Baby Boomers Not Getting the Retirement Message
Key Survey Findings: Baby Boomers are spending less time on financial planning - with most spending little to no time on it.
- While Baby Boomers recognize retirement is now further away than they hoped, most hope to retire at 62.
- Of respondents who have changed jobs, 22 percent cashed out their retirement plans.
- Women respondents feel much less confident about their retirement planning than men, and more women than men believe they will be worse off in retirement than they are now.
- While younger respondents (ages 35 to 44) are significantly more confident than older Boomers that they will be better off in retirement, they are less likely to seek financial advice from professionals and are more likely to state they "live beyond their means."
- On a positive note … A majority of Baby Boomers stayed the course in the past two years, contributing the same or more to their employer-sponsored retirement plans.
- Despite the floundering economy, a dismal job market, war in Iraq, and the events of Sept. 11, a significant number of Baby Boomers have not heeded the warnings about preparing for their retirement. According to the national survey, "Boomers Still on the Brink," a follow-up to research conducted in 2001 by ING, many Boomers remain ill prepared for their golden years, and a significant number are in worse financial shape than they were two years ago.
ING, a leading provider of retirement plans in the United States, serving approximately 2.3 million participants in more than 34,000 plans, interviewed 500 people between the ages of 35 and 55 for the survey.
"Our survey found that the events of the past two years seem to have put many Baby Boomers in a perpetual stall when it comes to planning for their retirement," said Thomas J. McInerney, CEO of ING U.S. Financial Services. "Many Boomers have a ‘glass is half-full’ mentality, which is certainly admirable, but the reality is that for many, they are not prepared."
Close to two-thirds (62 percent) of Baby Boomers said they spend one hour or less on retirement planning activities - such as checking their existing investment portfolios and talking with a professional advisor - in a typical month. One in three (32 percent) said they don’t spend any time on such activities. This compares to 44 percent of respondents in 2001 who spent one hour or less on planning and 12 percent who didn’t spend any time.
McInerney called this lack of attention to financial planning "truly disturbing" and once again explained that regardless of age or financial situation, most people should be guided by three rules when retirement planning:
- Pay yourself first
- Force yourself to not take anything out of your long-term savings
- Be disciplined in how you choose to spend money
A Longer Retirement Road
The "Boomers Still on the Brink" survey suggests that while Baby Boomers are not oblivious to their financial situation, many haven’t significantly altered their retirement preparations over the past two tumultuous years. In 2003, respondents said they expect they’ll be financially secure enough to retire when they are 62, which is almost seven years longer than they would like to be working. In 2001, respondents expected to be able to retire by age 60, just four years more than they would like.
"Boomers are finally realizing that they will have to work longer than they ever thought," said McInerney. "They are beginning to understand that they may not be prepared for retirement and have to recover financially from the economic downturn. The statistics, however, point to people needing to work even longer."
More than half (56 percent) of those surveyed believe that when they retire, they will be in about the same financial situation as they are now. Slightly more think they will be financially better off than they are now (23 percent) compared to those who think they will be worse off then they are now (18 percent). Two years ago, more than half (52 percent) said they would be about the same; however, more were optimistic about being better off in retirement (30 percent) and fewer felt they would be worse off (14 percent).
Ability to Retire
"Boomers Still on the Brink" shows that half of respondents (50 percent) in 2003 said they feel comfortable and under control regarding their financial preparations for retirement, and 55 percent gave themselves an "A" or "B" grade on their preparation. Yet, when asked if they had an emergency, how long they could maintain their standard of living without tapping into long-term savings or retirement plans, half also said they wouldn’t last more than six months.
In 2001, Baby Boomers had an even more favorable opinion of their planning skills with 61 percent ranking themselves "A" or "B." But, nearly 50 percent also said they wouldn’t last more than six months if faced with an emergency.
In 2003, Baby Boomers said they would prefer to consult a professional financial advisor (74 percent) for reliable advice and information on retirement planning decisions more than consult anyone else. Friends and relatives (56 percent) were the next most sought consultants, and accountants (52 percent) rounded out the top three.
Yet, while three-fourths say they would consult a professional, only two-thirds (66 percent) have actually consulted a professional for advice.
It’s Not All Bad - Many are Saving
On a positive note, the large majority of Baby Boomers surveyed (83 percent) said they have an employer-sponsored retirement plan, while nearly half have an IRA (46 percent). And, more than half of respondents (54 percent) said they are relying on their employer-sponsored plan as their largest source of retirement income.
More encouraging news: A majority of the Baby Boomers "stayed the course" and contributed the same or more to their employer-sponsored retirement plan over the past two years, with 47 percent not changing their contributions and 35 percent increasing the percentage of income they contributed. Very few (5 percent) decreased the percentage of contribution, and just 3 percent cashed out.
Baby Boomers in the moderate income category ($50,000 to $75,000) are more likely to rely on Social Security and less likely to rely on their employee-sponsored retirement plans than those with incomes of $75,000 to $125,000.
Other findings in the survey
- Women feel much less confident about their retirement planning than men. Forty-three percent of women said they are comfortable with their retirement planning, compared to 58 percent of men.
- More women than men believe they will be worse off in retirement than they are now (25 percent vs. 10 percent).
- Younger Boomers (ages 35-44) are more confident that they will be better off in retirement than older Boomers (32 percent vs. 14 percent).
- Younger Boomers are more likely than their older counterparts to say that "living beyond their means," (32 percent vs. 17 percent) and "lack of tim" (34 percent vs. 16 percent) are reasons they grade themselves low in financial preparation.
- Young Boomers are more likely than their older counterparts to consult friends and relatives (65 percent vs. 47 percent).
- On average, men spend more time per month on financial planning than women (4 hours vs. 2.5 hours). Baby Boomers with children over age 18 spend more time than respondents with no children over age 18 (4.3 hours vs. 2.3 hours).
- Of those who feel they are doing an above-average job in retirement planning (rating themselves an "A" or "B"), two-thirds (64 percent) say "planning early" is the key. Half or more say "living modestly" (56 percent), "investing wisely" (56 percent), and "self-disciplin" (50 percent) were reasons they feel prepared.
Both "bulls" and "bears" are cautiously optimistic on predictions for the stock market for the next year. Thirty percent said it would stabilize, 46 percent said it would increase slightly, and 5 percent said it will increase dramatically. Another 12 percent expected the stock market to decrease slightly (9 percent) or dramatically (3 percent).
ING Groep N.V. (NYSE: ING) is one of the largest integrated financial services companies in the world, providing insurance, banking, and asset management products. The company strives to provide an innovative, client-focused approach to its financial products and services through strategic global distribution channels. In the U.S., ING offers a comprehensive array of financial services to retail and institutional clients that includes retirement plans, mutual funds, managed accounts, alternative investments, direct banking, institutional investment management, annuities, life insurance, employee benefits, financial planning, and reinsurance. Currently, ING holds top-tier rankings in key U.S. markets and serves over 14 million customers across the nation. Globally, ING serves over 65 million private, corporate, and institutional clients throughout 60 countries. For more information, visit www.ing.com.
Phil Margolis Barb Hemberger
ING U.S. Financial Services Weber Shandwick for ING