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Inflation is not just a daily concern for Americans. It is now also their main retirement risk.
A survey by Allianz Life Insurance Company of North America reveals that 25% of Americans see rising inflation as the biggest risk to their retirement plans.
That’s up from the 8% who said they saw rising prices as a risk to their retirement in 2020.
Inflation also tops other retirement risks people are concerned about in 2021, such as outliving their money, which was cited by 8%; increase in health care costs, also by 8%; and job security, 7%.
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Inflation has increased 6.8% in November a year ago in the fastest acceleration since 1982, according to Consumer Price Index data released last week.
Much of this increase in the index, which tracks the prices of consumer goods and services, was driven by soaring food and energy prices.
Allianz’s online survey was conducted between November 15 and 17. It included 1,115 respondents aged 18 and over.
The survey results preceded the latest CPI data, as well as recent market declines prompted by the announcement of the new omicron variant of Covid-19.
While all consumers see higher prices for food and heating, the problem is deeper for people who are already retired, especially those in their later years, who may be forced to choose between food, prescriptions or rent, noted Kelly LaVigne, vice president of consumer insights at Allianz Life.
Even if inflation remained stable at 3%, the cost of living would double in 24 years, he said.
“The risks in retirement are many, and that’s certainly something the pandemic has brought to light,” LaVigne said.
Despite Americans’ economic concerns, the Allianz survey found that only 12% of people included financial planning in their resolutions for 2022. That’s because most people think they already have a plan in place. or think they don’t have enough money to worry about.
Only 22% of survey respondents said they plan to seek professional financial advice in the new year, down from 27% last year.
But people of all ages would likely benefit from financial advice, LaVigne said.
“You want to make sure you have some sort of idea and you have professional advice on what you should do rather than panicking right now,” LaVigne said.
If you don’t already work with a financial advisor, interview a few and identify a professional you trust, LaVigne recommended.
By working with an advisor, you can get an idea of how you can adjust your personal plan for inflation and market risks, and in particular where you can spend less, he said.