Unexpected Risks and Retirement Planning

Anna Rappaport, FSA, MAAA is a member of the Pension Research Council Advisory Board, and the chairperson of the Society of Actuaries Committee on Post-Retirement Needs and Risks.

For many people, relocating to a seaside resort area is a retirement dream. Florida has many seaside locations, many options for living on them including high rise buildings, and many retirees. But retirement planning is about more than money. On June 24, 2021, a building which was part of the Champlain Towers South condominium in Florida collapsed. As of this writing, the cause of the tragedy has not been determined, but the collapse has rekindled discussions about climate change and its potential impact on seaside housing and development.

Today we see regular reports of tornados, forecasts of increased hurricane activity, and droughts and heat waves in the Western states. Hurricanes, floods, earthquakes, and fires threaten homes and retirement security. Each of these events can be financially disruptive to retirees and lead to health issues and loss of life. That their frequency has increased has been linked to climate change.

One of the difficult lessons of the last decade is that societal risks matter, and more thought is needed about how to incorporate them in retirement planning. Pandemics have long been identified as an important emerging risk, but until recently, average citizens did not pay much attention to them. Now, we increasingly understand that climate change and pandemics present huge global challenges.

Societal vs. Individual Risks

The Society of Actuaries (SOA) regularly conducts research on different types of risks and their impact on retirement planning. Two recent SOA research projects that focus on households and big societal issues include Financial Perspectives on Aging and Retirement Across the Generations and The 14th Annual Survey of Emerging Risks.

Societal risks can affect large groups of people at a single time. For example, Millennials suffered deeply from both the Great Recession and the pandemic. People who had difficulty getting a decent career start or who had their homes foreclosed in the Great Recession are likely to feel the effects for years to come – and some may never catch up.

A range of retirement risks is discussed in Managing Post-Retirement Risks: Strategies for a Secure Retirement. Emerging risk topics include vulnerability to societal events. Moreover, such events can have long-term effects. The 2019 SOA Risks and Process of Retirement Survey included a question about the impact of the 2008-9 Great Recession, and retirees were asked about the 2008 mortgage crisis and stock market decline. One-third of the retirees reported that it had had an impact on their perceived retirement security.

Retirement planning theory calls for considering the risks that affect individuals year-by-year, such as inflation, fluctuations in investment markets, higher than expected health care costs, long-term care costs, and many more.  Nevertheless, SOA research indicates that many people limit their planning for retirement to relatively short-term cash flows and they fail to consider the long-term or bigger picture risks.  Many focus group participants said that they expected to deal with risks when they happened, rather than preparing for them.

The Survey of Emerging Risks

While climate change has not historically been linked to retirement, it is likely to be linked to retirement more often in the future. The pandemic and meteorological experiences of 2020-2021 reminded us about how unpredictable life can be, and how important it is to be able to adapt to unexpected circumstances.

The SOA’s 14th Annual Survey of Emerging Risks, completed in November 2020, listed 23 risks in five categories.  The top five risks were as follows:

  • Climate change: number 1 in 2019 and 2020 – was in the top 5 in 2018
  • Cyber/networks: number 2 in 2019 and 2020 – was number 1 in 2017 and 2018
  • Pandemics/infectious disease: number 3 in 2020, for the first time on the top 5 list – this was the risk with the biggest move between 2019 and 2020
  • Disruptive technology: number 4 in 2020 – down from number 3 in 2017 to 2019
  • Financial volatility: number 5 in 2018 to 2020

Risks included in the top five from 2017 to 2019 but which were downrated in 2020, included demographic shifts, terrorism, regional instability, and asset price collapse.

Emerging risks have often been overlooked in retirement planning. Yet organizations structuring investment portfolios, retirement products, and financial wellness programs should take these risks into consideration, to build in resiliency as they structure their offerings. Such risks affect investments generally, the companies which sell retirement products, individuals, and society at large.

Climate Change and Retirement Expectations

Climate change headed the Emerging Risks list for the last two years, indicating a high level of awareness on the part of professional risk managers and the business community. Building collapses, tornados, and heat waves are three areas of current focus that may be linked to climate change. The 2021 Generations survey sought to understand how climate change is affecting peoples’ concerns about retirement. Some climate risks affect people over very large geographic areas, while others have a more limited impact. Some devastate homeowners from the biggest cities to remote farmers.  Others affect society in general, as they alter the atmosphere, water, or food supplies. Many investments are affected by climate issues and risks, whether they are explicitly recognized or not.

The Generations research provides insight into expectations about the importance of climate change when planning for retirement.  The survey found that:

  • Worries about climate change impacting retirement is highest among Millennials. They are more likely to believe climate change will affect their health, increase the likelihood of property damage, and influence where they will be able to live in retirement.
  • Half of Millennials report that they are concerned with the effect that climate change will have on their retirement financial security. Only 16% of the Silent generation report the same concern
  • Worries around higher living expenses, taxes, and insurance costs are key areas that all generations believe will be impacted by climate change.

Of course, climate change is not occurring instantaneously, and its effects are likely to be magnified and compounded over time. This may help explain why Millennials are more concerned than their counterparts.


This review of recent events in the aftermath of the pandemic and the Great Recession makes it clear that societal risks are very important in ultimate retirement security outcomes. More attention is needed to build resilience, help people plan longer term for retirement, and incorporate a broader range of risks in that planning.


Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.