Friday, March 29, 2024

A Tale Of Two Pandemics: Younger Americans Feeling Financially At Risk While Retirees Emerge Resilient

Allianz Life study finds retirement concerns remain high for non-retired Americans, yet pandemic-induced fatigue has also caused poor financial decisions

A recent study from Allianz Life finds retirement concerns remain high for non-retired Americans, yet pandemic-induced fatigue has also caused poor financial decisions.

Key findings:

  • 63 percent of non-retirees fear running out of money more than death, versus 46 percent of retired respondents.
  • 68 percent of pre-retirees feel confident about being able to financially support their future goals, down from 75 percent in 2021.
  • 42 percent of retirees said they retired earlier than expected, down from 68 percent in 2021; fewer did so due to healthcare issues (26 percent down from 33 percent in 2021) or unexpected job loss (15 oercent down from 22 percent in 2021).
  • 54 percent of non-retirees admitted to spending too much money on non-necessities during the pandemic.

As the United States passes the two-year mark of the COVID-19 pandemic, it’s becoming increasingly clear that there is a significant gap in the financial experience of younger Americans and their retired counterparts. Nearly two-thirds (63 percent) of non-retirees said they fear running out of money more than death, versus less than half (46 percent) of retired respondents, according to the new 2022 Retirement Risk Readiness Study* from Allianz Life Insurance Company of North America (Allianz Life).

Americans who have yet to retire and are still balancing careers, family and savings are feeling more worried about their financial future than they did at this point last year, and are significantly less confident than current retirees. This is particularly true for people who are 10 or more years from retirement—pre-retirees.

Fewer than seven in 10 (68 percent) pre-retirees said they feel confident in being able to financially support their future goals in the latest survey. This is down from 2021, when 75 percent of pre-retirees said they had confidence in financially supporting those goals. Meanwhile, 89 percent of retired respondents said they feel confident about funding their future financial goals.

Retired Americans are less worried than pre-retirees about a number of retirement concerns, including:

  • Having enough money to do all the things they want in retirement (28 percent versus 64 percent of pre-retirees);
  • The cost of living increasing and limiting their ability to afford necessities (33 percent versus 69 percent of pre-retirees); and,
  • Running out of money before they die (31 percent versus 65 percent of pre-retirees).

At the same time, retirees are more relaxed than they were last year about various retirement risks, including:

  • Market downturns (47 percent, down from 65 percent in 2021);
  • Healthcare costs (43 percent, down from 73 percent in 2021); and,
  • The rising cost of living preventing them from enjoying retirement (41 percent, down from 59 percent in 2021).

While an ongoing Great Resignation makes the headlines, only 42 percent of retirees in the survey said they retired earlier than expected, down significantly from the 68 percent last year. Notably, fewer said they retired early due to unexpected issues and a higher percentage were able to retire on their own terms:

  • Healthcare issues (26 percent, down from 33 percent in 2021);
  • Unexpected job loss (15 percent, down from 22 percent in 2021);
  • Feeling financially ready (18 percent, up from nine percent in 2021); and,
  • Wanting to have fun while they still can (12 percent, up from seven percent in 2021).

“While it’s encouraging that many retired Americans were able to weather the financial storm caused by the pandemic, it’s equally concerning that so many pre-retirees did not escape unscathed,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. “The reality is, financial aftershocks from the pandemic are still ongoing, so both groups need to make sure they are taking the necessary steps to mitigate risks to their retirement security.”

Pandemic frustrations causing financial fatigue
The 2022 Retirement Risk Readiness Study surveyed three categories of Americans to get different perspectives on retirement: Pre-retirees (those 10 years or more from retirement); near-retirees (those within 10 years of retirement); and those who are already retired. In addition to highlighting the disparity in retirement confidence among Americans, the 2022 study identified how the pandemic has caused financial fatigue, potentially putting non-retirees’ financial future at risk.

During the pandemic, more than one-third (34 percent) of non-retired respondents said they took money out of investment accounts (401K, IRA) in favor of cash, and 39 percent said they reduced the amount of money they were putting into retirement accounts. More than half (54 percent) said they were spending too much money on non-necessities during the pandemic, with the majority saying they regret the decision.

Despite these actions, non-retired respondents do have a desire to improve their financial decision-making, particularly those who are further from retirement. Nearly half of pre-retirees (48 percent) said they would like to make a formal financial plan with a financial professional. The same amount said they are interested in purchasing a financial product that provides a guaranteed source of retirement income.

