Planning for retirement means preparing for risks that could derail your financial security — but Americans and financial advisors don’t agree on what those risks are. A new report from the Alliance for Lifetime Income reveals a surprising disconnect that may be putting long-term security in jeopardy.
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According to average Americans and their advisors, here’s a look at the biggest retirement risks.
According to the report, consumers’ No. 1 concern when it comes to retirement is inflation, with 63% seeing this as a retirement risk. However, advisors don’t list inflation as a top risk at all. Instead, they see the biggest retirement risks as outliving savings (56%) and market volatility (51%).
“Despite the obvious disconnect, both are right for different reasons,” said Cyrus Bamji, chief strategy and communications officer at the Alliance for Lifetime Income. “Consumers and advisors emphasize different risks because they feel, experience and understand them from different perspectives.”
Bamji noted that consumers feel inflation directly in their day-to-day lives and expenses, so to them, higher prices become the most immediate and tangible threat.
“It’s emotionally charged, and we’ve been living through it for almost four years now,” he said. “Unfortunately, research shows that most people underestimate how long they’ll live, which makes inflation feel like the dominant, immediate worry rather than a long-term planning issue.”
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The disconnect between what consumers and advisors see as the biggest risks could be because while consumers are focused on immediate issues, advisors are trained to look at a long-term retirement horizon for their clients — one that could last 20, 30 or more years. For them, outliving savings and market volatility are top of mind.
“Though inflation is a concern, from their perspective, the biggest threats are the various risks that can cause a retirement plan to fail over decades, starting with the potential for clients to outlive their savings,” Bamji said. “In other words, they see longevity and market risk as the factors that truly magnify financial strain over time.”
In short, consumers are right about what feels most threatening now, but advisors are right about what most often derails a long-term retirement plan. The real answer is to address both — protecting purchasing power while managing longevity and market risks is what ultimately enables a successful retirement.