Most Americans Unable to Afford Unexpected Needs in Retirement

April 28, 2004 ( two-thirds of Americans (64%) have retirement plans in which they will be unable to make sufficient adjustments to their investments in response to market pressures or life changes, according to a Retirement Income Flexibility study commissioned by Golden Retirement Resources, Inc.

More that one-third of survey participants are afraid of running out of money due to personal or market changes (37%) or have had to “severely” restrict their spending (34%).

There is also a correlation between household income and ability to adapt to economic and life events, the survey found. While 45% of respondents with under $75,000 in household income were afraid of running out of money, only 21% of individuals with incomes more than $75,000 had the same concern. The disparity was also there in restricting income: 42% of those same lower income households needed to severely restrict spending due to economic or life changes, as compared to only 13% of those with higher incomes.

Decreasing value of their investment portfolio, cited by 51%, falling interest rates, mentioned by 47%, and cost of living increases were three reasons cited by the 83% of people surveyed age 50 and older who said their ability to generate sufficient retirement income was reduced during the past five years.

Of those people surveyed age 50 and over, either retired or partially retired, 83% had a personal event, such as declining health, illness or job loss that impacted their income needs in retirement. Additionally:

  • 50% had to spend more of their own money on health care or home care than they anticipated
  • 36% had declining health or an illness that affected their retirement income
  • 29% experienced a reduced standard of living

These statistics are set to get worse as the millions of baby boomers about to retire are almost completely unprepared for a long retirement and the lifestyle changes and income demands that may accompany it, the survey reports. As support, the survey release cites an AARP estimate that 46% of people over 65 will live in nursing homes for some time during the next 20 years, costing them as much as $100,000 per year.

As far as receiving help from financial advisors, 44% said they did not have an advisor, or their advisor was no longer helping and 18% said the help they received from their advisor for retirement planning was fair or poor.

The Retirement Income Flexibility study was conductedMarch 25-29, 2004 by Opinion Research Corporation among 961 Americans aged 50 years and older and has a margin of error of +/- 3%.