Session 159 PD Retirement Risk Survey & Late-in-Life Survey. Moderator: Anna M. Rappaport, FSA, MAAA

Transcription

1 Session 159 PD Retirement Risk Survey & Late-in-Life Survey Moderator: Anna M. Rappaport, FSA, MAAA Presenters: Mathew Greenwald Anna M. Rappaport, FSA, MAAA SOA Antitrust Compliance Guidelines SOA Presentation Disclaimer

2 Findings from the 2017 SOA Post-Retirement Risk Survey and Qualitative Research PRESENTERS Anna Rappaport Mathew Greenwald Session 159: Wednesday, October 18

3 Agenda: Background Methodology Results Late in Life Qualitative Research Retirement Concerns & Preparations Financial Wellness Among Retirees & Pre-Retirees Housing Decisions for Retirement Planning for Future Long-term Care Needs Conclusions and Next Steps 2

4 Background: Post-Retirement Needs and Risk Committee Society of Actuaries post-retirement risk research: nearly 20 years of work Members from many disciplines of retirement expertise Overall program goal: Understand and improve post-retirement risk management Risk and Process of Retirement Survey conducted biennially since Late in Life research focuses on those ages 85 and over Major special project in 2017 Builds on earlier work 2013 focus groups with people retired less than 10 years and 2015 focus groups with people retired 15 years or more Findings now cover pre-retirement and full retirement periods 3

5 Background: Prior Findings and Current Environment Generally consistent results over the long-term both with regard to risk concerns and risk management strategies. Pre-retirees more concerned than retirees about risks. Major differences in situation by income level. Debt can be problematic. Retirees are resilient and many deal with the situation in a way satisfactory to them. Consumers often plan for shorter term cash flows and not for the long-term. Consumers do not plan well for risks in retirement and often focus on dealing with risks as they happen. But they also try to retain assets and minimize spend down. Works out well for some, but multiple shocks are more different. Some experience shocks that set them back financially divorce, major long-term care, children needing longer help. Consumers do not plan well for major long-term care and assisted living. Health status is extremely important in what people are able to do; by age 80 many have limitations. Key to Late in Life Research: What are the consequences of earlier retirement planning and decisions later in life both in terms of financial and emotional wellness? 4

6 As We Think About This Work: Some Big Questions Retirement is a period of change Do changes respond to aging or are they cohort effects? Will Boomers be similar to people born before World War II? To what extent do earlier in life experiences influence us late in life? As we develop limitations, families become more important Will families live up to the elderly s expectations of and needs for support? What will people without spouses/partners or children do? Will families play the same role in the future that they do now? For middle income American families, Social Security is the key income source What will happen if it is cut back? 5

7 IDI Late in Life Study Methodology Qualitative phase - In-depth Interviews (IDI) 62 In-depth Interviews 36 in U.S. Baltimore and Chicago 26 in Canada Toronto and Vancouver Subjects over age 85 with 1/3 over 90 Represented by mix of elderly themselves, children and dyads Under $400K in assets, with half under $50K Mix of married/unmarried, gender Mix of living arrangements own, rent, live with children, community settings No pension income over $2,500 Additional quantitative surveys of post-85 retirees and their children to be conducted at a later date 6

8 Retirement Risk Survey Methodology Sample size: 2,258 total (1,030 pre-retirees, 1,025 retirees, 421 oversample of retired widows) Ages 45 to 80 Conducted online for first time in 2013 Includes all income levels U.S. only 7

9 LATE IN LIFE QUALITATIVE RESEARCH

10 IDI Big Picture: What We Learned 1. Most adapt to their financial circumstances and are resilient Most are comfortable with frugality expenses lower 2. Successful month-to-month balancing of income and assets Small level of assets provide ample cushion Most shocks seem less impactful than in the15+ years retirees focus groups Health expenses covered well with Medicare plus Supplement 3. Health and vitality vary tremendously As does activity level and need for socializing 4. Importance of family support critical as health declines More discussion about family role often needed 5. Cost of assisted living and major long-term care are major challenges Little planning More easily paid for in Canada than U.S. 9

11 IDI Most adapt to their financial circumstance and are resilient. We have everything we need. Everything is paid for. Our house is paid for. The cars are paid for. Our kids are okay. Elderly, over-$50k asset male, Baltimore I get a pension and it s satisfactory. Mostly [I can afford everything I need]. I don t need that much because I live here with my children. I m very satisfied with what I have here.. Elderly, under-$50k-asset female, Chicago 10

