Genworth Study Finds Lack of Awareness About Cost of Retirement
A survey conducted by Genworth found that most consumers are unaware of the true cost of retirement and have false confidence about their target retirement age. The findings of the study were released this week and showed a serious gap between expectations and reality when it comes to retirement.
The majority of pre-retirees (73%) are confident that they will retire as planned, but only 48% of retirees actually ended up retiring at the time they had originally expected. 46%, however, retired sooner than planned.
The fact that they retired sooner than planned doesn’t necessarily mean they are ready for retirement, though. Nearly the opposite proved to be true. 36% of people entered retirement due to job loss, while another 25% simply “didn’t want to work anymore”. Another 17% of people retired due to health problems. Many people underestimate the costs that come along with retirement in the first place.
“Unpredictable retirement dates, compounded by misperceptions about retirement expenses and the uncertain futures of traditional sources of retirement income may leave many retirees at risk for outliving their retirement savings if they don’t prepare properly,” said Eric Taylor, Vice President and National Sales Manager for Annuities at Genworth, in the press release.
Off Target Estimates
The Retirement Income Study surveyed 1,340 adults in the United States between the ages of 40 and 80, all of whom had a household income of at least $50,000. Of those surveyed, 700 were retired.
More than half of pre-retirees surveyed believe that retirement will involve a decrease in expenses, but 77% of retirees reported that their general living expenses actually went up in retirement. Health care expenses were the main area that retirees saw an increase in costs, which 41% of retirees reported. Another 26% reported an increase in real estate costs.
Factoring in health expenses is often something that people do not consider when planning for retirement. Many wrongly assume that Medicare or health insurance will cover the cost of retirement health care and are shocked to learn that they must pay the full out of pocket cost. Understanding how to appropriately budget for health care in retirement can help you prevent running into financial disaster in retirement due to big medical bills.
Budget for Health
Genworth is a leading provider of long term care insurance, which offers coverage for a potential care situation. Most people need long term care in their retirement years for various reasons, whether it is due t o an injury, dementia, or physical frailty. The cost of this care is high enough to destroy some people’s entire retirement nest egg, which is where long term care insurance comes in. This type of coverage ensures you don’t have to pay the full out of pocket cost, giving you peace of mind.
The Genworth study found that even among people who worked with a financial expert, only 50% had a written plan for retirement. Establishing a written plan with specific monetary targets encourages more savings and can help you understand in what areas you lack preparation.