Benefits September 8, 2003

ING: Boomers Feel More Prepared For Retirement Than They Are

September 8, 2003 (PLANSPONSOR.com) - The perception baby boomers have about where they stand in preparation for retirement versus the reality of where they are at is still worlds apart.
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Half of the baby boomers polled by ING said they feel comfortable and under control regarding their financial preparations for retirement, with 55% giving themselves an “A” or “B” grade on their preparation. However, a disconnect was found when asked how long they could go during an emergency before tapping into their long-term savings – the same half would not be able to last more than six months.

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This trend diverged even further at the gender fork in the road. Overall, women respondents feel much less confident about their retirement planning than men (43% versus 58%), and more women than men believe they will be worse off in retirement than they are now (25% versus 10%). Additionally, men on average are spending more time per month on financial planning than women (4 hours versus 2.5 hours).

The same trend of dipping into retirement savings and a lack of preparedness was seen elsewhere in the Boomers Still on the Brink survey. Of respondents who have changed jobs, 22% cashed out their retirement plans, a major no-no when it comes to long-term retirement savings. Further, nearly two-thirds (62%) are currently spending less than an hour per month on retirement savings, with 32% not spending any time at all with retirement planning issues.

Seeing The Light

It is not that the baby boomer population is oblivious to the situation, with many seeing the light at the end of the tunnel growing dimmer and dimmer. R espondents said they expect to be financially secure enough to retire when they are 62, which is almost seven years longer than they would like to be working. Comparatively, in 2001, boomers expected to be able to retire by age 60, just four years more than they would like.

When the day does come, more than half (56%) of those surveyed believe they will be in about the same financial situation as they are now. Otherwise:

  • 23% – think they will be financially better off than they are now
  • 18% – think they will be worse off then they are now.

By comparison, in 2001, more than half (52%) said they would be about the same; however, more were optimistic about being better off in retirement (30%) and fewer felt they would be worse off (14%).

To help them achieve this goal most would prefer to consult a professional financial advisor (74%) for reliable advice and information on retirement planning decisions more than consult anyone else. Friends and relatives (56%) were the next most sought consultants, and accountants (52%) rounded out the top three. However, the disconnect was found again between doing what they say, not what they do, as only two-thirds (66%) have actually consulted a professional for advice.

Not surprisingly, younger respondents (ages 35 to 44) are significantly more confident than older boomers that they will be better off in retirement (32% versus 14%), they are less likely to seek financial advice from professionals (65% versus 47%) and are more likely to state they “live beyond their means” (32% versus 17%).

Positive Trends

However all hope is not lost. The vast majority (83%) said they have an employer-sponsored retirement plan, while nearly half have an IRA (46%). Additionally, more than half of respondents (54%) said they are relying on their employer-sponsored plan as their largest source of retirement income and a majority (47%) “stayed the course” and contributed the same or more to their employer-sponsored retirement plan over the past two years. The remaining boomers increased their contributions (35%), decreased them (5%) or cashed out (3%).

Further, a sense of cautious optimism was in the air on predictions for the stock market for the next year:

  • 46% – foresee a slight increase
  • 30% – predict stabilization
  • 9% – anticipate a slight decrease
  • 5% – forecast a dramatic increase
  • 3% – see a dramatic decrease.

The “Boomers Still on the Brink” survey was conducted in July 2003 by the research firm, KRC Research. The survey of 500 respondents included people ages 35 through 55 with annual household incomes between $50,000 and $125,000.

Administration September 7, 2003

GenXers Join Older Generations On Investing Bandwagon

July 9, 2003 (PLANSPONSOR.com) - When it comes to investing, Generation X is in line with its older relatives, as 82% are saving regularly for retirement, compared to 83% of Boomers and 76% of nonretired Matures.
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In fact, the 52 million Americans born between 1967 and 1981 are markedly similar to Baby Boomers (age 37 to 54) and Matures (age 55 to 70) in their overall savings patterns and attitudes and even correlate closely in terms of values with their elders.   Nearly three-quarters (73%) of Generation Xers rank family above career, wealth and leisure, compared to 64% of Boomers and 52% of Matures. Health considerations rank second among all three segments, with 10% of GenXers, 25% of Boomers and 34% of Matures identifying “health” as most important, according to The NYLIM Generations Survey conducted by New York Life Investment Management LLC.