12 IDI Most are comfortable with frugality. Some have childhood memories of parents living through the Great Depression I ve been somewhat frugal, yes. Because when you re a child in the Depression days, my parents were very frugal. I saw how it happened for them that they were all right when they did retire. Elderly, over-$50k asset female, Vancouver [Concerns] No, because we were always frugal. I don t expect to buy a Lamborghini. Elderly, under-$50k-asset female, Baltimore 11

13 IDI Most successfully manage cash flow. Most have very short-term focus that they maintain indefinitely. I have a checking account. When I have excess money, I ll put it in the checking account, so sometimes I have to fall back on that, right? Dyad (parent-child interview), elderly parent, over-$50kasset female, Baltimore I looked at it today and saw I ve got $3,000 in there. Wow! And I paid all my bills. I don t budget, I just see it, and as soon as I get the check, I pay it. Elderly, under-$50k-asset female, Chicago 12

14 IDI Activity level and social interaction vary greatly. There is a group that meets at McDonald s every day, seven days a week. We go maybe two or three times a week for lunch. We sit around from approximately 12:00 until maybe 2:00. We eat, and then we talk about current affairs and politics and argue a lot about the election of Trump. Elderly, under-$50k-asset male, Baltimore I think people backed away because they didn t want to deal with having to get her into a car or any of that. I saw a pretty quick decline in people that were very close to her disappearing, which I am very bitter about. Dyad, adult child, under-$50k-asset female, Los Angeles 17

15 IDI Family support more important as physical health and mental capability declines. Healthy often maintain financial and social independence but some require assistance with money management. That is the last thing I ever want to do is ask my children for money. If we go out for dinner, they pay for my dinner and I reciprocate. My son has a dog, and if he goes out of town, I take care of the dog. My daughter has two dogs, and I ll take care of them. Elderly, under-$50k-asset male, Chicago Usually it s me. But he has a card, right? If he needs to withdraw money, my sister, she can take him to the bank during the weekdays, right? Because I opened his account all information, you know, I kept that information. Adult child, under-$50k-asset male, Toronto 18

16 IDI Cost of long-term care is the major challenge less so in Canada. If I needed long-term care, I really don t know what I would do. I have wonderful children, and I know that they would help me out if needed. Elderly, under-$50k-asset female, Chicago I think it is going to be more of the ones that the government would subsidize her with. The public ones. That is what we are looking at. I don t know the specific numbers, but I think with her pension going into that, we would have to subsidize maybe $1,000 a month. So from her $40,000. Adult child, over-$50k-asset male, Toronto 19

17 IDI Key Findings Later in Life 85+ Interviews Standard of living sustainable for most in the short run. Most have successfully negotiated short-term cash flow. Longevity has been managed, as long as health is sustained and paid longterm care is not needed. However, assisted living/long-term care is a looming financial threat, but it is unclear whether there is a readily available good solution. Planning to address this threat is inadequate, especially in U.S. Families play a growing role when there are limitations. 85+ interview findings are compatible with focus group findings 15 years plus retirees. Resilience found in both retiree groups. Both retiree groups have cut expenses, often tend to be frugal, accept giving up some spending. Unclear to what extent lack of formal planning hurts people. 21

18 IDI Next Steps - Research by Retirement Stage Quantitative surveys with elderly(85+)/children of elderly to be completed by end of 2017 Potential ideas for new exploration Lessons learned - research on children of deceased parent Further examination of managing care for cognitively diminished and physically restricted elderly Further examination of family dynamics Open questions about driving, blended families, changes in activity levels Societal approaches to long-term care financing and delivery 22

19 Retirement Concerns & Preparations

20 Background: Risk Concerns and Management These issues are core of risk survey have been repeatedly studied Survey offers quantitative data focus groups and interviews help us to understand more about rationale and thinking Findings tend to be generally consistent over time Risk management does not fit expectations of retirement professionals Not discussed here, but retirees prefer to minimize asset spend down Results are quite different by income group will be explored in special topic reports 24

