National Survey Reveals Boomers Have Unrealistic Expectations When it Comes to
Retirement: They Regret How They've Saved
Yet Expect a Comfortable Retirement Lifestyle
Call to Advisors: Think About Boomers' Individual Financial Needs
OppenheimerFunds' Research Identifies Four "Retirement Savings Profiles"
Among Baby Boomers
NEW YORK, March 10 /PRNewswire/ -- Baby Boomers have different investment
needs depending on their "retirement savings profile," but share some common
regrets when it comes to money: they are uneasy about the extent to which they
have saved for retirement. Despite this -- and the fact that most will carry
debt into retirement -- they have expectations of a comfortable lifestyle in
retirement. These are some of the key findings from the OppenheimerFunds
Investing for Retirement Survey released today by OppenheimerFunds, Inc., a
leading asset manager. The nationwide survey examined the financial behaviors
and attitudes of 1,000 retirees and pre-retirees, most of whom are baby
boomers.
"Most of the Boomers we talked to have mixed emotions when it comes to
money, feeling both regret and contentment," said Jim Ruff, President of
OppenheimerFunds Distributor, Inc. "Many feel they could have planned better
and saved more responsibly, but did not for various reasons."
The survey findings revealed that both workers and retirees are
uncomfortable with how much they have accumulated during their pre-retirement
years. Ninety-seven percent of workers surveyed say that they regret how they
and their spouse spent their money considering how much more savings they
could have accumulated; 98% of retirees regret how they spent their money
before retiring. Still, both groups continue to overspend and many are not
concerned about rising costs for critical expenses such as healthcare.
"According to our survey, self awareness, being realistic and proper
planning are some of the keys for Boomers to achieve a successful retirement,
" said Ruff. "Boomers need to take a step back and evaluate how they've saved
so far, gain a true understanding of future expenses and either formulate a
plan or re-evaluate an existing one."
The survey was conducted between September and October 2004 among
Americans ages 45 to 75 with household incomes of at least $75,000 or
household savings and investments of at least $300,000 (not including primary
residence). It measured the views and attitudes of working boomers and
retirees regarding retirement, preparations for retirement and confidence in
retirement planning. Six hundred workers and 401 retirees were surveyed. The
telephone interviewing was conducted by Matthew Greenwald & Associates, a
leading market research firm focused on retirement planning based in
Washington D.C. The margin of error (at the 95% confidence level) for the
total number of respondents in this study (1,001) is a plus or minus 3.2
percentage points.
Boomer Profiles: Four Retirement Savings Personalities
To help boomers better plan for retirement, OppenheimerFunds, Inc. and
Matthew Greenwald & Associates identified four "retirement savings profiles"
based on levels of confidence and preparedness among non-retired boomers:
smooth sailors (21% of respondents); nervous nellies (27% of respondents);
hopeful idealists (29% of respondents) and pensive procrastinators (23% of
respondents).
"It's time to stop thinking of baby boomers as a single group and start
addressing their specific financial needs," said John V. Murphy, Chairman,
President and CEO of OppenheimerFunds, Inc. "Advisors can help boomers
identify which segment they fit into and work with them to develop goals and
plans to address their specific needs."
Smooth Sailors (Prepared and Unconcerned) 21% of non-retirees This group
is the most prepared of the four. They are the most likely to have an exact
dollar amount in mind as their accumulation goal for retirement (50% do) or as
their retirement income goal (42% do). They are more likely than the
unprepared groups to have a written financial plan. Despite this, they will
carry some debt (i.e. car loan, credit card debt) into retirement. This group
is less likely than Boomers in other groups to expect to have a mortgage in
retirement (15% expect to).
Some other characteristics of Smooth Sailors:
* They are most likely to say that, considering their age, they are very
prepared for retirement (87%);
* They have saved more than others -- 22% have at least $1 million;
* They enjoy investing (43%) and consider themselves excellent or good
investors (82%).
"Like good sailors, this group seems prepared for nearly any situation,"
said Ruff. "This group enjoys investing and considers themselves successful
at it, giving them confidence in their ability to cruise into a comfortable
retirement."
Nervous Nellies (Prepared and Concerned) 27% of non-retirees This group
of non-retirees has taken many steps to achieve a secure retirement and
believe they are prepared, but are worried that events beyond their control
might compromise their ability to attain financial security. They are most
likely to have a written financial plan (75%) and half have done a great deal
of financial planning in the past year.
Some other characteristics:
* The majority (87%) are very or somewhat concerned about the possible
effects of a market downturn and 80% are concerned about rising medical
costs;
* They are more likely than any other group other than the Smooth Sailors
to have accumulated a high amount in savings and investments (12% have
at least $1 million).
One reason for this group's higher concern may be that they lack trust in
their own investing abilities. They are the most likely to have a financial
advisor, perhaps as a result of their lack of confidence in investing.
"While it is impossible to control things such as market downturns and
rising medical costs, people who worry a lot would benefit from incorporating
these "potential" events into their plans," said Ruff. "Whether its saving
more, spending less or investing in specialized financial products that can
help address specific needs, its important for this group to take steps to
ease their concerns."
Unrealistic Optimists (unprepared/unconcerned) 29% of non-retirees These
investors are not prepared yet are optimistic about their prospects for a
comfortable retirement. Very few (15%) consider themselves very prepared for
retirement and 72% say that, considering their age, they are only somewhat
prepared for retirement. Yet 99% say they are looking forward to a
comfortable retirement.
Following are some other characteristics of Unrealistic Optimists:
* 60% have done little or no financial planning for retirement in the
past year; 65% do not have a written financial plan;
* 20% admit to dipping into their retirement accounts for current needs;
* 32% do not have a retirement accumulation goal and 21% do not have a
retirement income goal. Those who do have goals are more likely to
have a general goal in mind vs. a specific dollar amount in mind.