Great Resignation still in motion
Many Americans are considering a job change in the near future, which could have a severe impact on their retirement security.

More than one-quarter of pre-retirees said they are likely to take a new job this year, either with a new company (31 percent) or going into business for themselves (26 percent). Surprisingly, an even higher percentage of near-retirees are planning an employment change in 2022 (33 percent with a new company and 32 percent switching to self-employment).

As expected, these potential job changes come with a significant amount of worry related to both short- and long-term financial planning. Nearly six in 10 non-retired respondents said they are worried about how a change in employment will affect a number of spending/saving topics, including: Paying for necessities like housing and food (57 percent); cutting back on non-essentials like entertainment (57 percent); reducing the amount they can save for retirement (60 percent); and completely stopping savings for retirement (56 percent).

“With the pandemic driving many Americans to consider a disruption to their current employment status, it’s important to remember how that can also have a significant effect on retirement planning far into the future,” said LaVigne. “During these periods of uncertainty, it can be beneficial to work with a financial professional so you can make sure all of the bases are covered before making any drastic changes.”

Inflation concerns persist
One concern that continues to plague both retired and non-retired Americans is how rising costs will affect their finances. Nearly eight in 10 (78 percent) expect inflation to get worse over the next 12 months. About six in 10 people (59 percent) who are still in the workforce said their income is not keeping up with the rising cost of living, and 40 percent of retirees said their retirement income is not keeping pace.

Non-retirees are particularly concerned about inflation affecting their ability to pay for necessities (57 percent), save as much for retirement as they should (66 percent), and make the retirement lifestyle they envisioned unobtainable (61 percent).\

Although only about half (52 percent) of retirees said they have a plan to address the rising cost of living in retirement, non-retired Americans are feeling the most pain. In order to address these challenges, non-retirees noted they have done or expect to do the following:

  • Find a job that pays more—53 percent;
  • Reduce spending on necessities—52 percent;
  • Dip into savings to make ends meet—49 percent;
  • Stop or reduce education savings (among those with children)—52 percent; and,
  • Stop or reduce retirement savings—45 percent.

“Regardless of whether they are retired or still in the workforce, all Americans are challenged by inflation right now and need to develop strategies that ensure their income keeps up with rising costs,” added LaVigne. “While changes to spending habits can help in the short term, it’s important that people take measured steps, such as adding a source of guaranteed income that can help to protect their finances without sacrificing retirement security.”

*Allianz Life conducted an online survey, the 2022 Retirement Risk Readiness Study, in February 2022 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k.

Allianz Life Insurance Company of North America, one of the FORTUNE 100 Best Companies to Work For® and one of the Ethisphere World’s Most Ethical Companies®, has been keeping its promises since 1896 by helping Americans achieve their retirement income and protection goals with a variety of annuity and life insurance products. In 2021, Allianz Life provided additional value to its policyholders via distributions of more than $10.6 billion. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with approximately 150,000 employees in more than 70 countries. Allianz Life is a proud sponsor of Allianz Field® in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.

Life Insurance Sales Surge In Third Quarter 2021

LIMRA

Total life insurance new annualized premium grew 18 percent in the third quarter, representing the third consecutive quarter of double-digit growth, according to LIMRA’s Third Quarter U.S. Retail Life Insurance Sales Survey.

“Aside from last quarter, third quarter premium growth was at its highest level since third quarter 2007,” said John Carroll, senior vice president and head of LIMRA’s Insurance Division. “Overall growth was widespread with 65 percent of carriers, including nine of the top ten carriers, reporting increases.”

Year to date, total new premium increased 18 percent, representing the largest growth recorded for nine months in 25 years. Our research shows all product lines recorded positive gains in premium in the third quarter and year-to-date.

While overall policy sales were level with prior year (which were up seven percent in third quarter 2020), the number of policies sold year-to-date was five percent higher than in the first three quarters of 2020. Except for term products, all products experienced growth in policy sales in the third quarter, and—for the first time in at least 25 years—every major product line logged increased in policy sales in the first nine months of 2021.

Variable universal life (VUL) new annualized premium doubled in the third quarter, up 104 percent, and recorded the greatest growth in terms of absolute dollars. While protection-focused product sales—which have driven growth earlier in the year—increased 46 percent in the quarter, accumulation-focused product sales growth was also strong, up three-fold from third quarter 2020 results.

