Natural disasters affected investments or savings of 39% of Americans, 21% change their retirement plans

04 / 11 / 2024

• news
• Sustainable Development

Nearly two in five (39%) Americans affected by natural disasters used money intended for savings or investments to recover from or protect against extreme weather. Of those affected by a natural disaster, 21% had to change their retirement plans due to the impacts of extreme weather, according to a study by Allianz.

Holistic, long-term planning is key to any solid retirement strategy, and anticipating the costs associated with extreme weather events should be part of the plan.

According to the  2024 Annual Retirement Study from Allianz Life Insurance Company of North America, 82% of Americans would like a financial plan that addresses the growing costs and economic risks of extreme weather. Based on the findings of this research, Allianz Life has launched an innovative campaign to help financial professionals and their clients address these concerns in their long-term financial planning.

“At Allianz Life, we focus on helping Americans manage risk as part of their retirement strategy, including emerging risks that may not yet be part of the traditional retirement nest egg conversation. Economic risks and costs that can derail a retirement strategy – like inflation, market volatility and increasing health care costs – remain relevant,” said Lorinda Niemeyer, Head of Sustainability at Allianz Life.

“But beyond these, the data is also clear: extreme weather is becoming more frequent, intense, and costly. We see headlines about extreme weather almost daily in the news, but there’s relatively little attention to how it directly impacts individual finances, retirement savings, and even health and well-being. This means we also need to factor in rising costs and other risks associated with extreme weather, such as skyrocketing homeowners’ insurance rates, that can also quickly erode retirement savings,” he added.

Extreme weather is increasingly impacting everyone everywhere, but it can take a particularly high emotional, health and financial toll on retirees. No matter which planning stage you are in and where you live, a financial plan should factor in the rising costs associated with increasingly extreme weather, including insurance, taxes, energy, and construction upgrades. Beyond these ongoing costs, the immediate costs of extreme weather can include paying for evacuation motel stays, recovery and re-construction, and even medical expenses. 

For anyone, these costs can be a burden. But, for retirees on a fixed income, they can be financially devastating. Those who are still in the workforce can generate new income to help cover these unplanned expenses, but retirees may have to unexpectedly draw from their limited nest eggs. In the longer term, property values may also decline, which can jeopardize retirees who rely on real estate equity as part of their retirement funding. 

Location is another consideration when thinking about the impact on retirees. While many parts of the U.S. are increasingly exposed to extreme weather events, this is particularly so in many target retiree destinations like Florida and the Southeastern and Southwestern U.S. For example, the cost of homeowners’ insurance increased by 35% across the U.S. from 2021 to 2023, according to the 2023 Policygenius Home Insurance Pricing Report. In Florida, over that same time, it surged by 68%. These costs are difficult to absorb if retirees haven’t planned for them.