However, the early jump that Generation X got on the retirement saving bandwagon apparently could not have come too soon, with this generation anticipating a $2 million nest egg upon retirement, double that of Matures ($1 million) and almost twice the size of Boomers ($1.3 million). The most recent survey findings are in line with earlier reports that showed Generation Xers are savers, with more than two-thirds (69%) expecting to retire with more assets than their parents.  And a comparable 70% have savings outside their retirement fund (See  GenXers Financially Focused ).

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Yet, even that may not be enough.   With a life expectancy of 89 years, a 32-year-old Generation X couple will need over $10 million to retire at 60 with the current equivalent of $100,000 in gross income. This compares with $4.4 million for a Boomer couple age 45 with a life expectancy of 83 years who expect to retire at 64, and $1.1 million for a Mature couple age 62 who have a life expectancy of 78 years and expect to retire at 67, using the same current gross income assumption of $100,000.

Planning Ahead

An earlier release of data by NYLIM showed “few GenXers are investing sufficiently – or aggressively enough – to achieve their ambitious retirement goals,” observed Beverly Moore, Managing Director, NYLIM Retail Markets . “With a life expectancy of 85 to 89, GenXers may live for as many as 30 years on their retirement income. To remain on track, they need to develop a comprehensive financial plan, which includes an overall asset allocation approach, and stay the course.”   (See  GenX Rocked By Market Losses ).

The number of GenXers with such a plan is on the wane, only one-third of the generation’s investors currently have a financial plan, but approximately 70% of those without a plan believe that they will need one in the future, a figure higher than previous years (See GenX Seeking Financial Advice). Not surprisingly, GenXers expect to develop a financial plan with the help of an investment professional. Fully half of this year’s respondents acknowledge needing “the help of professional advisors to manage investments,” up from 44% in 2002.

NYLIM points to the recent market debacle as a possible reason for the slowdown among this generation, that has seen the number of Generation Xers who are not investing jump to 11% from just 4% in 2002.  As a result, only 59% of today’s GenXers own non-retirement assets, down from 70% in the previous year.   Cited as the number one reason for the decline in investment activity is “lack of funds” (58%), followed by, “inadequate experience making financial choices” (29%) ,losing “too much money in the past 12 months” (11%)anda distrust of Wall Street (32%).

Educating the Masses

Despite the earlier parallels, the generations divide in preparing for college expenses.   After years of skyrocketing college costs, 63% of GenXers are saving for their children’s education, compared with 52% of Baby Boomers. Still, due to tuition and fee increases, one-third of Generation X investors expect college costs to be beyond reach by the time their children are ready for college, up from 26% in 2002.   By comparison 33% of Baby Boomers and 25% of Matures agree that college costs are getting out of hand.

“Tuition and fee costs have nearly doubled over the past ten years and, at the current rate of increase, will likely double again in the next ten years,” notes Moore. “Fortunately, participation in college savings accounts, such as 529 plans, has also increased at a healthy pace. To keep up with inflation, investors need to factor tuition costs into their comprehensive financial plan and invest consistently.”

Generation X though is doing what they can, with 26% investing in 529 Savings Plans, up from 18% in 2002 and more than only 12% of Baby Boomers and 6% of Matures.  

However, even though most of the younger generation plans to foot tuition bills themselves, one in five expect parents or other family members to help finance their children’s education, up from 17% in 2002. Interestingly, few family members have the same expectation, as only 7% of Boomers and 5% of Matures are concerned about saving for their grandchildren’s education.

In fact, due to market volatility decimating retirement accounts, Baby Boomers are most likely to report that their progeny headed off to higher education will need to apply for financial aid. Overall, 23% of Boomers indicate that their children/grandchildren will need to seek aid, compared with 10% of Matures and 5% of Generation X.

The study was completed in April 2003 and polled 1,529 investors with more than 500 people in each of the survey’s three demographic segments.   Qualified respondents were U.S. citizens between the ages of 22 and 70, with investable assets of at least $50,000.

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