Inflation. Today's Top Retirement Concern?
Every day 78 million baby boomers inch closer to retirement. At the same time, current retirees are experiencing soaring costs in a volatile market. In this environment, concerns surrounding retirement risks are increasingly being felt by both those already in retirement and those approaching it. Highlighted in the recent Society of Actuaries Risks and Process of Retirement Survey Report, inflation ranks as a top concern because of the broad impact it has on many aspects of a financially secure retirement.
"Today's retirement environment is much more complex than it has been for previous generations," said Anna Rappaport, 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. As an actuary, I am proud of the work we have done in these studies. I also feel that the public is not concerned enough about their future in retirement and that many people do not plan longer term."
So what can be done to navigate this uncertain future? Today's actuaries are using their rigorous training to help employers and employees identify retirement risks and understand approaches in managing the complex retirement market.
In the SOA's recent retirement report, leading actuaries outline approaches to addressing a variety of retirement concerns impacted by inflation. For example, 30 percent of all women and almost 20 percent of men at age 65 can expect to reach 90. So how can pre-retirees prepare themselves so that they don't outlive their assets in a market where inflation is a key concern? Actuaries recommend considering a range of strategies including purchase of annuities, such as joint and survivor annuities and deferred annuities commencing at higher ages, and investment strategies to preserve principal. The report also offers insights for addressing concerns regarding the loss of a spouse, decline in functional status and rising healthcare and medical expenses. An important message from the report is that there is no general agreement on the best strategy and it can vary widely by individual because of differing personal and financial situations.
Beyond the recent risk report, the SOA's Pension Section Council is leading the Retirement 20/20 effort, which is examining the needs, risks and roles of all stakeholders and addressing the key issues that must be considered as new retirement systems are considered. The initiative leverages the insights of more than 60 experts, including leading pension and retirement actuaries, corporate benefits managers, attorneys, public policy advocates and academics. As part of the effort, actuaries are recommending that the new systems consider issues including: new norms for work and retirement and the role of the normative retirement age, alignment between stakeholder roles and skills, self-adjusting systems and systems better aligned with the financial markets.
The Retirement Risk Report, actuarial recommendations for addressing these risks and the media interest in actuaries' thoughts on the topic are all examples of the thought leadership and increasingly prevalent role played by actuaries in today's society. This report was widely cited in newspapers from coast to coast, including the San Francisco Chronicle, Kansas City Star and Nashua (NH) Telegraph, as well as such major online outlets as Newsweek.com and MSN.com. Radio and television coverage included KOMO-AM, Seattle, and the national PBS show Nightly Business Report. You can learn more about the recent SOA risk report or Retirement 20/20 by visiting the Society of Actuaries Web site, www.soa.org.