Brett Arends’s ROI: Americans are ‘more afraid of running out of money than death’
A new survey finds that 61% of us are more afraid of running out of money in our old age than we are of dying itself.
Life insurance giant Allianz, which conducted the survey, found the result “remarkable,” but actually it sort of makes sense. Death is inevitable, running out of cash isn’t.
And when you’re dead, you’re dead. Maybe it sucks, but you don’t know about it.
Being old and broke: Not the same.
The findings emerged from a survey of a representative sample of 1,000 middle-class Americans aged 25 and over. (Those surveyed either had $150,000 or more of investable assets, or incomes of $50,000 a year if single and $75,000 a year if married.)
The danger of outliving your money, and ending up poor and old, is why Social Security is so important to everyone but the very rich — even to those who have saved wisely all their lives. It’s an inflation-adjusted lifetime annuity that never runs out.
It’s also why most financial experts encourage us to purchase “single premium immediate annuities” when we retire, if not before. These convert a lump sum (the single premium paid up front) into a regular monthly income that will last for the rest of your life—whether you live for one month or 40 years.
The main problem with most single-premium immediate annuities is that they don’t include cost of living adjustments, so over time your monthly income buys less and less.
(Single-premium immediate annuities should not be confused with all the other insurance products called “annuities,” most of which are just tax shelters with very high fees.)
Meanwhile, in a testament to our volatile modern era, 56% of those surveyed told Allianz they now consider regular “financial crises” to be an integral part of their retirement planning. And 46% say their retirement planning has been derailed by the most recent crisis, which has been rolling since March 2020.
The people getting hit the hardest, it seems, are Generation X—which might also be called The Forgotten Generation or the Overlooked Generation, sandwiched as they are between the high-profile boomers and millennials.
Gen X—those born between the mid-60s and late-70s—have the lowest overall financial confidence among the three generations, says Allianz. This may not be surprising, as many were walloped with not one but three major crises in the first 20 years of their working lives—the recession of the early 1990s, the crash of 2000-3, and the global financial crisis of 2007-9.
They are the generation now on deck for retirement. The oldest are turning 59 this year. The youngest are entering their mid 40s. Some 25% tell Allianz they still have time to save—down from 43% just two years ago.
But across the generations, 40% tell Allianz they don’t have a retirement plan and 56% say they don’t know where to start planning, beyond having basic accounts like a 401(k) and an IRA.
Having those accounts, and saving the maximum into both each year, is a good place to start.