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AARP Annual Survey
Boomers, Seniors (45+) Score a "C" on Consumer Issues
Oct.
23, 2003 - Americans 45+ were judged average, with potential for
improvement, when it comes to consumer issues based on findings from
AARP's new 2003 Consumer Experiences Survey that examined individuals'
experiences with financial products and services. The survey looked at
credit behavior, fraud and financial planning. These consumers are
attempting to protect their financial security, however, their lack of
basic financial knowledge can make their planning more difficult.
"Consumers age 45+ are the fastest growing and most valuable segment
of the financial marketplace," said Christine Donohoo, associate
executive director at AARP. "However, only half of the 1,500
respondents could correctly answer fundamental financial questions
e.g., 'what charges and fees do no-load mutual funds have'; 'what does
the FDIC cover in investment losses'; and 'does diversification of
investments decrease risk.'"
Although consumers age 45+ are lacking knowledge of basic financial
and investment terms they do understand some aspects of personal
credit, including such things as how failing to make timely credit
card payments can impact their credit rating. While acknowledging room
for improvement, 45+ consumers also report managing their debt levels
well, with only seven percent saying that they have more debt than
they can financially handle. This knowledge prevented this group from
receiving an even lower grade from AARP.
"We
need to better educate consumers in basic financial planning," said
Donohoo. "Without the planning, many consumers will have a rough time
preparing for their future." For now, most information comes from
family and friends instead of professionals who are trained at
answering these issues.
There
is good news in this report. Ninety-eight percent of all 45+ consumers
surveyed have taken steps to protect their identity and credit
situation. Some of these steps include ordering a copy of their credit
report and limiting the number of identification cards they carry.
Identity theft is one of the fastest growing crimes in the U.S. today
and AARP encourages older consumers to protect themselves from this
invasive crime.
The
percentage of 45+ consumers reporting bad purchasing experiences in
the past year has increased over the past four years. And while more
consumers took some type of action, including complaints to the Better
Business Bureau, in 2003 compared with 1999, overall respondents are
slightly less satisfied in 2003 with the action they took. Of those
people who say they had a bad experience in the past year,
thirty-seven percent say they were victims of a major swindle or
fraud.
Other
key findings include:
45+
consumers own a variety of investment products
• Sixty percent of consumers own a 401(k) retirement plan;
• Thirty-nine percent invest through a mutual fund account;
• Thirty-six percent own individual stock
45+
consumers are least prepared for future expenses
• Thirty-eight percent report having enough set aside for retirement;
• Twenty-four percent report having enough set aside for long-term
care expenses
• Fifteen percent have "none at all" set aside for retirement
African-Americans and Hispanics that were surveyed are more likely to
carry a higher debt ratio, are less likely to hold financial
investments, and are more likely to have bad experiences with major
purchases and products. There are some positives however. Both groups
seek senior business personnel when they complain about a product or
service and African-Americans are more knowledgeable than others
surveyed in understanding the impact of on-time bill paying and how it
reflects on their credit report.
Executive Summary
The 2003 Consumer Experiences
study surveyed 1500 45+ consumers including over samples of
African-Americans and Hispanics. The purpose of this survey was
to learn about overall experiences that consumers have when they
interact with various aspects of the financial marketplace. AARP
conducted research in a variety of areas including consumers':
- experience with products and services
- experience with home repairs
- knowledge of basic credit scoring and its impact on the
loan process
- knowledge about home equity loans
- knowledge about investments
- experience with identity theft and fraud
- perceptions of debt level
- ownership of legal documents
- use of alternative financial services such as
check-cashing outlets and pawn shops
A brief description of the major findings follows: Forty-five
plus consumers are somewhat knowledgeable about personal credit.
- More than nine in ten (94%) 45+ consumers know that a
missed credit card payment can be reported on their credit
report.
- More than eight in ten (88%) consumers correctly report
that an individual's bill paying history on their credit
report affects their ability to get a home loan. However, only
61 percent know that their bill paying history affects the
interest rates that lenders charge them.
- Of the 82 percent of 45+ homeowners, at least two- thirds
know that they can be sued in court for the value of a missed
mortgage payment (62%); lenders can sue the borrower for the
debt owed (77%), and the lender can report the non-payment on
the homeowner's credit report (88%).
