A majority of Americans are far more concerned about their ability to pay their bills today at the expense of retirement planning.
“Two in three Americans (67%) say they are more concerned about paying bills right now than saving for their financial future,” said the authors of a study conducted by Allianz Life Insurance Company of North America. “Inflation risks reducing purchasing power is driving those present concerns. The vast majority (82%) of Americans say they are worried about rising inflation continuing to have a negative impact on the purchasing power of their income in the next six months.”
Further complicating matters is the concept of tapping into retirement accounts while still working, which many Americans are doing to manage historic levels of inflation and cost-of-living increases.
“The majority of Americans (55%) say they have either stopped or reduced their retirement savings due to rising inflation,” the results say. “And 45% say they have had to dip into their retirement savings because of rising inflation.”
Taking money out of retirement accounts before they’re intended to be drawn upon could play havoc with a person’s end-of-career preparations, according to Kelly LaVigne, vice president of consumer insights at Allianz Life.
“Reducing retirement savings should be a last resort, short-term answer for inflation because it could have a significant detrimental effect on financial security for years to come,” LaVigne said. “This is why it is so important to work with a financial professional to achieve long-term financial stability with a written plan that incorporates strategies for risks like inflation.”
The millennial generation is particularly prone to putting off retirement plans, with 75% of millennial respondents telling Allianz they’re far more concerned about today’s bills as opposed to life after a career. Generation X is only slightly more interested in retirement, with 73% of those respondents prioritizing today’s expenses. Baby boomers — who are either far closer or already into retirement — is still 56% more interested in today’s bills versus retirement planning.
Insufficient retirement savings for baby boomers and older generations are one of the primary causes reverse mortgage professionals cite to justify engaging with the product category. Reverse mortgage educator and author Dan Hultquist noted in December that these types of issues may be resolved if a retiree entertains the prospect of using their home’s equity from a reverse mortgage.
“The baby boomers are aging into a bracket where they have required minimum distributions, and people are drawing more money because they have to,” Hultquist told RMD in December. “People tend to be afraid of drawing too much money from other sources, because it’s not sustainable. But once we open up a new bucket with something like a reverse mortgage, that can serve as a solution.”