When the choices are ‘very concerned’ or ‘terrified’, clearly something’s troubling pre-retirees
MINNEAPOLIS – April 12, 2016 – Nearly half of Americans (47%) report being either “very concerned” (36%) or “terrified” (11%) that the rising cost of living will affect their retirement plans, according to a new study* on Americans’ perceptions of the effects of inflation from Allianz Life Insurance Company of North America (Allianz Life®).
Additionally, 47% of respondents note they are either “very worried” (36%) or “panicked” (11%) that they won’t be able to afford the lifestyle they want in retirement due to rising costs.
Furthermore, 53% of Americans report they would feel either “very worried” (38%) or “panicked” (15%) about paying for expenses if their income was frozen and they never received an increase in annual salary. This concern is even greater among households with lower earnings – less than $50,000 per year – with 65% noting they are either “very worried” (41%) or “panicked” (22%) about the potential of having no annual pay raise on a fixed income.
Unfortunately, many Americans already understand the challenge of living on a fixed income as only 50% of respondents reported they received annual pay raises during working years, and almost a third said they do “less than half of the time” (17%) or “almost never” (15%).
“This study highlights the potential psychological and fiscal impact of inflation on a person’s financial strategy,” said Allianz Life Vice President of Consumer Insights Katie Libbe. “As consumers move into retirement, they will not only need to consider how to make their income last for 30 years or more, but also how it can cover rising costs driven by inflation.”
Worried about inflation’s erosive influence
According to Libbe, it’s clear from the data that consumers are aware of inflation and concerned about its effects on their retirement plans.
Yet, these concerns are often overestimated. The average inflation rate Americans experienced over the last 20 years was 2.24%. However, more than a third (34%) of respondents believe the cost of living will rise 3%-4% per year during their retirement. Moreover, 19% expect to see an annual increase of 5%-6%, and almost one in 10 (8%) feel there could be an increase of more than 10% each year during their retirement.
These negative perceptions about inflation affect the way people are planning for their future, including basic needs such as housing, food and medical care. Nearly one-third (28%) worry they won’t be able to pay for the essentials because of the rising cost of living. This number jumps to 41% for those whose household income was less than $50,000. The study revealed that the majority (57%) of respondents plan to address rising costs by living more modestly in retirement.
“Consumers can change their lifestyle and invest smartly to manage their finances during retirement. But for added security, they should also explore strategies and products that offer opportunities for their income payments to rise,” added Libbe. “Many Americans already understand the importance of this concept, evidenced by the fact that more than half of those surveyed said they feel it is very or extremely important that guaranteed income products offer the possibility for income to increase over time.”
*The Allianz Life 2016 Inflation Study was conducted by Ipsos via their eNation Online Omnibus in March 2016. The survey was completed via Ipsos’ iSay/Amario Panel with 1,005 U.S. adults age 18+, and was commissioned by Allianz Life.
About Allianz Life Insurance Company of North America
Allianz Life Insurance Company of North America, one of FORTUNE’s 100 Best Companies to Work For in 2016, has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income and protection goals with a variety of annuities and life insurance products. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with 147,000 employees worldwide. More than 85 million private and corporate customers rely on Allianz knowledge, global reach, and capital strength to help them make the most of financial opportunities.