Boom Times A Bust For Retirement Assurances: Results of the 1998 Retirement Confidence Survey

June 2, 1998
Dallas Salisbury
202-775-6322
salisbury@ebri.org, EBRI
Jennifer Hicks
202-686-0300
mga1@worldweb.net, EBRI
Paul Yakoboski
202-775-6329
yakoboski@ebri.org, EBRI

 

WASHINGTON, DC -- The current boom times are an apparent bust when it comes to increasing Americans' retirement confidence, according to the results of the 1998 Retirement Confidence Survey (RCS), co-sponsored by the Employee Benefit Research Institute (EBRI), the American Savings Education Council (ASEC), and Mathew Greenwald & Associates (MGA). The reason may be that more Americans have tried to figure out how much money they really need to save-and the answers have them worried.

"It would have been reasonable to expect confidence to increase this year in light of the strong economy," stated EBRI President Dallas Salisbury. "The fact is, the stock market may be booming but confidence is not."

A consistent 20 to 25 percent of working Americans are very confident that they will have enough money to live comfortably through their retirement years. This figure has remained within this range over the past 6 years-a period that includes some of the most prosperous years in this century.

The good news, noted Salisbury, is that increasing numbers of every age group have tried to figure out how much they need to save by retirement. Forty-five percent of working Americans have made the calculation, up from 32 percent in 1996 and 36 percent in 1997. The increase is particularly striking among baby boomers. Half of the older boomers (those born between 1946-1953) have now tried to figure out what they'll need, up a whopping 12 percent, while among young boomers (1954-1964) the number is up a full 15 percent.

The RCS, released two days before the 1998 White House/Congressional National Summit on Retirement Savings (Summit), focuses attention on a number of issues that will be addressed during the Summit. ASEC is co-organizing the Summit, and "More and more Americans-and especially the baby boomer generation-are recognizing that they may be retired for 20 or more years, and are trying to figure out what a retirement that long will cost. When we ask them about specific retirement costs, we can see their worries increasing," noted MGA President Mathew Greenwald.

Half of workers (51 percent) are worried they won't have enough money for long-term health care. More than one-third are worried they will not be able to take care of medical expenses, and 30 percent -- almost one-third -- don't think they will have enough money to support themselves in retirement no matter how long they live.

Concern remains about the nearly one-third of Americans who are not saving and the reasons they don't. According to the RCS, most think they are already stretched to the limit. Almost 50 percent of nonsavers cite "too many current financial responsibilities" as the most important reason they don't save, with 66 percent indicating it is a major reason. Yet both savers and nonsavers agree they could save an additional $20 a week.

The magic of compound interest will help a 25-year-old saving $20 a week -- the cost of eight lattes -- translate $1,040 a year, assuming 5 percent compound interest over 35 years, into nearly a $100,000 nest egg. That's a lot of coffee.

Fear seems to be an important motivator in encouraging workers to save. "Seeing people not prepare and struggle" (48 percent) and "time running out" (37 percent) are the first and second strongest motivators people cite for starting to save. This perception may in fact reflect reality. Among retirees, 20 percent indicate that their standard of living has been worse than expected.

In addition to the increase in people figuring out what they will need for retirement, the 1998 RCS reveals some other striking evidence that savings education has a measurable and positive impact on savings behavior. Eighty-one percent of those receiving employer information in the past year have money earmarked for retirement, v. 67 percent of those who have not received information. Fifty-six percent of those who receive employer information have tried to figure out how much they need to save, compared with 38 percent of those who have not received information from their employer.

"These findings dramatically show that education, and prompting people to consider saving and retirement planning, can stimulate action and ease anxiety," stated ASEC President Don Blandin. "In the past year, there has been a dramatic increase in attention to this issue from ASEC, the Department of Labor, Congress, the Securities and Exchange Commission, and other private- and public-sector entities. We can see the results as more people take the very important first step in determining what they will need in retirement."

Ethnic Groups: Fewer Save
The 1998 RCS reveals some striking differences in retirement planning among members of minority groups surveyed for this year's RCS. Far fewer Hispanic-Americans (37 percent) have personally saved any money for retirement when compared with Asian-Americans (62 percent) or whites (66 percent). Nearly half of African-Americans have saved for retirement. Only 22 percent of Hispanic-Americans have tried to figure out how much they will need to have saved by the time they retire, compared with 45 percent of whites.

African-Americans more than any group are motivated to save because they have seen people struggle in retirement (60 percent v. 42 percent of whites), and realize that time is running out (48 percent v. 32 percent of whites).

"Our findings relating to different ethnic groups are important not only because of the differences between the minority groups and whites, but because of the differences that are revealed between different ethnic groups themselves. For the first time in the RCS we can see these differences in perceptions and approaches to retirement savings," stated Greenwald. "They also suggest which groups are being underserved in our efforts to provide the tools that help people save."

The Gender Gap
Women show much less confidence in their ability to invest wisely and make investment decisions (38 percent very confident about making investment decisions v. 52 percent of men).

"The 1998 RCS results show that we are on the threshold of a major advance in saving and retirement planning," said ASEC President Don Blandin. "The challenge for us at the Summit and in the future will be to keep that momentum going."

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These findings are part of the eighth annual Retirement Confidence Survey (RCS), a survey that gauges the views and attitudes of working and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. The survey was conducted in March 1998, through 22-minute phone interviews with 1,500 individuals (1,142 workers, 358 retirees) ages 25 and older. Random digit dialing was used to obtain a representative cross section of the U.S. population. This year's project also includes a special analysis of minority groups, specifically African-Americans, Hispanic-Americans, and Asian-Americans.

The RCS is co-organized by the Employee Benefit Research Institute (EBRI), a private, nonprofit, nonpartisan public policy research organization; the American Savings Education Council (ASEC), a partnership of more than 250 private- and public-sector institutions dedicated to raising the public awareness of what is needed to ensure long-term personal financial independence, a part of the EBRI-Education and Research fund; and Mathew Greenwald & Associates, Inc., a Washington, DC-based market research firm.

The 1998 RCS data collection was funded by grants from 33 public and private organizations, and the special report on minorities data collection was funded by grants from 14 organizations. Staffing was donated by EBRI and MG Associates. RCS materials and a list of underwriters may be accessed at the EBRI website: www.ebri.org/rcs.

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