Here at USAA, we just wrapped up our second annual life insurance survey. Over the first couple of years, the survey has provided insights into people's thinking regarding life insurance as well as other timely financial topics.
This year, inflation was top of mind. One unique feature of the survey is the demographic blend of the participants. The responses reflect a balanced mix of folks with military ties -- currently serving, veterans and military spouses -- and the broader U.S. population.
If there was any notable trend this year, it supports what I have heard anecdotally at events and in conversations with USAA members over the past couple of years: On a relative basis, the military community is faring well financially.
You can dig into all the details at www.usaa.com/lifesurvey, but here are a few of the findings that caught my attention.
Only Half of Americans Are Concerned Inflation Will Affect Their Retirement.
I feel safe in saying that the half that aren't concerned should be. Heck, I felt that way before inflation really started to take off last year. Even at 3%, rising prices can erode your lifestyle in retirement. So ensure that inflation is part of your retirement plans and projections. If I'm wrong, you'll just be in a better position to live your best life.
Military Members Lead the Way.
According to our survey results, military members are outpacing their civilian counterparts in several important areas. From maintaining an emergency fund to carrying adequate life insurance coverage, military-affiliated respondents held a positive double-digit advantage over civilians.
Cost Is a Key Factor in the Life Insurance Decision.
At just under 70%, "cost of the coverage" was just behind the "type of coverage" in importance, according to all survey respondents. In today's environment, it's easy to understand the price-sensitive nature of shoppers. When you are evaluating the pros and cons of life insurance strategies, I think starting with what you need -- how much coverage -- and then figuring out how to make it happen -- price and type of coverage -- is a good approach.
Few Are Life Diversified.
You probably think of stocks, bonds and cash when you hear the word diversification. Here, though, I'm talking about maintaining a mix of life insurance coverage both through your employer and on your own. Employer plans are typically easy and a good value, but having coverage outside of your employer ensures a portion of your coverage is portable if you change jobs. Less than 20% of survey respondents had coverage at work and owned a private policy.
One-Third Would Forgo Life Insurance for Money to Invest.
I thought this finding was a bit odd. If we had money to pay off all our debts, replace income from our working years, and fund the kids' education and our retirement, we wouldn't necessarily need life insurance. The "explosion" of benefits at our death is what makes life insurance unique.
In most cases, we have the life insurance to fill a gap until that gap goes away, because we have the funds we need, or the need is gone. While diverting $50-$100 to an investment account could pay dividends decades into the future, using that money for life insurance can help avoid a financial catastrophe today.
Inflation-Fighting Choices Seem Solid.
Your spending plan is the front line of your efforts to defend against the effects of inflation. Over half of all respondents have had to make cuts to make things work in this environment. The top two targets to reduce spending were discretionary expenses (41%) and vacation planning (37%). Ideally, those kinds of adjustments are enough to put you in a good place. Less than a quarter of respondents have had to trim investments or cut insurance. Somewhat surprisingly, 45% have not made any adjustments.
I look forward to sharing some additional insights from the survey in an upcoming column, but until then, check it out for yourself.
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