21 Current retirees retired earlier than future retirees plan to do. Other research indicates that reasons for early retirement include declining health status and challenges arising in the workplace. Anticipated vs. Actual Retirement Age Pre-retirees Anticipated Retirement Age Pre-retirees (n=1,030) Retirees Actual Retirement Age Retirees (n=1,025) Mean Anticipated Retirement Age: 8% 2% Under to 59 19% 28% Mean Actual Retirement Age: % 60 to 61 8% % 62 to 64 23% 40% 65 to 67 15% 23% 68 or older 6% 9% Don t expect to retire Don t consider self retired 1% 25

22 Risk Concerns: Inflation, health care costs and long-term care costs are key concerns Concerns in Retirement Pre-retirees (n=1,025), Retirees (n=1,030), Retired Widows (n=421) The value of your savings and investments might not keep up with inflation 77% 45% 57% 33% 67% 40% You might not have enough money to pay for adequate health care 75% 37% 53% 57% 29% 32% You might not have enough money to pay for a long stay in a nursing home or a long period of nursing care at home 73% 38% 59% 33% 65% 37% You might deplete all of your savings 70% 38% 52% 58% 30% 33% You might not be able to maintain a reasonable standard of living for the rest of your life 66% 36% 52% 57% 29% 34% 39% There might come a time when you (and your spouse/partner) are incapable of managing your finances 59% 51% 33% 60% 39% 33% 24% 27% 37% 25% 26% 35% 26% 29% 32% 22% 25% 30% 23% 23% 21% 18% 21% Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Preretirees Preretirees Preretirees Preretirees Preretirees Preretirees Retirees Retired Widows Very concerned Somewhat concerned How concerned are you about each of the following (during retirement)? 26

23 Planning: Few have given a great deal of thought to key retirement planning issues. Amount of Thought Given to Financial Retirement Aspects Pre-retirees (n=1,030), Retirees (n=1,025), Retired Widows (n=421) The type of lifestyle you want for the rest of your life How well your current savings will meet your expense needs for retirement How long your assets will last in retirement What the cost of healthcare will be during your retirement How you should invest your financial assets during retirement Who will manage your finances if you become unable 72% 72% 75% 69% 70% 73% 67% 66% 71% 64% 69% 74% 61% 71% 42% 41% 40% 39% 39% 37% 39% 36% 38% 38% 37% 40% 54% 52% 53% 37% 28% 28% 46% 30% 37% 35% 30% 31% 35% 30% 31% 36% 28% 29% 33% 26% 31% 34% 16% 24% 25% 16% 25% 36% Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Preretirees Preretirees Preretirees Preretirees Preretirees Preretirees Retirees Retired Widows A great deal How much thought have you given to each of the following aspects of your finances in retirement? Some 28

24 Managing Risks: Eliminating consumer debt, saving as much as possible, and cutting back expenses are the most common actions pre-retirees and retirees have taken to protect themselves financially in retirement. Eliminate all of your consumer debt, by paying off all credit cards and loans 89% 82% 82% 54% 36% 35% 42% Actions Taken for Financial Protection Pre-retirees (n=1,030), Retirees (n=1,025), Retired Widows (n=421) Try to save as much as you can Cut back on spending Completely pay off your mortgage 86% 70% 26% 65% 20% 75% 47% 20% 63% 64% 14% 70% 45% 62% 59% 20% 13% 36% 46% 48% 44% 45% 45% 28% 43% 50% 26% 42% 46% Pre-retirees Retirees Retired Widows Pre-retirees Retirees Retired Widows Pre-retirees Retirees Retired Widows Pre-retirees Retirees Retired Widows Already done Plan to do Have you already done the following, plan to do it in the future, or have no plans to do it to protect yourself financially (after you retire/as you get older)? 29

25 Observations Risk concerns increased since 2015, particularly among pre-retirees. Same top concerns (order changes) year by year: long-term care, inflation, health care costs Concerns show some misunderstanding around health and long-term care risk protection. But few individuals have long-term care insurance. Few buy annuities with guaranteed lifetime income. Few do formal long-term planning. Basic approach is to adjust to events. Three primary strategies: reduce spending, eliminate debt, save as much as possible Pre-retirees more anxious about almost all risks than retirees, and shorterterm retirees more anxious than longer-term. The ability to adapt is important, but might not extend to next generation. 31

