Add senior citizens to the list of Americans who are
starting to experience the impact of rising inflation in retirement.
The uptick in the cost of living and other economic factors
is taking its toll on seniors, adding to their concern about making retirement
dollars last, according to a new report from American Advisors Group (AAG), a
reverse mortgage lending service.
Economic inflation is the top worry with 66% of seniors
worrying that it will have a negative impact on their retirement. And widowed
or divorced senior women answered at the highest rate with 72% expressing
concern. Additionally, 19% of seniors said that COVID-19 pandemic has affected
retirement planning.
“Many seniors in this country are discovering that their
retirement plans aren’t working out as they had hoped, and inflation is only
making that reality worse,” said AAG Chief Marketing Officer Martin Lenoir.
Overall, seniors did not appear to anticipate how expensive
it is to retire–an observation that is playing out in real time in academic
circles. In a recent interview with The American College’s professor of wealth
management, Michael Finke, PhD, said that it’s never been a more costly time
for an individual to retire.
“I could produce the same income stream in dividends and
interest from $250,000 in retirement savings in 1992 that I could from $1
million in 2022,” says Finke.
AAG’s study found that while life is more expensive for
today’s seniors, many have even less financial stability than they planned.
Among the findings:
More than one in three seniors (36%) say they have less
money than they thought they would at this point in their life, with widowed or
divorced senior women again answering at the highest rate of 44%;
53% of seniors said the cost of living is higher in
retirement than they had expected and more than a third of them have less money
than they planned to have at this point in their lives; and
Nearly one-third of older Americans believe they will
outlive their money.
Looking for solutions
The obvious question is where will older Americans turn to
secure additional funds for the remainder of their retirement? More than one
third (37%) of the respondents say they need to increase their cash flow in
order to live comfortably, with widowed or divorced senior women coming in at
50%. AAG noted that products such as its reverse mortgage options could be a
solution–a concept that was boosted by a recent study that found reverse
mortgages can act as a risk mitigation tool for millions of retirees.
Under the reverse mortgage scenario, seniors aged 62 and
older can access home equity, while also eliminating monthly mortgage
payments–though they are required to continue paying taxes and insurance, among
other terms.
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