Aug
Retirement Income Needs Aren’t Confusing For Most, Survey Finds
Written by Leo FranklinMarketWatch recently offered a surprisingly upbeat assessment of retirement planning. The news service reported that, “One third of people close to retirement said they don’t know how much money they will need to cover basic expenses in retirement, according to a new study.”
Allianz Life Insurance Company of North America also surveyed some 1,000 U.S. residents who were between the age of 55 and 65. Questions covered were what concerns retirement planning raises and how much money respondents think they need to retire.
It seems optimistic to us that two-thirds of those facing retirement within the decade know how much money they will need. There are just too many uncertainties in life and in the current market environment, but figuring out how much needs to be saved for retirement: not a problem for most!
Still, concerns linger. Health care, for example, is a major expense in retirement. Under the current system, co-pays and deductibles are confusing and substantial. Most retirees already spend more than 10 percent of their income on health care.
That could change, of course, as the new health care system is still being defined. While costs for some services will drop, others will certainly rise and overall no one knows what the impact will be. Until we know for sure, we think most retirees should plan on spending more for health care in the future.
Other costs are also impacted by inflation. The MarketWatch article provided an interesting example:
“To gauge their understanding of inflation, survey respondents were asked to forecast how much a loaf of bread will cost 10 years from now, in 2022. They were told that a loaf cost $1.10 in 2002 and averages $2.50 now.
While 75% correctly predicted the future price of $5, another 25% demonstrated unfamiliarity with inflation and the effect it has on their future purchasing power. Of the 25% who got it wrong, 8% said the loaf of bread would cost $2.75, another 13% said it would cost $8.25, and 4% said the price would spike to $10.05.
“We have been living in a low-inflation environment and people put it on a back burner. But even an inflation rate as low as 3% can kind of double a cost of loaf of bread over 25 years,” said Katie Libbe, vice president of consumer marketing and solutions at Allianz Life.
We don’t know how much money will be needed to live ten years from now, but we do know every available source of income should be considered as part of retirement planning. Reverse mortgages turn a home into income, a valuable option for those faced with so much financial uncertainty.
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