Year-to-date, VUL new annualized premium increased 78 percent. VUL market share was 13 percent in the third quarter, five percentage points higher than a year ago and nearly double pre-pandemic levels.

“VUL sales have been remarkable in 2021,” noted Carroll. “Low interest rates, strong equity markets and recent changes to tax law (IRC 7702) have made VUL products more attractive to consumers, driving their growth over the past several quarters.”

Indexed universal life (IUL) new premium jumped 21 percent in the third quarter with two-thirds of IUL carriers increasing their sales and all but one carrier reporting double-digit growth. In the first nine months of 2021, IUL premium increased 18 percent. IUL represented a quarter (26 percent) of all individual life premium in the third quarter.

Fixed UL results were also positive. New annualized premium increased 11 percent in the third quarter, primarily driven by current-assumption product sales. Fixed lifetime guarantee premium, however, continued to fall, down 13 percent for the quarter. Year-to-date, fixed UL ticked up two percent. In the third quarter, fixed UL held eight percent of premium market share.

Whole life sales growth slowed in the third quarter, compared with the growth experienced in the first half of the year. In the third quarter, whole life new premium grew eight percent, resulting in a 17 percent increase year-to-date. Whole life represented 33 percent of the total individual life insurance premium collected in the third quarter.

“Increased consumer interest in life insurance and an expansion of accelerated underwriting programs have helped whole life sales across all distribution channels,” noted Carroll. “LIMRA is forecasting double-digit growth in whole life sales for 2021 and continued strong sales results through 2022.”

Term life insurance new premium increased four percent in the third quarter and was up seven percent year to date. LIMRA is projecting term life premium to grow as much as eight percent in 2021, propelled by continued consumer interest and online availability.

“COVID-19 raised Americans’ awareness about the importance of having enough life insurance coverage. Our research finds more than a third (36 percent) of consumers said they planned to purchase coverage this year,” said Carroll. “Our sales results suggest many are following through on this. Yet there are 102 million Americans living with a life insurance coverage gap. As we look to 2022, LIMRA will continue to lead the industrywide Help Protect Our Families campaign, focusing on the underserved markets that rely on our products to ensure their families’ future financial security.”

LIMRA’s Third Quarter 2021 U.S. Individual Life Insurance Sales Survey represents approximately 85 percent of the U.S. individual life insurance annualized premium market.

The latest data table* with U.S. life insurance sales trends can be viewed in the Fact Tank**.

Reference:
*https://www.limra.com/siteassets/newsroom/fact-tank/sales-data/2021/q3/third-quarter-2021-individual-life-sales-v-final.pdf.
** https://www.limra.com/en/newsroom/fact-tank.

Rising Inflation Seen As Biggest Risk To Americans’ Retirement Plans In 2022

Annual New Year’s Resolutions study from Allianz Life finds more commitment to improving finances, especially from Millennials

Although Americans say they worried most about the COVID-19 pandemic in 2021, rising inflation is now seen as the biggest risk to their retirement plans, according to the annual New Year’s Resolutions Study* conducted by Allianz Life Insurance Company of North America (Allianz Life). Nearly half (48 percent) of respondents identified the pandemic as the most worrisome threat of 2021, with the rising cost of living following at 38 percent. However, looking ahead, a full one-quarter of Americans now view rising inflation as the single greatest risk to their retirement plans, more than doubling from 2020 (eight percent).

This focus on inflation is significantly higher than other risks to retirement, many of which saw a significant decline in concern from 2020.

20212020
Rising inflation25%8%
Outliving my money8%10%
Increased healthcare costs8%13%
Job security7%12%

“Given the seemingly constant changes with the pandemic, it’s no surprise it is top of mind for the majority of Americans as they think about saving and spending in the new year,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. “However, inflation is clearly a more pressing concern as people live with it day to day. It’s also forcing them to think about how they can mitigate this significant risk to their retirement security down the road.”

Less desire for professional help, more do-it-yourself approach
At the same time, the percentage of people who identified financial stability as their top focus area for 2022 increased to 30 percent, the highest since 2017. Despite this, most Americans decline to make that commitment formal via their New Year’s Resolutions. The percentage of people including financial planning in their 2022 resolutions is at an all-time low of 12 percent, down 21 percentage points from its high in 2009-2010. The primary reasons why people don’t include financial planning in their resolutions remain unchanged over the years: Believing they already have a solid plan (34 percent) or that they don’t make enough money to worry about it (26 percent).