26 Financial Wellness Among Retirees & Pre- Retirees

27 New Context for Retirement Planning Growing recognition of financial wellness as essential to retirement planning. People who can t manage regular month by month expenses will not be able to do retirement planning well. Key issues include spending and debt. Retirement planning being woven into broader picture by many employers. High interest charges on some forms of credit and low returns on fixed income investments make this particularly important. First time this topic explored in risk survey series 33

28 The majority of pre-retirees and retirees feel somewhat or very financially secure. Assessment of Financial Security 62% 70% 72% 49% 49% 52% 14% 21% 21% Pre-retirees (n=1,030) Retirees (n=1,025) Retired Widows (n=421) Very secure Somewhat secure How financially secure do you feel currently? 34

29 Given that they have more debt overall, pre-retirees are more likely to say it has negatively impacted their ability to save and invest, with three in ten saying it has impacted them a great deal. Negative Impact of Debt (Asked among those with debt) 51% 23% 35% 37% 22% 25% 28% 13% 12% Pre-retirees (n=714) Retirees (n=565) Retired Widows (n=222) A great deal Somewhat To what extent, if at all, has debt negatively impacted (how much you are able to put away each month in savings and investments/your ability to maintain your desired lifestyle)? 36

30 Debt clearly reduces the feeling of financial security. Assessment of Financial Security (% Very/Somewhat Secure) 78% 82% 64% 65% 50% 54% Pre-retirees No debt (n=208) 1-2 types of debt (n=479) 3+ types of debt (n=343) Retirees No debt (n=379) 1-2 types of debt (n=486) 3+ types of debt (n=160) No debt Own 1-2 types of debt Owns 3+ types of debt How financially secure do you feel currently? 37

31 Many feel vulnerable to financial shocks that may occur in retirement. Ability to Handle Financial Shocks in Retirement (% Very/Somewhat prepared) 65% 67% 68% 65% 61% 54% 50% 52% 48% 35% 35% 38% 33% 36% 38% 37% 31% 31% 34% 37% 31% 33% 35% 10% 11% 9% 1% Car repairs or replacement Major home Significant out-ofpocket medical, repairs or upgrades dental, or prescription expenses The death of a spouse or longterm partner during retirement A drop in home value of 25% or more Running out of assets Pre-retirees (n=1,030) Retirees (n=1,025) Retired Widows (n=421) A family member A loss in the total in need of financial value of your support savings of 25% or more due to poor investment decisions or a market decline How well prepared are you financially to handle the following (during retirement)? Divorce during retirement 39

32 Two-thirds of pre-retirees expect to spend less in retirement and only one-third of retirees expect to have to make further spending cuts. Spending in Retirement Net Spend Less: Pre-retirees 63% Retirees 35% Retired Widows 30% Net Spend More: Pre-retirees 9% Retirees 14% Retired Widows 16% 50% 54% 48% 27% 28% 26% 2% 2% 3% 12% 13% 7% 16% 7% 4% Much more than you spend now Somewhat more than you spend now About the same as you spend now Somewhat less than you spend now Pre-retirees (n=1,030) Retirees (n=1,025) Retired Widows (n=421) As you age (in retirement), do you expect you will spend more or less than you do now or about the same? Much less than you spend now 41

33 Observations The experiences of retirees do not always fit well with the survey responses need to think about the interviews and past focus groups as well as the risk survey. Americans do not have strong feelings of financial security. Debt is clearly a factor and problem for many families at all ages. There is clear evidence of a lack of long term planning, but it is not so clear that many people do not manage reasonably well without it. Many have not taken key steps including creating financial planning documents and a will instrumental for financial security. Pre-retirees more concerned than retirees about risks and financial shocks in retirement, but do not take steps that could protect them. Pre-retirees say they have a high level of interest in financial education, which has some potential to enhance financial security, but often people do not take opportunities offered to them. Retirees have done better than researchers expected, but certain shocks create major problems major long-term care event, divorce in retirement, children needing ongoing help multiple shocks are also a problem. 43

34 Housing Decisions for Retirement

35 Housing Issues and Importance Housing is the biggest item of retirement spending on average. Housing is a very important lifestyle issue. For many retired households housing assets are larger than financial assets. Huge variations in housing cost by geographic area Big decisions around housing in retirement Stay or move Modify for limitations or replace with appropriate housing Pay off mortgage, use reverse mortgage Seek senior housing 45

