Retiree’s Top Financial Concerns

What Retirees Worry About the Most?

Retiree’s Top Financial Concerns

What Retirees Worry About The Most?

Introduction

In this article, we are going to discuss retiree’s top financial concerns. Though retirement is an exciting milestone to look forward to, the idea of it can be nerve-wracking.

Personal Financial Planning by Invest Yadnya
Personal Financial Planning by Invest Yadnya

Retiree’s Top Financial Concerns

Though retirement is an exciting milestone to look forward to, the idea of it can be nerve-wracking. After all, there is a host of financial unknowns associated with retirement. And living on a fixed income leaves many seniors struggling to make ends meet. 

Formal retirement has been identified as the tenth most stressful life event. The retirement life stage, whichever way you choose to structure it, can be an incredibly stressful time for those experiencing it.

Out of the most stressful events could happen in one’s lifetime, about one-half of these events are likely to happen during a person’s retirement years. These include events such as the death of a spouse or close friend, severe illness, retrenchment, formal retirement, change in financial state, change in living conditions, change in social activities and moving residence.

What Retirees Worry About Most?

Compounding the above mentioned stress is the fact that many of these life events take place simultaneously in retirement. In addition to these life events, there are many other things retirees worry about the most.

Here are the retiree’s top 7 financial concerns explained in detail.

Retiree's Top Financial Concerns
Retiree’s Top Financial Concerns

1. Outliving the Retirement Corpus

  • Inability to anticipate future financial needs is the main roadblock to planning
    • A Retirement Study found that 76% of working age people in India expect a comfortable retired life, but only 33% are actually putting aside money to fund that their retirement phase of life.
    • 45% people feel it’s better to spend money on enjoying life now than saving for retirement, while 53% save for short-term goals rather than longer term.
  • Increased Human Longevity Due to Advanced Medical Technology
    • Running out of money is one of the primary concerns of most retirees. Longevity risk is an even larger concern today, as life expectancy has risen.
    • As medical technology continues to advance, this trend will continue to extend human life expectancy. Increased human longevity means that more retiree are outliving their retirement corpus.

2. Beating Inflation

  • When you are earning a fixed income, inflation can have a profound impact on the quality of your life. Beating inflation is often cited as the most essential function of long-term saving because of the risk it poses in retirement.
  • Example: If the current yearly expenses of an individual is Rs.6 Lakh, then assuming the rate of inflation to be 7% per annum, the value of yearly expenses after 20 years would be Rs.23.21 Lakh.
  • Decreasing Interest Rates on traditional investment products like Fixed Deposits, Post Office Schemes like Kisan Vikas Patra, LIC are not even matching the inflation and therefore savings are not growing. Lower interest rates reduce retirement income by lowering growth rates for savings accounts and assets.

3. Rising Healthcare Costs

  • Ageing and increased levels of chronic disease are the main drivers of medical inflation. The Medical or Healthcare inflation in India is rising at double the rate of overall retail inflation, almost at 10-12% currently in 2019.
  • For retirees, the major concern is whether they will be able to pay for good quality healthcare when they need it.
  • Paying for private nursing home care can quickly wipe out a lifetime of savings. A retiree’s ability to pay for the cost of in-home healthcare, adult day-care and nursing home expenses may determine the quality of healthcare the retiree can receive.

4. The Onset of Major Life-threatening Disease

  • A number of major life-threatening disease, including Cancer, Stroke, Heart disease and Diabetes are common worries amongst the retirees.
  • In India, more than 4 million people are estimated to be suffering from Alzheimer’s and other forms of dementia. India’s dementia and Alzheimer’s burden is forecasted to reach almost 7.5 million by the end of 2030. The disease primarily occurs in patients over the age of 60. The legal and estate planning complications, and adjustments to living arrangements need to be considered in such cases.
  • The lifetime risk of cancer for people born since 1960 is greater than 50% now. The cost of cancer treatment has also gone up many-fold in recent years. In fact, treatment costs now have the potential to wipe out a retiree’s entire life savings.

5. Becoming a Financial Burden on Adult Children

  • According to one survey, 7 out of 10 Indians expect their children to support them in their retirement and relying on their adult children for financial support.
  • The retiree’s adult children struggle to educate their teenage children and care for their ageing parents at the same time.
  • Many adult children end up delaying their own retirement funding in order to support their retired parents, which in turn perpetuates the cycle of dependency.

6. Being a Victim of Fraud

  • The risk of losing money to scams, fake schemes and investment fraud is a very real fear for many retirees.
  • Recent PMC Bank Fraud (Punjab and Maharashtra Bank) is one of the example of this kind of frauds, where many retiree’s life-time savings and deposits are still engaged in the scam. These retiree are not able to even withdraw their entire corpus from the bank and struggling for the same.

7. Losing a Spouse or Partner

  • The death of a spouse ranks as the most stressful life event in the retirement phase. The fear of losing one’s life partner in retirement is a major stressor for retirees.
  • Also, there is the financial impact : A spouse’s death (who was financially independent) can lead to a reduction in pension benefits or bring additional financial burdens, including lingering medical bills and debts.
  • Besides for remaining socially connected in retirement, retirees are advised to ensure full transparency with regard to their finances and estate planning to reduce the burden on the surviving spouse.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: