Many Americans dream of retirement as a time once they can stop working, travel the world, spend time with family members and pursue their passions.
Then again, the concept of retirement is suffused with anxiety and fear for a good portion of employees, in accordance with a report released Wednesday by the Transamerica Institute.
In its twenty fourth annual survey, the nonprofit retirement research organization homes in on the center class, polling over 10,000 individuals with household incomes between $50,000 and $199,999. A lot of them expressed concerns about their health and funds of their later years. A couple of third of employees anticipate working past 65, and 15% of them say they never expect to retire.
“America’s middle class is navigating the turbulent post-pandemic economy and high rates of inflation,” said Catherine Collinson, CEO and president of Transamerica Institute, in a news release. “They’re focused on their health and financial well-being, but many are liable to not achieving a financially secure retirement.”
5 biggest retirement fears for the American middle class
Transamerica has long tracked what Americans say they’re afraid of in terms of retirement. Over the past decade, particularly, their answers have remained notably consistent: The highest three worries are almost at all times related to inadequate savings, declining health and uncertainty over Social Security advantages.
The newest survey asked respondents to decide on their biggest fears from a listing of 14 options, including one for “I don’t have any retirement fears.” Only 11% of respondents chosen that option.
The remaining report having no less than one major concern for his or her golden years. Here’s a more in-depth have a look at the retirement issues most certainly to be keeping Americans up at night:
1. Outliving their money
Americans’ best fear for retirement is undisputed. With one exception throughout the pandemic — when respondents rated potentially declining health as their top concern — people have consistently said they’re most afraid of outliving their savings and investments.
Growing life expectancy may very well be one major reason why. Respondents typically expect to live to 90, equating to a retirement of about 25 years if someone retires at age 65. With an extended lifespan comes ballooning health care costs in old age, which might cut deeply into Americans’ nest eggs.
The scale of the nest egg is one other vital factor. Individuals who have not retired yet have an estimated median of $66,000 in retirement savings — removed from what they are saying they’ll really want to live comfortably. The Transamerica respondents typically said they’ll require about $500,000 to retire, but separate research puts the associated fee at as much as $1.8 million on average.
2. Declining health and long-term care
Americans are frightened their health as they get older might put a damper on their retirement plans.
As a really close second biggest fear, about 40% of respondents cited declining health issues that require long-term care as a chief retirement concern. Health issues come as a double whammy for retirees: One, as a serious expense, and two, as an element that would hinder their goals to travel or nurture certain hobbies.
In lots of cases, folks know firsthand the challenges that long-term care can pose. Already, some 40% of people that haven’t retired (and the same share of retirees) told Transamerica that they’ve acted as a caregiver for somebody who required long-term care.
3. Dwindling Social Security advantages
Social Security has traditionally been the backbone of the U.S. retirement system. About 55 million Americans receive retirement advantages every month from the agency, nevertheless it has serious funding issues.
Social Security’s retirement profit trust fund is predicted to expire of cash by 2033 without legislative intervention. If Congress doesn’t act and allows the coffers to deplete, Social Security wouldn’t go away — but retirement advantages may very well be immediately reduced by about 21%.
Given the recognition of this system, the funding woes have caused a panic amongst Americans, and Transamerica’s report highlights the priority. Some 39% of respondents named Social Security advantages being cut or eliminated amongst their best fears about retirement, making it the third-biggest fear overall.
Thankfully, there isn’t any indication that this system goes away, and Congress still has several years to pass laws to fix Social Security’s financial problems.
4. Developing dementia
Other than general health declines as they age, Americans appear particularly frightened about developing Alzheimer’s disease or the same dementia-related disorder.
Based on the Alzheimer’s Association, the disease is progressive and incurable. Often, symptoms aren’t noticed until they’re severe, interfering with basic on a regular basis tasks like chores, funds, and even talking with family or friends. Roughly 6 million to 7 million Americans are diagnosed with Alzheimer’s, and the overwhelming majority of them are 65 or older.
While there isn’t any cure, there may be treatment to stop the dementia from progressing. But treatment is kind of expensive. A 2019 study found that the annual cost of treating Alzheimer’s runs about $15,000 to $30,000 depending on the stage and severity of the disease.
The Alzheimer’s Association says the perfect solution to stave off the damaging effects of the disease is to know the early warning signs of dementia and to get checked as soon as possible should you or a loved one displays them.
5. Affording long-term care costs
Long-term care — whether it’s at home from a loved one or at a nursing facility — could be costly. While Medicare helps cover typical health care costs for retirees, to many individuals’s surprise, it doesn’t cover any long-term care expenses.
Because the fifth best retirement fear, many Americans are frightened they won’t have the funds for to afford round the clock care should they need it of their old age. In some ways, this retirement fear encapsulates all of the others in a single: a fear of developing a health condition that restricts your each day activities while draining your retirement savings.
“Population aging and the skyrocketing cost of long-term care are a threat to the retirement security of [the middle class],” Transamerica researchers wrote within the report.
Most retirees said they plan to depend on their family or friends to care for them, if needed, versus receiving skilled care, but this is not any surefire solution to avoid the financial ramifications given the toll it will tackle the caregiver’s funds.
Long-term care insurance purchased at the fitting time (normally in your 50s or 60s before any conditions arise) might help defray out-of-pocket costs. Typically, the policy is cheaper the younger you’re whenever you purchase it. Annual insurance premiums normally run anywhere from $900 to $7,000, in comparison with the worth of services without coverage, which average between $60,000 and $100,000 per yr within the U.S.
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