36 Housing Issues and Importance (continued) Housing and Retirement Finance Housing tends to not be seen as a financial management issue. People think of housing separate from financial management to the extent they can. It is only when finances force them that most will pull money out of their home by selling it. People are very reluctant to use home equity, they are especially negative on reverse mortgages. However, three in ten are willing to use home equity to help fund their retirement. 46

37 About half of pre-retiree and retired homeowners have less than $150,000 of home equity. Current Market Value of Home (Asked among homeowners) Equity Built in Primary Home (Asked among homeowners) 22% 30% 32% 38% 36% 38% 23% 19% 18% 14% 12% 10% 51% 45% 43% 24% 25% 29% 12% 14% 11% 5% 8% 7% LT $150K $150K to LT $300K $300K to LT $500K $500K+ Pre-retirees (n=826) Retirees (n=808) Retired Widows (n=329) LT $150K $150K to LT $300K $300K to LT $500K $500K+ Pre-retirees (n=826) Retirees (n=808) Retired Widows (n=329) What do you estimate is the current market value of your primary home? How much equity do you currently have in your primary home? 47

38 The majority of retirees and over two in five pre-retirees plan to stay in their home throughout their retirement. Plan to Stay in Current Home 29% 23% 13% 19% 10% 27% 44% 64% 71% Pre-retirees (n=1,030) Retirees (n=1,025) Retired Widows (n=421) Yes No Not sure Do you plan to live in your current home throughout your retirement? 48

39 Half are concerned about being able to stay in their home as they age. Housing Related Concerns (Asked among homeowners) Pre-retirees (n=826), Retirees (n=808), Retired Widows (n=829) You may not be able to stay in your home as you age 52% 35% 47% 31% 54% 38% Not having a choice in where you live in retirement 48% 33% 37% 42% 21% 26% 29% The equity you have in your home may not be sufficient to support your retirement plans 19% 23% 21% 8% 11% 17% 15% 17% 15% 16% 16% 15% 12% 12% 12% 7% 6% 44% 31% 35% Having too much housing debt (mortgage, refinancing or home equity loan debt) 33% 16% 17% You may not be able to leave your home or the money from the sale of your home as an inheritance 31% 27% 28% 20% 18% 21% 10% 10% 7% Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Preretirees Preretirees Preretirees Preretirees Preretirees Retirees Retired Widows Very concerned Somewhat concerned How concerned are you about each of the following (in retirement)? 50

40 Respondents are divided on selling their primary home to fund retirement, with pre-retirees expressing a little more willingness than retirees. Willingness to Use Home to Fund Retirement (Asked among those who have built home equity) Pre-retirees (n=754) Retirees (n=719) Retired Widows (n=286) 24% 19% 37% Willing to use primary home to fund retirement 18% 35% 12% 28% Willing to use primary home to fund retirement 16% 32% 18% 30% Willing to use primary home to fund retirement 12% 39% 37% 38% You would be just as willing to use it as any other asset you own You would be a little less likely to use it than other assets you own You would be reluctant to use it, but would if you absolutely needed the money for something like medical or long-term care You would never touch it Which best describes how you feel about selling your primary home to fund your retirement? 52

41 The most valued housing attributes are easy access to needed services and low maintenance. Important Attributes in Deciding Where to Live in Retirement Access to Services (%Very/Somewhat important) 86% 89% 91% 85% 80% 85% 82% 87% 78% 78% 80% 81% 80% 78% 83% 71% 65% 72% 56% 52% 63% Near quality healthcare and/or hospitals Low or no home maintenance required An area with a low cost of living Nearby shops and restaurants The ability to receive professional care or support if you need it Access to needed transportation Pre-retirees (n=1,025) Retirees (n=1,030) Retired Widows (n=421) The ability to receive help with chores, like cleaning or laundry Thinking about where you plan to live throughout your retirement, how important is it that the home and/or location you choose offer the following? 53

42 Roughly six in ten find assisted living and continuing care communities attractive but very few say a nursing home is appealing. Attractiveness of Senior Communities and Long-term Care Facilities Pre-retirees (n=1,025), Retirees (n=1,030), Retired Widows (n=421) Independent Living Assisted Living Continuing Care Communities Nursing Home 90% 89% 90% 37% 37% 31% 67% 63% 69% 60% 58% 63% 53% 52% 59% 51% 48% 52% 46% 42% 43% 15% 15% 17% 14% 16% 21% 10% 10% 8% 7% 8% 7% Retirees Retired Widows Retirees Retired Widows Retirees Retired Widows Preretirees Preretirees Preretirees Preretirees Retirees Retired Widows Very attractive Somewhat attractive If you needed assistance and it met your care needs, how attractive would the following types of senior communities and long-term care facilities be to you? 56

