59% of American adults are worriers. You probably know some of them. You might even be one. Worry doesn’t attack just young or old, rich or poor, young adult or retiree—it’s found in all demographics. But for retirees specifically, there are six key financial worries that scare them, according to a new report, The Four Pillars of the New Retirement: What a Difference a Year Makes. Here’s a look at the top six from bottom to top.
Tax Increases
31% of retirees worry that tax increases will eat away at their retirement income leaving them with less money and less ability to enjoy their retirement years. Some of that fear may come from the current administration’s talk about raising taxes, although that rhetoric is primarily focused on the ultra-wealthy. Or it may come from a fear of general tax increases over time. But there’s also more talk about stealth taxes, like the Widow(er)s income penalty tax, increased taxes on Social Security benefits, income penalty increases on Medicare Part B and D premiums, net investment income taxes, and reduced income tax deductions. Whatever the reason, almost one-third of retirees worry about the taxman.
Inflation
32% of retirees worry about inflation—a legitimate concern since inflation is inevitable and retirees will spend 20-30 years in retirement. Here’s a simple example. A U.S. postage stamp cost 33-cents in 2001. Today it costs 55-cents. That’s a 66% increase in 20 years. That’s inflation. Here are some other examples.
On May 12, 2021, the government announced that the Consumer Price Index was 4.2% higher in April of this year than it was one year earlier, the fastest increase since the Great Recession more than a decade ago.
Since January 1, 2021, to the end of June, crude oil prices have risen more than 50% and gas prices at the pump have gone up between 50%-60% depending on where you live. Prices are also substantially higher at the grocery store.
Living Too Long
32% of retirees are worried that they’ll outlive their money. People are living longer than ever before. It’s common for people to live well into their 90’s. Without the regular income they earned during their working careers, retirees live off their savings and if that runs out, Social Security benefits may be their only source of income.
Significant Economic Downturn/Recession
38% of retirees worry that a significant economic downturn or recession may devastate them. Most retirees remember the early 2000’s when the stock market dropped more than 50%, and the Great Recession 2007-2009 when the market dropped more than 50%, and most recently the COVID Pandemic when the market dropped. They worry that another cataclysmic market event during their retirement years, while they’re withdrawing savings, will deplete those savings much sooner than they planned.
Unexpected Expenses
56% of retirees worry that unexpected expenses will severely damage or possibly decimate their retirement plan—major repairs to their home, a natural disaster, a vehicle that just won’t go anymore, or…
Healthcare Costs and Long-Term Care
For 58% of retirees, healthcare costs are the number one worry, and understandably. According to the U.S. Bureau of Labor Statistics, the cost of medical care is up 92.08% from 2001 to 2021.
It’s a given that retirees will require more care just because of the aging process. Others will receive a devastating healthcare diagnosis. Still, others will require long-term care. If medical expenses continue to rise at the rate they have for the past 20 years, healthcare costs will be not only a retirees’ number one worry, but the number one enemy of their retirement survival.