NORTHBROOK, Ill., March 5 /PRNewswire-FirstCall/ -- Forty-year lows on
mortgages and zero-percent interest rates on auto loans could be the newest
sources of "found money" for consumers, spurring a surge in retirement savings
for many Americans. But are most Americans using this disposable income to
invest in their futures?
Not necessarily. Well over one-half of the cash being raised from record
home refinancings -- nearly $170 billion in 2002 alone -- is being used to
directly finance more spending, on everything from home improvements to
vehicle purchases, vacations and even general living expenses(1). And while
all this spending may be good for the economy, many Americans may be
forgetting an important savings strategy -- pay yourself first.
In a recent poll by Allstate Financial, 93 percent of Americans surveyed
said they believe it is up to individuals to ensure their own financial
security during retirement. Yet ironically, the same poll showed that as many
as 70 percent of this same group said that present financial obligations
preclude them from saving as much as they would like for the years ahead.
While respondents to the Allstate survey recognized that they should be
saving and investing more than they currently do for their retirement, 57%
admitted that paying bills and expenses is the main barrier for not doing so.
"Each phase of life presents us with its own unique set of financial
challenges -- ongoing bills and expenses that can impede saving for
retirement," said Casey Sylla, president of Allstate Financial, a business
unit of The Allstate Corporation. "Unfortunately, for most of us, there is no
'perfect' time to begin saving. Whether you are just starting out in your
first home, have a new baby or are sending the kids off to college, there will
always be other financial priorities. Yet it's crucial for people to
understand that they must make saving for their own retirement a top priority.
Low mortgage rates and student loans can help you realize your current and
near-term dreams, but there is no 'financial aid' when it comes to
retirement."
Food for thought
According to the Allstate survey, another key barrier to saving is having
"too little income" or "lack of money" (40 percent). But when asked what
would motivate them to save and invest more for retirement, respondents were
most likely to cite outside sources including higher income/better employer
programs (32 percent). A mere eight percent indicated that they could save
and invest more by reducing their expenses.
Yet, Americans do have good intentions to save. The Allstate poll also
found that approximately 75 percent of those surveyed say they do save for
retirement on a regular basis, although the amount saved varies widely. The
most popular retirement investment vehicle is the 401k (42 percent), followed
by mutual funds (26 percent) and IRAs (22 percent).
But consider this -- according to the U.S. Department of Labor Consumer
Expenditure Survey, the average American household spent $2,235 on dining out
in 2001 -- a generous contribution to an IRA. Another source of "found money"
may be that tax rebate check. According to IRS data, the average American
household will receive a tax rebate of $2,228.84 in 2002.
"Investing in an IRA should be automatic, because there are so many
benefits," said Sylla. "You get an immediate tax break, as well as a simple
and effective way to build your retirement savings. Contributing to an IRA is
particularly crucial for individuals who don't have access to a 401(k) program
at work."
He also noted that taxpayers who don't procrastinate can get an added
benefit: They may claim an IRA contribution on their 2002 tax returns before
the money actually is invested. "This is certainly a time that filing your
taxes before April 15 pays off. The tedious job is complete, and taxpayers
then can use their refund to make the contribution. Using your refund this
way creates an almost painless way of contributing to retirement, because it
is 'found money,' not funds taken away from your everyday budget," Sylla said.
He cautioned, however, that the contribution must be made by April 15, even if
the tax refund hasn't come by then.
The Allstate "Barriers to Savings" Survey was conducted through Market
Facts. Telephone interviews were completed with 1,009 members of a nationally
representative panel of consumer households. Respondents were intentionally
divided 50/50 between males and females. Households that were already retired
were excluded. Interviews were completed between June 19 and July 10, 2002.
The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held
personal lines insurer. Widely known through the "You're In Good Hands With
Allstate(R)" slogan, Allstate provides insurance products to more than 16
million households and has approximately 12,500 exclusive agents and financial
specialists in the U.S. and Canada. Customers can access Allstate products
and services through Allstate agents, or in select states at allstate.com and
1-800-Allstate. Encompass(SM) and Deerbrook(R) Insurance brand property and
casualty products are sold exclusively through independent agents. Allstate
Financial Group includes the businesses that provide life insurance,
retirement and investment products, through Allstate agents, workplace
marketing, independent agents, banks and securities firms.
(1) Source: 2002 Fannie Mae National Housing Study
SOURCE Allstate Corporation
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CONTACT:
Laura Margolis of Allstate Media Relations,
+1-847-402-5600
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