In addition, most people prefer to go it alone rather than seek professional assistance with financial planning. Only 22 percent of respondents said they are more likely to seek the advice of a financial professional in 2022, down from 27 percent last year.

This confidence could be a reflection of the fact that more people seem to be active in managing their finances – both in eliminating bad financial habits as well as establishing positive behaviors. The top bad financial habits from 2020 both saw declines this year, with less than one-third (28 percent) saying they “spend too much,” down from 32 percent, and only 23 percent saying they “save some, but not as much as they could,” down from 27 percent. Furthermore, a full one-third believe they have no bad financial habits, up from 28 percent in 2020.

Millennials feeling financial angst, but see the light ahead
Unfortunately, all Americans aren’t feeling equally as confident about the state of their finances. One-quarter of Millennials said their financial situation got worse this year compared to 2020, higher than both Gen Xers (17 percent) and boomers (15 percent). In addition, compared to other generations, Millennials are more concerned about stagnant wages (22 percent vs. 15 percent Gen X and six percent boomers) and job security (21 percent vs. 12 percent Gen X and five percent boomers). Moreover, Millennials are particularly concerned that the rising cost of living will impact their ability to pay for necessities (65 percent), and save enough for retirement (71 percent) and short-term goals (70 percent).

These financial concerns may be having a negative effect on Millennials’ health. More than four in ten (46 percent) said they experienced more overall stress this year compared to last year, the highest of all generations (37 percent Gen X and 27 percent boomers), as well as more stress related specifically to their finances (41 percent Millennials vs. 28 percent Gen Xers and 16 percent boomers).

That said, about four in ten (42 percent) Millennials are optimistic their financial situation will improve in 2022, much higher than Gen X (22 percent) or boomer (18 percent) respondents.

“Whether you work with a financial professional or set your own agenda for managing your finances in the new year, it’s crucial to consider the various risks like inflation that can derail your financial strategy and adjust accordingly,” added LaVigne. “Regardless of your age or amount of time until your retirement, it is important to take into account all of these issues and begin to devise an action plan to mitigate these risks.”

*Allianz Life Insurance Company of North America conducted an online survey, the 2021 Allianz Life New Year’s Resolutions Study, November 15-17, 2021 with a nationally representative sample of 1,115 respondents ages 18 years or older.

Half Of Americans Fear Falling More Than Cancer And Want To Age In Home Without Stairs

Nationwide

Survey: Americans want in-home long term care, but half worry if their current home will be safe

Over a year and a half into the COVID-19 pandemic, most Americans (85 percent) agree that it’s more important than ever to stay in their home for long term care. However, nearly half of those not retired (47 percent) say they are concerned their current home will not be safe for them to “age in place.”

According to the tenth annual Nationwide Retirement Institute® Long-term Care Survey of 1,812 U.S. adults aged 24 or over and 706 caregivers, conducted by The Harris Poll in October 2021, the vast majority of Americans (88 percent) believe it’s more important than ever for people to have a plan for long term care and have long term care insurance (86 percent) as COVID-19 has raised concerns about nursing homes.

“The pandemic has further fueled people’s fear of being alone in a nursing home when they need long term care,” said Holly Snyder, president of Nationwide’s life insurance business. “Our survey revealed that six in 10 adults would rather die than live in a nursing home. It’s also made people consider whether they have a plan that will allow them to age in place in their current home if they need long term care.”

What’s more, 80 percent of Americans agree that it is important for them to live in a single-floor home when they age. In contrast, 68 percent of non-retirees say their current home has stairs.

“Many adults are concerned about navigating their home’s stairs and step-up entries as they age,” Snyder added. “In fact, nearly half of those we surveyed (47 percent) say they are more afraid of falling than getting cancer. There are long term care solutions with cash indemnity style benefits that allow policy holders to use the money to pay for more than just typical assisted living expenses. You can use this coverage to pay a relative to help with your long term care and to install lifts, elevators and safety railings so you can stay in your home.”

