MainStreet) — Uncertain markets, lack of once-reliable retirement income and questions about savings have many fearing outliving their money in their golden years — even more than death.
That’s according to a new survey by the Allianz Life Insurance Company, which found 61% of those surveyed said they were more scared of outliving their assets than they were of dying. The numbers got even higher when looking at those between the ages of 44 and 49, where 77% said they feared outliving their retirement money more, and that number rose to 82% for those in their late 40s who had dependents.
“Planning is key,” said Katie Libbe, vice president of consumer insight at Allianz. Libbe said two out of five people retire before they had planned, leaving many short. She said those planning to keep the same lifestyle in retirement must carefully watch savings and investments, and appropriately managing risk when necessary.
“It can be difficult,” she said. “You want to manage your downside, but you don’t want to limit your upside too much.”
Libbe said a good rule of thumb is to stress upside more when you’re younger — as you can ride out a bad market if one hits. However, when you are between five and 10 years away from retirement, you want to start to limit your risk.
“I think a lot of people learned a lot from 2008,” Libbe said. “At 40 you should be aggressive, but come 50 or 55, you have to start protecting around your assets.”
The research found the economic downturn that started in 2008 did indeed cause a major shift in the financial behaviors of many Americans. More than half of those who responded said their net worth dropped significantly in a very short period of time, with 43% saying their home value dropped and 41% saying they realized they were not as “in control” of their financial future as they had thought.
To combat the downturn, many respondents said they changed their behaviors, with more than half — 52% — saying they cut back on entertainment and dining expenses, 42% saying they found ways to cut daily expenses and 11% told their children to expect less financial support.
5% said they actually moved and decided to move to a less expensive area.
Despite the uptick in the economy, many still feel unprepared for retirement. More than half of those surveyed between the ages of 44 and 54 said they feel that way, and 77% of those with lower income levels feel “totally unprepared for retirement.” And 56% of those respondents said recent market events have caused them to question when — if ever — they can retire.
Libbe said those facing retirement — or uncertain of it — should figure out their cash flow and see what the gap is between their future expenses and their anticipated retirement income. She admits it has gotten difficult for many who can no longer rely on pensions or just their 401(k)s to get them through their golden years, but there are other options.
Libbe said to research annuities before retiring. More than half of the annuity owners surveyed said they like the product because it’s a safe long-term investment, a great way to supplement their retirement income, and an effective way to get tax-deferred growth potential. She added another option in retirement may be part-time work, as many Baby Boomers now in their later years have decided to go that route not just for added income, but also to stay engaged.
“Knowledge is power,” Libbe said. “If you can start planning now — with a professional or by yourself — and really figuring out what you need in retirement you will be ahead of the game.”
To Your Successful Retirement!
Michael Ginsberg, JD, CFP®