The level of confidence of retirees and near-retirees in their finances has popped back from the days of the recession, but they aren't planning for how long their money may need to last, says a new study by the Society of Actuaries.
Although their confidence levels have returned to the pre-recession levels, a large group of near retirees are "self insuring" and not worrying about the possibility that their money may have to last 20 or more years, says a panel of experts who presented a webinar recently on the actuaries' findings.
"Retirees are planning for only five years down the road and yet many are as confident as they were before the 2008 recession," says Sally Bryck, associate research director of Limra, a research and professional development organization for insurance and financial services companies.
"There is a disconnect. How can they have confidence if they do not know how long their money will last? There is a gap between the way they are feeling and the way they are behaving," adds Betty Meredith, director of education and research at the International Foundation for Retirement Education.
The study, The Financial Recovery for Retirees Continues, was done for the Society of Actuaries, Limra and the International Foundation for Retirement Education. The study, started four years ago, was taken of 461 retirees who were between 55 to 77 years old in 2008 and had $100,000 or more investable assets.
This year 85 percent of retirees in the study said they feel they will have enough money to live comfortably, almost back to the 2008 level, compared with 79 percent in 2009. Half feel their investments are being handled in the best possible way, again approaching the 2008 level after a dip in 2009.
In 2008 before the recession, 55 percent said they felt as secure as they thought they would in retirement. That dipped to 39 percent in 2009 but has come back to 56 percent for 2011. But only 45 percent acknowledge their money may have to last 20 years or more, a significant drop from 2008 when 65 percent acknowledged that possibility.
Retirees are not considering health needs they will likely encounter because of living longer, the experts said during the webinar.
"Financial professionals are concerned retirees are overlooking major components of retirement planning," the study says. "The study highlights the importance of retirees educating themselves on how to successfully plan for their retirement years while understanding the value of partnering with a trusted financial advisor for guidance." The number of retirees with advisors is growing, from 56 percent in 2008 to 61 percent in 2011.
The study also found retirees are bringing down their debt, with 34 percent in 2008 having no debt compared with 46 percent in 2011. Retirees today are more risk averse, says Anna Rappaport, actuary and chairwoman of the Society of Actuaries Committee on Post Retirement Needs and Risks.