Retiree Concerns Could Cause Future Challenges

Many retirees in the current survey reported concerns about the future that, if realized, could flip their answers in future surveys. For example, retirees’ highest concern, reported by more than two-thirds of retirees (69%), is that the U.S. government will make significant changes to the American retirement system. These concerns are valid, given the widespread publicity about funding challenges with Social Security and Medicare.

Regarding Social Security, nine in 10 retirees report that Social Security is their primary source of retirement income. However, if Congress doesn’t solve Social Security’s funding challenges, current retirees could face a cutback in their benefits of 20% or more in the early 2030s, according to numerous forecasts.

The second-highest concern of retirees is an economic recession, reported by 56% of survey respondents. Economic recessions usually manifest as a stock market crash. And indeed, this is a valid concern, since it’s highly likely that current retirees will experience one or more stock market crashes over the balance of their lifetimes.

Health can be yet another future challenge. For example, only about one in three retirees report they’re in excellent or very good health. Additionally, 46% reported concern about a future health event, and 44% reported a concern about a needing to provide care for a loved one who has a health condition or disability.

These concerns correspond with my observations of older relatives and friends. They enjoy a good retirement until a significant event happens, such as the death of a spouse, a serious health event that involves high medical bills or long-term care, or their retirement income finally falls well below their living expenses. Most likely these people would have reported confidence in their finances if they’d participated in prior surveys. However, when the situations changes, their answers would flip to the negative.

View Concerns As A Retirement Planning Challenge

Simply wringing your hands about a retirement crisis won’t help your situation. Our U.S. government is in no position to help, given the funding challenges with Social Security and Medicare, and the growing federal debt problem (which could turn into a widespread crisis).

Instead, view any concerns as a retirement planning challenge to address. For example:

• Estimate how much your retirement income could drop if Social Security benefits are reduced by 20%. Could you still pay for your living expenses? If not, plan for making future adjustments in your living expenses.
• Determine if your spouse be okay financially if you pass away first. Usually, the retirement income of the survivor drops more than their living expenses do. Plan to make sure your spouse will have enough income to cover their living expenses if you pass away first.
• If the stock market crashed by 50%, work out what the resulting reduction in retirement income would be. Could you still meet your living expenses? If not, again plan for making future adjustments.
• Develop a plan to pay for high medical bills or long-term care if you or your spouse experiences a serious medical condition.

As you can see, you can help address these concerns and relieve your worry by developing “what if” plans. You may need to work with a qualified financial planner to develop these plans, since the necessary expertise is often beyond most people’s skill sets. In the survey, four in 10 retirees report that a financial advisor is their most-used source for retirement planning.

Don’t let your worries keep you up at night! Instead, develop plans to address what can go wrong with your retirement. That will help you continue to be confident with—and enjoy—your retirement.