Unrealistic Optimists expect to work for pay in retirement (58%) and are
more likely to expect that they will need to spend less money in retirement to
support their lifestyle than before retirement (59%). Boomers in this group
are more likely than others to expect to carry credit card debt into
retirement.
"This group faces the biggest hurdle as they are living for the here and
now rather than thinking long term," said Ruff. "They are making assumptions
about retirement that are bolstering their carefree attitudes toward
retirement planning."
Pensive Procrastinators (Unprepared/Concerned) 23% of non-retirees The
pensive procrastinators have not planned well and are worried about it. They
do not consider themselves well prepared for retirement and are concerned that
they will be unable to save enough money for a secure retirement. Despite
this, 76% of this group say they expect to live a comfortable retirement.
Some other characteristics:
* 71% say they are somewhat prepared but only 6% consider themselves very
prepared;
* 28% have dipped into retirement accounts;
* 59% expect to supplement their retirement income by downsizing their
homes;
* 60% expect to work for pay in retirement; 56% expect they will spend
less money in retirement than before they retired.
The low average income levels of this group may explain why they are more
likely to have lower amounts in savings and investments (40% have less than
$200,000). This group is also most likely to carry debt into retirement and
almost half expect to have a mortgage and car loan in retirement.
"It's encouraging that this group is self-aware enough to realize that they
need to do things to make up for their lack of financial planning," said Ruff.
"They are realistic about their need to compensate for low savings and ongoing
debt through other sources of retirement income such as downsizing their homes
or working for pay."
Misperceptions About the Realities of Living in Retirement:
Regrets and Lessons To Be Learned From Today's Retirees
Many Boomers are unrealistic about the real cost of living in retirement
and how their plans to exit the workforce will mesh with their savings plans.
For example, Boomers appear to be underestimating the impact that debt will
have on their retirement, especially as many expect to enter retirement owing
more than previous generations. Higher costs of living driven by more
expensive homes, purchasing luxury items and excessive use of credit cards
prevent debt pay down.
"There is a substantial disconnect between what Boomers expect their
retirement expenses will be and what retirees are actually spending," said
Murphy. "Boomers appear to be significantly underestimating their future
income needs given today's longer retirements and the real cost of living in
retirement which is constantly increasing due to factors such as rising
medical costs and declining social security benefits."
A lot can be learned from current retirees. Knowing what they believe
they have done right and believe they could have done better can help Baby
Boomers with planning and saving for retirement.
Boomers anticipate that they'll have to work longer than their current
retiree counterparts. When asked at what age they think they'll retire, only
a small portion of Boomers said before they reach 60. Yet over half of the
retirees surveyed left the workforce before that age. Also, the majority of
Boomers say they will continue to have some form of paid employment after they
"retire." On the contrary, a quarter of current retirees said they never had
to work in retirement. Regardless of when they think they will retire,
Boomers should have a plan in place in case they are not able to work as long
as they expect.
When it comes to saving, less than half of the Boomers surveyed wish they
had saved more. Yet when asked to consider their saving and investing habits,
98% of retirees had regrets about pre-retirement spending.
Boomers believe they will need to save less than ten times their current
income for retirement, yet the average life expectancy in retirement is twenty
years. Also, while they perceive that their expenses will decline once they
stop working, almost 70% of retirees said they now spend the same or more as
when they worked.
"When it comes to Baby Boomers and financial planning, there is a striking
contrast between perception and reality," said Murphy. "The overriding lesson
is clear: The earlier you start planning, the less likely it is that you will
have to compromise your retirement dreams and plans. Make planning a priority
now, not when retirement is imminent."
Advisors Key to Achieving Peace of Mind and Financial Security
The survey demonstrates the value of professional advice for all four Baby
Boomer segments. Investors who use an advisor benefit from their expertise
and guidance, while for those surveyed who do not, an advisor could help get
them started on the right track.
"Our study points to the need for Boomers to work with advisors who can
create workable plans that enable them to simultaneously save for the future
and take care of everyday bills and expenses, " said Ruff. "Advisors can help
clients live more efficient financial lives."
Despite a high level of confidence in their own investing abilities, 67%
of Smooth Sailors have a professional financial advisor. Respondents in this
group say using an advisor makes them even more confident in their investing
abilities and about their retirement preparation.
Nervous Nellies are the most likely group to have a financial advisor (85%
do) and are less likely than others to make the majority of their investment
decisions on their own. Only 39% of Unrealistic Optimists have a financial
advisor and few regularly use their financial advisor's help. Three-quarters
of this group say they make more than half of investment decisions themselves.
"When it comes to financial planning, the 'me generation' needs to become
the 'we generation,'" said Murphy. "Many boomers are trying to put together
their own plans, but lack the skills and resources financial professionals
offer to properly assess risk and define specific goals."
In looking at financial planning and goals, one of the biggest factors
detracting from boomers' ability to realize their retirement dreams is debt.
Advisors should help investors factor debt reduction and living within means
into retirement planning early on.
"Boomers will continue to redefine retirement as they expect to work
longer and work for pay in retirement," said Murphy. "This will likely result
in major changes for the role of financial advisors."
OppenheimerFunds, Inc. will do its part in educating advisors by
developing tips on the best way to work with boomers to help them meet their
specific retirement needs. The Company is developing a Baby Boomer module for
its Client Connect program, which is a comprehensive sales and training tool
designed to help advisors build their businesses and target new selling
opportunities. A consumer brochure will be available as well.
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investment management companies. As of December 31, 2004, OppenheimerFunds,
Inc., including subsidiaries and controlled affiliates, managed assets of more
than $170 billion, including assets in more than 60 mutual funds and more than
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