Inflation Ranks as Today's Top Retirement Concern

Mon May 19, 2008 11:00am EDT

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Society of Actuaries' Report Outlines Retirement Risks and Identifies
Approaches to Manage Those Risks

SCHAUMBURG, Ill., May 19 /PRNewswire/ -- From the high price of milk and
eggs to the unprecedented cost of gas, inflation is affecting every American.
Among the largest groups affected are the 78 million baby boomers inching ever
closer to retirement and current retirees who are experiencing soaring costs
in a volatile economy.
    In fact, according to the Risks and Process of Retirement Survey Report, a
new study from the Society of Actuaries (SOA), inflation is the top retirement
concern. According to the report, pre-retirees and retirees are worrying about
keeping the value of their assets up with inflation as well as having enough
money to pay for long-term care, paying for adequate healthcare and the
challenges of maintaining a reasonable standard of living after the loss of a
spouse -- all of which are also impacted by inflation.
    The report identifies concerns raised from both pre-retirees and retirees
on their retirement resources and offers approaches to help manage them.
"Today's retirement environment is much more complex than it has been for
previous generations," said Anna Rappaport, Fellow of the Society of Actuaries
(FSA), MAAA, chair of the Committee on Post-Retirement Needs and Risks, and
leader of the report's project oversight work group. "With generally
acknowledged gaps in many employees' retirement benefits and resources,
actuaries are helping people understand the risks associated with retirement
and the importance of sound management of their retirement funds."
    Among today's 65-and-older population, average life expectancy for
American men and women is 17 and 20 years, respectively. Nearly one-third (30
percent) of all women and almost 20 percent of men age 65 can expect to reach
90 years old. As a result, pre-retirees and retirees are concerned that
inflation will impact the adequacy of their retirement investments and savings
by significantly contributing to their depletion. "With life expectancy
reaching the highest level ever, there is a real possibility that those in
retirement may outlive their assets," said Steve Vernon, FSA, MAAA, and
president of Rest-of-Life Communications. To manage this risk, actuarial
approaches include investment strategies to preserve principal, such as
investing in annuities, joint and survivor annuities and deferred annuities
commencing at later ages, such as 75 or 80.
    Long-Term Care and Healthcare Concerns Highlighted
    The survey also revealed that pre-retirees and retirees are concerned
about their ability to afford long-term care. For example, nursing home care
costs may reach $70,000 or more per person per year. To manage this risk,
actuarial approaches include strategies such as personal health and wellness
commitments and long-term care insurance that helps pay for the cost of
seniors with care needs.
    In addition, pre-retirees and retirees are concerned inflation will impact
their ability to afford adequate healthcare. With catastrophic illness,
medical costs for an over-65 retired couple not covered by Medicare can be a
major financial burden exceeding $1 million over their lifetime. To manage
this risk, actuarial approaches include strategies such as medical insurance
and Medicare supplements.
    Women's Concerns Higher Than Men's
    Other findings of the study provide insight into the differences of how
men and women perceive retirement risks and are affected by them. Women are
more concerned than men that inflation will significantly impact their
retirement resources. Such concerns may be magnified for women who have
experienced the loss of a spouse. "For retirees living on a fixed income, the
longer the period of retirement, the greater the impact of inflation," said
Rappaport. "For this reason, women are more adversely affected by inflation
than men because of their longer life expectancy. Traditionally, women have
been younger than their husbands; therefore, periods of widowhood of 15 years
or more are not uncommon. For many women, the death of a spouse is accompanied
by a decline in standard of living."
    Women expressed higher levels of concern versus men regarding the
following risks:    -- Inflation -- 62 percent versus 51 percent
    -- Affording long-term care -- 57 percent versus 47 percent
    -- Healthcare costs -- 56 percent versus 45 percent
    -- Depleting savings -- 52 percent versus 37 percent
    -- Staying in their home -- 44 percent versus 29 percent

    To manage these risks, actuarial approaches include investment strategies
to produce income, including joint and survivor annuities and life insurance.
    Re-envisioning Retirement
    Actuaries are at the forefront of identifying the retirement needs, risks
and roles of all stakeholders involved in retirement including consumers and
businesses. The Society of Actuaries and its Pension Section Council is
spearheading the first-ever Retirement 20/20 initiative. Launched in 2006,
Retirement 20/20 is leveraging the insights of more than 60 experts, including
leading retirement actuaries, corporate benefits managers, attorneys, public
policy advocates and academics. Retirement 20/20 will analyze the retirement
landscape with the goal of developing a new retirement system different from
traditional defined benefit and contribution plans in the coming years.
    Future Retirement Survey Reports
    In ongoing efforts to identify, understand and manage the retirement risks
facing today's pre-retirees and retirees, the SOA will release a series of
three retirement survey reports on the phases of retirement, long-term care
concerns and retirement risks for women. The SOA's three survey reports are
scheduled to be released later this year.
    About Actuaries
    Actuaries bring a complex future into focus by applying unique insight to
risk and opportunity. Known for their comprehensive approach, actuaries enable
smart, more confident decisions.
    About the Society of Actuaries
    The SOA is an educational, research and professional organization
dedicated to serving the public and its 19,000 members. The SOA's vision is
for actuaries to be recognized as the leading professionals in the modeling
and management of financial risk and contingent events. The SOA's mission is
to advance actuarial knowledge and to enhance the ability of actuaries to
provide expert advice and relevant solutions for financial, business and
societal problems involving uncertain future events. To learn more, visit
     Kim McKeown - SOA

     Mike Nowak - GolinHarris

SOURCE  Society of Actuaries

Kim McKeown of SOA, +1-847-706-3528,; or Mike Nowak of
GolinHarris, +1-312-729-4346,, for Society of
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