A ‘terrifying’ retirement story for many Americans

By John Forcucci

It’s not often you read the word “terrifying” in relation to financial matters. So, I was more than a bit surprised to see that term turn up in the 2023 Schroders U.S. Retirement Survey.

The idea of not having a regular paycheck in retirement is not only a matter of concern for 57% of non-retired Americans, but it is actually “terrifying” for another 23%, the survey noted.

Part of the reason so many Americans find that prospect terrifying is their lack of confidence in the Social Security system. Even though many are aware that they will qualify for the highest Social Security payment if they wait until age 70 to start collecting payments, many are starting that process in their mid-to-late 60s — or maybe even as early as 62 — because they want to collect something from the government while the program is still viable.

In fact, according to the study, only 10% of non-retired Americans will wait until 70 to receive their maximum Social Security benefit payments.

About 72% of non-retired investors and 95% of non-retired, ages 60-65, are aware that waiting longer earns them higher payments. So that makes the decision to collect early even more startling.

Here are the reasons those surveyed said they would collect early:

» 44% said they were concerned Social Security may run out of money or stop making payments.

» 36% said they will need the money.

» 34% said it was their money, and they wanted access to it as soon as possible.

» 13% said they were advised to take it earlier than age 70.

The major problem with this crisis in confidence many Americans have in the Social Security system is that they’re taking action that will ensure they will be living below the best financial position their investment in Social Security should be providing.

A strong ray of good news in the study is that those who have a financial advisor and a retirement plan report they are doing better in retirement than those who don’t.

This reaffirms how important having an advisor is to the many millions of Americans who are nearing retirement. The added complexities of the changing market conditions, the rise of annuities along with interest rates, and the challenges of funding long-term care all make having a strong financial advisor even more important today.

Recognizing the crisis of confidence many Americans have in the Social Security system and helping create a retirement plan they have confidence in is crucial. Especially since the fear factor seems to be at an all-time high for pre-retirees. More than ever, advisors have a critical role to play.

As American as apple pie … and home insurance …

While home ownership has always been part of the American Dream, home insurance has been an assumed sidecar to that dream. When we buy a house, home insurance is as much a part of the home ownership package as intermittent repair bills and paying local taxes.
Maybe not anymore, however.

The Wall Street Journal recently reported that with drastic increases in some home insurance premiums, many are increasingly forgoing home insurance. Why? Gambling that the likelihood of a disaster isn’t high enough to justify the cost of a policy.

With the rise in flood and fire damage, as well as damage from other natural disasters, premiums — especially in significantly affected locations — are rising rapidly. With the recent occurrence of hurricanes on the West Coast and the report of five tornadoes in one day throughout New England, there’s no denying that many areas are feeling the effects of climate change.

This, of course, is having an enormous impact on insurance rates. Consumers facing higher premiums generally fall into two camps: the wealthy, who can essentially self-insure, and the not-so-wealthy who often are feeling knock-on effects, such as the inability to pay other bills when their home insurance skyrockets. Some have said, for example, this has affected their ability to make mortgage payments.

So while the effects of extreme weather have been battering the insurance industry for a while now, the dip in home insurance is possibly a more unexpected outcome that will pose increased challenges as the weather crises worsen.

John Forcucci
Editor-in-chief