A preponderance of survey participants knows the basics of
borrowing.
- More than eight in ten 45+ respondents know that the
lender must show the borrower documentation of fees before
closing the loan. Three-quarters or greater know that the
lender must reveal the loans annual percentage rate, the total
dollar amount of the finance charge for the loan, and the
total dollar amount of all fees the consumer must pay.
Forty-five plus consumers are unsure or incorrect about basic
investment concepts.
- More than half (57%) correctly report that if you lose
money in a mutual fund invested in a bank, the Federal Deposit
Insurance Corporation will not cover their loses. And half
(52%) correctly report that diversification of investments
decreases risk.
- Only four in ten (41%) consumers correctly report that a
"no-load" mutual fund involves no sales charge but does have
maintenance fees the consumer must pay.
- In all questions, the "don't know" answers represent at
least a quarter of respondents.
Respondents use several sources of information when making
major purchases
- At least 4 in 10 45+ consumers use manufacturers,
agencies, and consumer literature as sources that inform their
buying decisions. Approximately two-thirds of adults age 45
and older report that information directly from the
manufacturer or service provider is useful for helping them
make decisions on buying major appliances or home repair
services.
Family and friends are the number one resource for financial
information.
- When presented with a list of possible sources, most (45%)
say they get financial advice from family and friends,
followed by media sources (TV, radio, and newspapers) and
banking professionals. Other financial resources, used by at
least one-quarter of respondents, include information from
magazines or books, financial planners, accountants,
stockbrokers, and lawyers.
Forty-five plus consumers have proactive financial behavior
such as checking their credit card and bank statements
regularly.
- An overwhelming ninety-eight percent of all 45+ consumers
have taken at least one action in the past two years towards
keeping abreast of their financial situations. Almost nine in
ten respondents refused to give out personal information on
the phone unless they initiate the call (87%). More than seven
in ten limited the number of identification cards that they
carry (72%). Seventy-one percent shredded or destroyed credit
card receipts, applications and other financial statements.
Approximately seven in ten (68%) regularly reviewed their
credit card and other financial statements. Approximately
one-third have contacted credit bureaus to reduce unsolicited
credit offers by mail, or ordered and reviewed a copy of their
credit report.
The 45+ seem to manage their consumer debt fairly well but
there is room for improvement.
- Even though fewer than 2 in 10 have no personal debt, four
in ten have about as much debt as they can handle. Less than
one in ten says they have more debt than they can handle
financially. Three in ten say that they can handle more debt.
Forty-five plus consumers own a variety of investment
products.
- Most consumers own a 401K retirement plan (60%). The
second most popular investment vehicle is a mutual funds
account (39%) followed by individual stocks (36%). Just over
one-quarter invest in money market accounts or certificates of
deposit. One-fifth own government bonds or annuities. The
fewest respondents own corporate bonds, the most stable among
investments (14%).
Consumers report that they have a variety of legal documents
that provide financial protection for them and their families.
- Not surprisingly, the most popular choice of documents to
hold is the will, drafted by more than half of those 45+. Two
in five 45+ consumers have a durable power of attorney for
health care decisions (39%). Far fewer have a durable power of
attorney for financial matters (27%) or a living trust (24%).
Lawyers emerge as the most popular choice for help preparing
these documents.
Forty-five plus homeowners receive many offers to borrow
against the equity in their homes. However, they are smart
shoppers.
- More than eight in ten (82%) of the 45+ consumers are
homeowners. Overwhelmingly, 45+ homeowners receive offers to
borrow money against the equity in their home via direct mail
(87%), followed by telephone, television, non-specific
advertisement, newspaper, and other types of solicitations.
However, just under a third of homeowners (28%) have actually
taken out a home equity loan in the past ten years.
- More than seven in ten (74%) homeowners who took a loan in
the past ten years comparison shopped before buying a home
equity loan. More than three-quarters (77%) of 45+ homeowners
inquired at their bank, savings and loan, or credit unions for
a home equity lender. Far fewer went to their current mortgage
lender to find a home equity loan (41%). Twenty-seven percent
went to their mortgage broker. Even fewer went to a lender
that their contractor recommended or responded to ads received
in the mail or on the phone. Six percent shopped the internet
for a loan.
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The
full report is
available
online. |
