A ‘terrifying’ retirement story for many Americans

It’s not often you read the word “terrifying” in relation to financial matters. So, I was more than a bit surprised to see that term turn up in the 2023 Schroders U.S. Retirement Survey.

The idea of not having a regular paycheck in retirement is not only a matter of concern for 57% of non-retired Americans, but it is actually “terrifying” for another 23%, the survey noted.

Part of the reason so many Americans find that prospect terrifying is their lack of confidence in the Social Security system. Even though many are aware that they will qualify for the highest Social Security payment if they wait until age 70 to start collecting payments, many are starting that process in their mid-tolate 60s — or maybe even as early as 62 — because they want to collect something from the government while the program is still viable.

In fact, according to the study, only 10% of non-retired Americans will wait until 70 to receive their maximum Social Security benefit payments.

About 72% of non-retired investors and 95% of non-retired, ages 60-65, are aware that waiting longer earns them higher payments. So that makes the decision to collect early even more startling.

Here are the reasons those surveyed said they would collect early:

» 44% said they were concerned

Social Security may run out of money or stop making payments.

» 36% said they will need the money.

» 34% said it was their money, and they wanted access to it as soon as possible.

» 13% said they were advised to take it earlier than age 70.

The major problem with this crisis in confidence many Americans have in the Social Security system is that they’re taking action that will ensure they will be living below the best financial position their investment in Social Security should be providing.

A strong ray of good news in the study is that those who have a financial advisor and a retirement plan report they are doing better in retirement than those who don’t.

This reaffirms how important having an advisor is to the many millions of Americans who are nearing retirement. The added complexities of the changing market conditions, the rise of annuities along with interest rates, and the challenges of funding long-term care all make having a strong financial advisor even more important today.

Recognizing the crisis of confidence many Americans have in the Social Security system and helping create a retirement plan they have confidence in is insurance is as much a part of the home ownership package as intermittent repair bills and paying local taxes. crucial. Especially since the fear factor seems to be at an all-time high for preretirees. More than ever, advisors have a critical role to play.

Maybe not anymore, however.

The Wall Street Journal recently reported that with drastic increases in some home insurance premiums, many are increasingly forgoing home insurance. Why? Gambling that the likelihood of a disaster isn’t high enough to justify the cost of a policy.

With the rise in flood and fire damage, as well as damage from other natural disasters, premiums — especially in significantly affected locations — are rising rapidly. With the recent occurrence of hurricanes on the West Coast and the report of five tornadoes in one day throughout New England, there’s no denying that many areas are feeling the effects of climate change.

This, of course, is having an enormous impact on insurance rates. Consumers facing higher premiums generally fall into two camps: the wealthy, who can essentially self-insure, and the not-so-wealthy who often are feeling knock-on effects, such as the inability to pay other bills when their home insurance skyrockets. Some have said, for example, this has affected their ability to make mortgage payments.

As American as apple pie … and home insurance …

While home ownership has always been part of the American Dream, home insurance has been an assumed sidecar to that dream. When we buy a house, home

So while the effects of extreme weather have been battering the insurance industry for a while now, the dip in home insurance is possibly a more unexpected outcome that will pose increased challenges as the weather crises worsen.

John Forcucci Editor-in-chief

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Climate ‘flickers’ warn of devastation to come

Canadian wildfires polluted New York City air for days. Maui wildfire deaths are well over 100 and rising. Phoenix recorded 31 straight days of 110-degree tempera tures, smashing the 49-year-old record of 18. Climate emergencies are happening in places they rarely ever happened before. And it’s no coincidence, said Peter Schlosser, vice president and vice provost of global futures and director, Julie Ann Wrigley Global Futures Laboratory at Arizona State University.

Schlosser presented climate data, findings and predictions during a meeting of the National Association of Insurance Commissioners’ Climate and Resiliency Task Force.

Climate change events are costing insurers heavy losses in many states, leading some to pull out of specific markets. There is a mounting concern about whether insurance will remain available as climate-related events grow more intense

In a meeting of the Treasury Department’s Financial Stability Oversight Council, its chairperson, Treasury Secretary Janet Yellen, warned of a “protection gap” for Americans trying to buy insurance against property losses from climate-related disasters, and said only 60% of the $165 billion in economic losses from extreme weather were covered by insurance last year.

YOUNG PEOPLE DON’T CONSIDER INSURANCE FRAUD A CRIME

More than a quarter of Americans under age 35 say they would be “envious” and “motivated” by someone they know committing insurance fraud.

The finding came from a new study by Verisk and the Coalition Against Insurance Fraud. Likewise, 23% say they would submit a false claim to their vehicle insurer for previous damage after an accident. Founded in 1993, the coalition produces periodic studies on the state of insurance fraud. Insurance fraud costs the U.S. economy a record $308.6 billion annually, the coalition found in a 2022 study.

One big issue is that younger people do not feel fiscally connected to insurance fraud. The 2022 coalition study, which examined all types of insurance products, found that the rising price of fraud penalizes every living American an equivalent of $932 a year, or $3,750 for the average U.S. family.