Retirement Hesitation Among Americans: Investigating the Root Causes for the Nation's Reluctance to Stop Working
As the country hits 'Peak 65', with more people turning 65 than ever before, concerns about retirement finances are on the rise. A recent study reveals that the top financial concerns for Americans approaching retirement include rising inflation and costs outpacing Social Security benefits, healthcare expenses, risk of outliving savings, debt burdens, and uncertainty about Social Security's future.
Inflation and rising costs have become a significant worry for retirees, with 63% believing that inflation, exacerbated by tariffs and economic changes, will outpace Social Security cost-of-living adjustments (COLAs). This fear is causing many retirees to reduce discretionary (52%) and even essential spending (31%).
Healthcare costs remain a top concern, with around 15% of seniors citing it as their biggest fear, closely tied with inflation and outliving savings.
The fear of outliving savings is prevalent, with 58% of seniors worried that their savings will not last through retirement. This concern is compounded by ongoing debt and financial responsibilities like supporting family members.
Many seniors depend heavily on Social Security, but 88-89% feel that benefits do not keep pace with rising costs. Over 7 in 10 want to learn about how Social Security benefits are taxed, indicating a need for better understanding tax implications on retirement income.
Financial advisers are addressing these concerns by providing personalized retirement plans that move beyond simple savings targets and incorporate detailed cash flow management, account tax structures, and strategies to manage market volatility and unexpected expenses.
Education about Social Security and taxes is crucial, given widespread confusion about Social Security taxation. Advisers help clients understand tax impacts and optimize benefit claiming strategies.
Planning for healthcare and long-term care costs is also vital. Advisers incorporate strategies to forecast and cover likely rising healthcare expenses, including insurance products and savings earmarked for medical needs.
Preparing for psychological transition and lifestyle changes is equally important. Advisers highlight the importance of planning for lifestyle, caregiving responsibilities, and retirement timing uncertainties to build resilience into plans.
To avoid common regrets, advisers emphasize starting retirement savings early and maintaining discipline to leverage compounding growth.
Those without a source of protected income - a pension or annuity - are twice as likely to delay retirement than those with one. More people should seek help from a financial adviser to gain the confidence needed for a stable, reliable retirement plan.
Financial advisers report that 28% of their clients have already delayed retirement. Over half of advisers are putting more client investments into annuities to provide protection and confidence.
The outlook for Gen X is uncertain, with only 14% having pension plans. According to a recent economic analysis published by the Retirement Income Institute, two-thirds of consumers aged 61 to 65 will be challenged to meet their financial needs in retirement, let alone maintain their current standard of living. More than half (52.5%) of 'Peak Boomers' have assets of $250,000 or less, increasing the likelihood of exhausting savings during retirement.
The study was conducted by the Alliance for Lifetime Income (ALI) 2025 Protected Retirement Income and Planning (PRIP) Study. The findings underscore the need for comprehensive retirement planning that addresses the layered uncertainties around inflation, health costs, income stability, and longevity risk, thus helping retirees better manage financial strain in a volatile economic environment.
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