A family affair
Most adults (70 percent) would like to have the option of relying on their family for long term care if they need it. In fact, half (50 percent) feel it is the responsibility of their family to care for them if they need long term care. This sentiment is particularly high for Millennials (69 percent) and declines with age (52 percent for Gen Xers and 33 percent for Boomers+). Millennials and Gen Xers expect their parents to live with them when they get older (61 percent and 49 percent), and they expect to live with their adult children when they get older (46 percent and 36 percent vs. just one in four Boomers).

That said, two-thirds of adults (66 percent) are worried they will become a burden to their family as they get older. Seven in 10 adults (70 percent) would not expect a family member to provide long term care if they were unable to compensate them.

Many adults misunderstand long term care coverage
The survey reveals that 25 percent of adults self-report that they currently own long term care insurance for themselves. This is concerning, as industry data shows only 15 percent of Americans have purchased long term care insurance and most of those are older consumers.*

According to the survey, Millennials (39 percent) are more likely than Gen Xers (26 percent) and Boomers+ (19 percent) to claim they currently own long term care insurance for themselves. Most say they bought the insurance at work, which gives away the misconception—too many adults confuse long term disability insurance with long term care insurance.

“Rarely is long term care included in a company benefit package,” Snyder said. “This misconception could mean that many Americans—mostly Millennials—mistakenly believe they have some sort long term care coverage, when in fact they do not.”

Most Americans (61 percent) cannot even estimate what current annual nursing home costs could be. Those who did, estimate current annual nursing home costs to be $43,096. That is not even half of what a semi-private room averages in 2020 ($93,075 semi-private, $105,850 for a private room**). They also underestimate home health care costs at $33,617 ($54,912**).

Caregivers face unique challenges
According to the survey, two in 10 adults are currently caregivers (21 percent) and close to four in 10 have been a caregiver at some point in their lives (39 percent). Caregiving is a time and money-intensive role. On average, most caregivers spend an average of 31.4 hours and $692 per month on caregiving duties.

Eight in 10 (80 percent) believe they should be able to be a caregiver without dipping into their savings to cover day to day expenses. The reality is, many say they are afraid caregiving expenses will keep them from ever retiring (68 percent of Millennials and 53 percent of Gen Xers), as well as worry caregiving could cause them to lose their job (62 percent of Millennials and 42 percent of Gen Xers). Despite all this, if given the choice, 80 percent of caregivers would choose to be a caregiver all over again.

Financial professionals have solutions
Nearly half of adults across all age groups have not discussed long term care costs with anyone. With fewer than one in 10 adults (eight percent) saying they’ve discussed long term planning with their financial professional, it’s important they start the planning process today to set themselves, their loved ones and future caregivers, up for success.

The good news is that more than one-third (36 percent) plan to discuss long term care costs with a financial professional in the future, in particular younger adults (41 percent Millennials and 46 percent Gen Xers, vs. 24 percent Boomers+).

“It is very clear that Americans across all generations need more education about long term care costs and solutions,” Snyder said. “Financial professionals can help adults create a plan that addresses these issues.”

To encourage discussions around health care and long term costs in retirement, Nationwide’s Health Care/LTC Cost Assessment tool uses proprietary health risk analysis and updated actuarial cost data to provide a meaningful, personalized cost estimate that will help financial professionals and clients plan for future medical and long term care expenses.

To learn more about the 2021 Nationwide Long term Care Consumer Survey, visit www.nationwidefinancial.com/ltcinsights.

Methodology
The 2021 Nationwide Retirement Institute Long term Care survey was conducted online within the United States between adults aged 25 and over by The Harris Poll on behalf of The Nationwide Retirement Institute. Within the survey, respondents who are current caregivers or have been caregivers in the past were identified. Caregivers are defined as those who have ever or are now providing paid or unpaid long term care to a friend or family member, not through an agency, business, or non-governmental organization. Those who care(d) only for a child under 18 or a child over 18 born with a disability did not qualify as a caregiver for this survey.

Respondents for these surveys were selected from among those who have agreed to participate in our surveys. Because the sample is based on those who agreed to participate in the online panel, no estimates of theoretical sampling error can be calculated. Data are weighted where necessary by age by gender, race/ethnicity, region, education, household income, marital status, household size, and propensity to be online to bring them in line with their actual proportions in the population. A propensity score was incorporated into weighting to adjust for attitudinal and behavioral differences between those who are online versus those who are not, those who join online panels versus those who do not, and those who responded to this survey versus those who did not.

About The Harris Poll
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 and is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. They work with clients in three primary areas: building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Their mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.

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