Retirees Face Healthcare and Portfolio Challenges

The floundering economy increases both healthcare and portfolio worries for retirees, creating an ongoing cycle of worry they never anticipated.  Forty six percent (almost half) of Retirees surveyed by Millionaire Corner in September indicated that they are in a worse financial situation than a year ago.  Thirty percent do not believe they will be in a better financial situation twelve months.

There are many factors impacting retirees, regardless of their level of wealth.  Seventy three percent of investors with $100,000 to $1,000,000 of net worth are worried about maintaining their financial situation through their retirement and basically throughout their lifetime.  Millionaires are worried as well with 73 percent of Millionaires just as worried as those with less wealth.  Even multi-millionaires, those with over $5 million of net worth show a growing concern over their finances with 65 percent worried about maintaining their financial position throughout their lifetime.

What are their biggest concerns?  More than half of Millionaires (56%) are worried about a Family Health Catastrophe with 58 percent of those with more than $5 million feeling similarly.  Fifty seven percent of those with less than $1 million rank family health concerns similarly.  So what have these investors done to prepare for a health crisis?  In most cases, few know what to do.  Recent focus group research indicates that investors are “just waiting it out.  We buy supplemental insurance but that won’t pay for everything if I have to stay in a nursing home for a long time.  Hopefully I will go fast”.

One of the common protections available to individuals in case they are not lucky enough to “go fast” is long term care insurance.  Yet according to Millionaire Corner research only 21 percent of households with $100,000 to $1 million have purchased long term care insurance.  The amount actually increases for those households more able to fund a family health catastrophe with 30 percent of households over $5 million having long term care insurance and 31 percent of Millionaires.

The final worry of Retirees is the make up of their portfolios.  Many of these investors rely upon income from investments to support a large portion of their retirement expenses, but with the stock market down and the rates on bonds and other fixed income investments at historic lows, the income they have been relying upon is challenged.  Millionaires rely upon dividends and interest for 21% of their annual income.  Wealthier households, those with more than $5 million depend on income from investments for more than a quarter of their annual income, or 28 percent.  Those households with less than $1 million only rely upon dividends and interest for 8% of their annual income.  They rely primarily on Social Security and distributions from the 401(k) plans, which may have also suffered in value in recent months.

It is very logical that retirees feel challenged by the volatile economy.  Instead of peacefully maintaining the lifestyle they had anticipated, they need to continually re-evaluate their financial position.  But as bad as they perceive it may be, eighty two percent believe the next generation will have it tougher.  Kudos to the WWII generation.