Americans fear outliving savings more than death

[UNITED STATES] Many Americans are expressing concern that they may outlive their retirement savings. A new survey from Allianz Life reveals that 64% of Americans are more worried about running out of money in retirement than about death itself. Among the key factors contributing to these fears are high inflation, insufficient Social Security benefits, and elevated taxes.

The recent economic volatility has only heightened these anxieties. The Federal Reserve's ongoing efforts to combat inflation by raising interest rates have made borrowing more expensive, while market fluctuations have reduced the value of some retirement portfolios. For those approaching retirement, these factors add an additional layer of uncertainty to their financial planning.

The fear of depleting retirement funds is particularly pronounced among Generation X, who are nearing retirement age. However, a majority of both millennials and baby boomers also express concerns about whether their savings will last, according to an online survey of 1,000 individuals conducted between January and February.

In a separate study, the Employee Benefit Research Institute (EBRI) found that most retirees are living the lifestyle they envisioned and are able to spend reasonably. Yet, more than half of respondents indicated that they spend less due to concerns about running out of money, based on a survey of over 2,700 individuals conducted during the same timeframe.

The EBRI report also highlighted a generational divide in retirement confidence. Older retirees, many of whom may have benefited from traditional pensions or more favorable market conditions, reported higher satisfaction levels. In contrast, younger retirees expressed more anxiety, reflecting the shift towards self-managed retirement savings and longer life expectancies.

Meanwhile, a Northwestern Mutual survey revealed that 51% of Americans believe it’s "somewhat or very likely" they will outlive their savings. This survey, which polled 4,626 U.S. adults aged 18 and older in January, suggests widespread concerns about retirement security.

Since these studies were conducted, recent tariff policies have unsettled the stock markets, and there are growing fears that inflation could rise. Additionally, changes in leadership at the Social Security Administration have sparked concerns about the future of benefits. Experts warn that these developments could further erode retirement confidence.

Ongoing debates over Social Security's long-term solvency remain a major issue. While the program is currently funded through 2035, potential reforms—such as adjusting benefit calculations or raising the payroll tax cap—could significantly impact future retirees. This uncertainty has placed even more pressure on individuals to save independently for retirement.

With employers increasingly offering 401(k) plans and other savings options instead of pensions, it is largely up to workers to manage their savings as they approach retirement. This shift has also contributed to concerns about outliving retirement funds, experts note.

Managing the ‘Fear of Outliving Your Resources’

Given the unique risks faced by individuals or couples when planning for retirement, experts suggest transferring some of the financial burden to a third party. David Blanchett, head of retirement research at PGIM DC Solutions, recommends creating a guaranteed lifetime income stream to cover essential expenses. This approach can help mitigate the financial strain caused by unexpected events that might require retirees to cut back on spending.

Blanchett advises that delaying Social Security benefits is one of the most effective strategies. While retirees can begin claiming benefits at age 62, waiting until age 70 yields the highest monthly payments. Furthermore, Social Security benefits are adjusted annually for inflation, which offers an added layer of protection against rising costs.

Another option retirees might consider is purchasing a lifetime income annuity, which can enhance their monthly income. Although annuities can be complex, Blanchett suggests starting with simpler products like single premium immediate annuities, which are easier to compare and understand.

“Without these strategies, the fear of outliving your resources is almost inevitable,” Blanchett explained.

Without a guaranteed income stream, retirees shoulder the full financial risk, Blanchett emphasized.

“Retirement could last 10 years, or it could last 40 years,” he noted. “You simply don’t know how long it’s going to be.”

Some retirees have been hesitant to purchase annuities, according to Craig Copeland, director of wealth benefits research at the EBRI. This hesitation stems from the need to exchange a lump sum of money for the promise of a guaranteed income stream.

However, recent innovations in annuity products, such as hybrid options that combine growth potential with income guarantees, could appeal to risk-averse retirees. Despite growing interest, education remains a key barrier—many consumers still do not fully understand how annuities work or how they can fit into a broader retirement plan.

“There’s a lot of interest, but we aren’t seeing an increase in uptake just yet,” Copeland said. “I do think that’s going to change soon.”

Boosting Retirement Confidence

Experts agree that seeking professional financial advice is crucial for effective retirement planning. Kelly LaVigne, vice president of consumer insights at Allianz Life, notes that few individuals have a clear plan for how to live off the assets they’ve accumulated over their careers.

“This is not something you should attempt to do on your own,” LaVigne emphasized.

While a survey by Northwestern Mutual found that many Americans believe they need $1.26 million to retire comfortably, the actual amount required varies greatly depending on personal circumstances. Kyle Menke, founder and wealth management advisor at Menke Financial, a Northwestern Mutual company, stresses the importance of considering factors like stock market performance, taxes, inflation, and healthcare costs when planning for retirement.

Even individuals who believe they have sufficient funds for retirement often lack confidence in their ability to manage these factors, Menke pointed out. Financial advisors can run simulations and stress-test retirement plans, offering retirees the peace of mind they may be lacking.

“I think this lack of confidence is one of the biggest gaps,” Menke said, referring to the uncertainty many Americans feel without a clear retirement plan.