43 Observations Most pre-retirees have a relatively modest amount of home equity, but enough to make a lifestyle difference in many cases. There is a strong desire to stay in the home and not use home equity. However, three in ten retirees are open to selling the home to fund retirement. There is a very strong desire to stay out of a nursing home. There is some potential for reverse mortgages and other new forms of home equity lines of credit to help retirees stay in their homes. It seems inevitable that more retirees will need to consider using home equity to fund retirement in the future. We do not know how many retirees have already simplified their housing arrangements. 57

44 PLANNING FOR FUTURE LONG-TERM CARE NEEDS

45 Long-term Care is a Major Challenge for Retirees Many American households with modest assets manage reasonably in retirement, but run out of assets if there is a major long-term care event. Planning that does not include long-term care leaves people vulnerable. While a majority need at least some long-term care, only a minority will have a major long-term care event. Only about 10% of Americans have long-term care insurance. Without such insurance, few middle income Americans can pay for assisted living and nursing home care. Availability of family caregivers makes a huge difference. For those without assets and with low income, Medicaid is often the solution. As age increases, an increasing percentage of people have limitations. 59

46 By the time they reach retirement, most people have had at least one parent require long-term care. Parents Care Experiences in Retirement (% Yes) (Asked among those whose parents lived to retirement) 52% 68% 74% 43% 61% 67% 36% 48% 55% An illness or disability that limited their ability to care for themselves The need for family or friends to provide care or support because they were unable to care for themselves The need for professional care or support because they were unable to care for themselves Pre-retirees (n=896) Retirees (n=757) Retired Widows (n=298) To the best of your knowledge, did either of your parents experience any of the following during retirement? 60

47 Concern about financial security in retirement increases among those whose parents required long-term care. Level of Financial Concern Based on Parents Experiences (% Much/Somewhat More Concerned) (Asked among those whose parents lived to retirement) 67% 41% 46% 32% Pre-retirees Parent(s) required long-term care (n=519) Parent (s) didn t require long-term care (n=377) Parent(s) required long-term care Retirees Parent(s) required long-term care (n=575) Parent (s) didn t require long-term care (n=182) Parent(s) did not require long-term care On the whole, do you think your parents' experiences have made you more or less concerned about - Your financial security in retirement? 61

48 More than half of pre-retirees and four in ten retirees state their parents experiences in retirement increased their concerns about financial security in retirement. Pre-retirees (n=896) 3% Level of Financial Concern Based on Parents Experiences (Asked among those whose parents lived to retirement) Retirees (n=757) Retired Widows (n=298) 2% 35% 6% 56% More concerned about financial security in retirement 25% 30% 43% 9% 5% 15% 43% More concerned about financial security in retirement 28% 43% 6% 49% More concerned about financial security in retirement 20% 28% Much more concerned Somewhat more concerned No more or less concerned Somewhat less concerned Much less concerned On the whole, do you think your parents' experiences have made you more or less concerned about - Your financial security in retirement? 63

49 About one in five pre-retirees and retirees report providing some level of financial support to their parents during their retirement. 79% Pre-retirees (n=896) 3% 6% 4% 21% Have Provided Financial Support 8% Financial Support Provided to Parents (Asked among those whose parents lived to retirement) 82% Retirees (n=757) 1% 3% 2% 18% Have Provided Financial Support 12% Retired Widows (n=298) 1% 3% 17% Have Provided Financial Support 83% 12% Yes, currently providing regular financial support Yes, currently providing occasional financial support Yes, provided regular financial support in the past Yes, provided occasional financial support in the past No, have not provided any financial support Did you provide or are you providing financial support to your parents during their retirement? 64

