When it comes to discussing retirement longevity with their clients, financial advisors can and should do better, according to an Allianz Life Study.

The new 2020 Retirement Risk Readiness Study from Allianz Life Insurance Company of North America (Allianz Life) surveyed three categories of Americans to get different perspectives on retirement: pre-retirees (those 10 years or more away from retirement); near-retirees (those within 10 years of retirement); and those who are already retired.

In January, Allianz Life conducted an online study of a nationally representative sample of 1,000 individuals aged 25 and older with annual household incomes of at least $50,000 (single) or $75,000 (married/partnered); and with at least $150,000 in investable assets. 

Allianz Life said findings revealed gaps in conversations financial professionals were having with their clients that could help protect retirement assets from some of the risks that can derail savings strategies.

Although people who have already retired were fairly confident about how long their money would last, six in 10 of non-retirees said that running out of money before they die was one of their biggest concerns. Only a quarter (27%) of non-retirees who work with a financial professional said they had discussed longevity risk, and less than 15% said they had shared the concern they would not have enough money to do the things they wanted to do in retirement.

Many non-retirees appeared to understand what steps they needed to take to ensure they could afford a long life in retirement, but were not following through on them, Allianz Life said. More than half of non-retiree respondents (55%) said they were worried they would not save enough for retirement, and nearly one-third (31%) said they are way too far behind on retirement goals to be able to catch up in time to achieve them. Only 12% said that setting long-term financial goals was their top priority, and only 6% said that developing a formal plan with a financial professional was their top priority.

Allianz Life also found that Americans felt particularly anxious about the effect of market volatility on their retirement savings. Even prior to the Covid-19 pandemic, both retired and non-retired people cited market risk as a top concern, with nearly half (49%) of all respondents identifying a stock market drop as the greatest threat to their retirement income.

Despite the fear of a market downturn that could harm their accounts, less than 30% of Americans who work with a financial professional said they had discussed potential financial risks to their retirement resulting from market drops, including only 22% of those within 10 years of retirement.

Respondents also cited inflation as a key concern, with nearly half (48%) viewing inflation as a threat to affording basic expenses in retirement. 

More than half (59%) also said they were worried that the rising cost of living would prevent them from enjoying their retirement, with 67% of those 10 years or more from retirement expressing the greatest concern versus 59% of near-retirees and 40% of retirees who felt the same. Yet among those who work with a financial professional, only two in 10 said they were having discussions about the impact of inflation and how it could prevent them from enjoying their retirement.

Kelly LaVigne, vice president of Consumer Insights, Allianz Life, said that financial professionals may need to be more proactive in discussing issues of concern to their clients so their clients.

“Simply put, we need to ask ourselves as financial professionals how we can move conversations about retirement beyond accumulation strategies to focus more on how to protect a client’s hard-earned savings from retirement risks that may jeopardize their financial future,” LaVigne said in the news release. “It’s crucial that we acknowledge the different challenges that are keeping clients up at night and build these risk-based discussions into the regular planning process.”