Living longer comes with a hefty price tag, and more seniors are starting to realize that the greatest financial risk they’re facing is longevity, says the 2011 MetLife Retirement Income IQ survey.
“Everyone knows they’re likely to live longer, but most don’t realize that can mean living past age 85 and they fail to calculate how much money they will need for a steady and lasting income,” said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute, in a statement.
In the 2011 survey, 62% of of respondents were aware of the major costs associated with living longer, compared to 56% in 2008 and 23% in 2003.
In keeping with the growing need for senior financing, more attention is being given to reverse mortgages, although there is still room for further education; MetLife says lack of knowledge of the product “still abounds.”
Nearly one in four survey respondents correctly identified that the loans are only available to homeowners aged 62 or older, but a majority, at 54%, were unaware of the HECM for Purchase program, which can be used to buy a primary home.
Many are still unprepared for retirement, as only 45% knew that they will need 80 to 90% of their pre-retirement income to maintain their current standard of living. Nearly 30% had an inflated sense of how much they could withdraw from their savings each year, at 7 to 10%, whereas experts recommend limiting the amount to between 4 and 6%.
An increased number since the 2008 survey recognized they’d be dependent on government programs such as Medicare and Social Security, with 45% feeling that those programs are more important compared with five years ago, but only 17% knew that putting off collecting Social Security for three years would add 24% to the amount they’d receive.
The biggest concern expressed by 32% of respondents is not having enough retirement income to cover necessary living expenses. Most respondents, at 87%, are working on ensuring adequate income for retirement, which includes increased contributions to retirement funds, and 1% of respondents saying they had taken out a reverse mortgage or tapped into home equity. Additionally, 45% said they will likely end up working longer than planned.
Although seniors have an increased awareness of longevity, their financial prowess is going downhill. The majority of surveyed respondents answered only five out of 15 questions correctly, which has worsened from a majority correctly responding to six out of 15 in 2008.
And, despite years of public education on long-term care costs, says MetLife, 42% of Americans still incorrectly believe that health insurance, Medicare or disability insurance will cover the costs of long-term care.
The full 2011 MetLife Retirement Income IQ survey can be seen here.
Written by Alyssa Gerace