50 Half think it is very or somewhat likely they will require long-term care at some point. Likelihood of Personally Requiring Long-term Care Pre-retirees (n=1,025), Retirees (n=1,030), Retired Widows (n=421) Any type of Long-term Care Care for the activities of daily living, such as getting in and out of bed, getting dressed, toileting, bathing, or eating Care for cognitive decline, Alzheimer's or dementia 43% 45% 43% 51% 54% 47% 61% 68% 66% 42% 43% 44% 38% 34% 42% 30% 27% 30% 15% 11% 11% 10% 11% 10% 9% 5% 4% Pre-retirees Retirees Retired Widows Pre-retirees Retirees Retired Widows Pre-retirees Retirees Retired Widows Already receiving Very likely Somewhat likely Not too likely/not at all likely As you age, how likely do you think it is that you, personally, will require...? 67

51 Half of workers and almost half of retirees would turn to their spouse, daughter or daughter-in-law if they needed long-term care, while only one in fourteen would turn to a son or son-in-law. 41% Primary Caregiver for Long-Term Care Support (Asked among those receiving or likely to receive long-term care) 33% 30% >.5% 13% 11% 9% 7% 12% 8% 14% 20% 7% 6% 15% 2% 3% 1% 2% 1% 1% 1% 1% 1% 1% 1% 0% 22% 18% 19% Spouse/partner Daughter/ Daughter-in-law Professional aides Care provided in a long-term care facility Son or son-inlaw Sister Other relative Non-relative, friend or neighbor Brother Not sure Pre-retirees (n=602) Retirees (n=585) Retired Widows (n=239) Who is or would be your primary caregiver if you need long-term care support? 68

52 Half of retirees believe Medicare would be one of the sources of funds they would turn to if long-term care was needed, while pre-retirees are more likely or be uncertain of how they would pay. Plans to Pay for Long-term Care Pre-retirees (n=1,025), Retirees (n=1,030), Retired Widows (n=421) 41% 38% 40% 50% 55% 33% 31% 30% 32% 21% 23% 20% 16% 19% 13% 3% 5% 6% 31% 19% 15% You (and/or your spouse or partner) will pay Medicare* Health insurance Medicaid Long-term care insurance Children or other family help Not sure Pre-retirees Retirees Retired Widows If you (or your spouse\partner) required extensive long-term care in a nursing home, how would you pay for it? Please select all that apply. *Medicare only covers a small portion of long-term care costs in limited circumstances 69

53 Beyond saving on their own which about half say they have done - very few have taken any action to prepare for the possible need for long-term care. Preparations Already Made for the Cost of Long-term Care Pre-retirees (n=1,025), Retirees (n=1,030), Retired Widows (n=421) 45% 46% 52% 24% 17% 19% 21% 11% 10% 12% 13% 9% 3% 10% 6% 1% 2% 2% Save on your own Discussed how you will pay for long-term care with your family Purchase long-term care insurance Discussed how you will pay for long-term care with a professional Sell your home Use a reverse mortgage Pre-retirees Retirees Retired Widows Have you done or do you plan to prepare for the costs of nursing home care or having a home aide in the following ways? 71

54 Observations The failure to protect financially against long-term care risk is one of the most important shortcomings of Americans financial planning. There is personal awareness of the impact of needing major long-term care, but many people do not think it will happen to them. A misunderstanding of Medicare and Medicaid coverage is a significant contributor to a lack of financial planning. The lack of long-term planning, identified in this research, is a more important reason. Several steps could help including a better long-term care financing system, public policy advances, more product development and education efforts at the work place. But the long-term care insurance industry has had challenges. 73

55 CONCLUSIONS AND NEXT STEPS

56 What People Do is Often Not What Professionals Expect Them to Do Reality is often short-term cash flow planning. Financial products to protect against risk are not very popular. Risk concerns seem quite consistent over time. The number of different risks often seems overwhelming, so dealing with things as they happen seems to make sense. Pre-retirees are more concerned about risk than retirees, and older retirees are less concerned than younger retirees. Cash flow planning includes regular expenses, but often not irregular expenses. Preferred asset use strategy is to hold onto assets as long as possible; not to have a plan to spend them and then deal with uncertainties as they occur. People want to stay in their houses. 75

57 There is an Imbalance Between Traditional Adequacy Measures and What is Needed Eventually Most people do not save enough by traditional adequacy measures. But, many retirees seem pretty satisfied and resilient. Further work is needed to think through these issues. Some review needed of guidance on target savings levels and targeted spending amounts in retirement. What asset levels are actually adequate for those over 85? New product development should be considered for use of home equity and methods of protecting against long-term care risk. 76

58 Key Conclusions From Our Work Risk concerns have increased since 2015; types of concerns are consistent. Families become very important once there are major limitations. Spouses help first, then children Help extends to many areas of care Unanswered questions about blended families Long-term care is a major risk facing retirees, but many people do not have a plan. Financial management structure that works well until a major long-term care event will no longer work for cost of assisted living or nursing home. 77

59 Key Conclusions From Our Work (Continued) Financial wellness is a major concern among working age population. Retirees overall probably in better shape But debt is a potential problem at all ages Future may require more use of housing assets to help finance retirement. Growing recognition of this issue, but most people want to stay in their homes More work is needed to integrate thinking about housing into planning Risk management in retirement is as in prior year surveys and focus groups. There are common threads between research findings relating to early and late in retirement. Things change when limitations emerge. 78

60 Confronting the Challenge of Declining Capability: Researcher Recommendations Better planning tools Education and testimonials Rethinking how retirement adequacy is defined A more realistic mindset about supporting the elderly in retirement More complete family financial planning for elderly 79

61 Next Steps Complete 85+ surveys Special topic reports that bring survey work together with other research Discussion with a variety of stakeholders and uses of material Build public awareness Input for benefit managers and software developers Input for planners 80

62 Recently Published Retirement Research RETIREMENT RISK REPORTS The Society of Actuaries (SOA) recently published several new retirement risk research reports. All reports are available at: research-projects/pension/research-post-retirement-needsand-risks.aspx The 2017 Risk and Process of Retirement Survey, in cooperation with Mathew Greenwald & Associates and EBRI, reports the results of this 2017 survey of retirees and pre-retirees. The survey explores retirees and pre-retirees awareness of retirement risk issues and strategies for dealing with them. The full report is now available. Previous reports in the series can also be found on the same Web page. Managing Retirement Decisions is a landmark effort examining the major decisions encountered in retirement. Drawing upon the expertise of prominent retirement professionals, the result is a thought-provoking series of issue briefs written in everyday language. The briefs tackle a variety of retirement decisions with practical considerations and advice. Retirement Literacy is a collection of briefs addressing a number of financial issues such as the cost of retirement and managing risk. The first brief is available and explores retirement from a holistic perspective looking at nonfinancial issues. Age Wise is a series of infographics on how life expectancy can impact retirement planning. MANAGING THE IMPACT OF LONG-TERM CARE Managing the Impact of Long-Term Care Needs and Expense on Retirement Security Monograph expands thinking on how long-term care events impact retirement security and approaches to mitigating the impact of these events. OPTIMAL RETIREMENT INCOME SOLUTIONS Optimal Retirement Income Solutions in DC Retirement Plans analyzes solutions for generating reliable retirement income from IRAs, 401(k) and other defined contribution (DC) accounts, and retirement savings in general. FINANCING RETIREMENT REPORTS Focus Group Series on Retirement Financial Strategies Post-Retirement Experiences of Individuals Retired for 15 Years or More seeks to understand how middle-income market retired Americans and Canadians manage their assets and spending decisions over the long-term. Diverse Risks Essays Collection explores the diverse risks associated with defined contribution plan risk management strategies, decumulation strategies for retirement, and longterm care financing. Financial Wellness Essays Collection provides a thoughtprovoking array of views and perspectives related to financial wellness. HIGHLIGHTS REPORTS FOCUSING ON SPECIFIC RETIREMENT RISK ISSUES A set of reports highlighting key findings from the 2015 Risk and Process of Retirement Survey was produced in conjunction with the survey. Understanding and Managing the Risks of Retirement explores what retirees and pre-retirees understand about various retirement risks and risk management strategies. Risks considered include investment, inflation, health care and longevity. Living Longer and Impact on Planning focuses on individuals understanding of and planning for longevity. Shocks and Unexpected Expenses in Retirement explores the impact of shocks and unexpected expenses on retirees financial planning. Spending Patterns and Debt examines spending decisions and the impact of debt in retirement. COMING SOON: 2017 HIGHLIGHTS REPORTS ADVICE AND DECISION MAKING IN RETIREMENT Models of Financial Advice for Retirement Plans; Considerations for Plan Sponsors provides a comprehensive overview of the professional advice industry. It includes considerations for plan sponsors regarding financial advice.