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Senior Citizens Poor Money Managers
Study Says Older Americans Own More of Nation's
Wealth: Having Trouble Managing It
May 6, 2004 – AARP released a new study today –
their fourth annual Beyond 50 report – reporting that older
Americans (45 and over in this latest lowering-of-the-age-group focus by
AARP) control more of the wealth than 20 years ago but are having
problems dealing with it. AARP did look at those 65 and up and decided
they are “lost” financial managers.
This fourth annual Beyond 50 report—titled
"A
Report to the Nation on Consumers in the Marketplace"—says that, as
of 2001, those 45 and over were responsible for a majority (52 percent)
of all consumer spending, up from 47 percent in 1984. It also notes that
today's consumers face a more complex marketplace and more time
constraints than any previous generation, often leading to confused
decisions.
A companion AARP national survey supports the point
as many Boomers (27 percent) acknowledge that they are worse financial
managers than their parents because of time constraints, the complexity
of choices and the vast number of choices. (See at bottom of page.)
This is most noticeably true in money management.
AARP's analysis of Federal Reserve Board data shows that consumers age
65 and older were more likely than others to be "lost" financial
managers (those who ranked low both in assets and in basic money
management skills). Nearly one-half (48 percent) of those 65 + are
"lost" financial managers, compared to 38 percent of individuals of all
ages.
Discussing the new report today, AARP Director of
Policy and Strategy John Rother said: "It should give us pause that,
while 45 and older Americans are a critical force in the economy,
individual consumers face many obstacles to effective decision-making.
These obstacles need to be addressed quickly."
Beyond 50 is an unprecedented annual look
at the status of, and trends affecting, older Americans. In its first
report, in 2001, AARP reported on the economic state of older Americans.
Subsequent reports focused on health and independent living and
disabilities. The current report is the first to address consumers in
the marketplace.
Beyond 50 begins to address the individual
challenges faced by older consumers by posing this question:
"…is spending power all that one needs to achieve
what economists call ‘consumer sovereignty’ or success in choosing a
product or service…?"
The report answers a resounding "no" and cites
these modern day roadblocks to "consumer sovereignty":
Less time, more decisions. AARP says that families
are spending more time than ever at work, which reduces time that can be
spent on other activities. Simultaneously, there is greater societal
emphasis on individual responsibility. For example, Boomers are more
likely than their parents to be responsible for investment decisions
about their retirement savings through 40l(k)s.
Increasing complexity of products and services.
Technological advances and regulatory changes have allowed financial
service providers to greatly broaden the number of choices available,
even those regarding basic products such as checking and savings
accounts. The report cites federal statistics showing the number of
long-distance telephone companies more than doubled between 1993 and
2003. AARP also notes that one local newspaper listed 41 different loan
types and 47 mortgage lenders for potential borrowers to compare.
To assist those aged 45 and older to overcome
consumer "roadblocks" and gain economic security, Beyond 50
emphasizes the need for the nation to commit itself to, in addition to
an increased level of consumer financial literacy, to improved consumer
information; and to facilitate more consumer choice and financial
service options for "isolated communities and underserved market
segments."
"Recent transparency problems in the financial
world cry out for reforms, starting with higher quality advice to
consumers," Rother said.
AARP Poll: Many Boomers Say They Are Worse
Financial Managers Than Parents
Lack Of Time A Major Problem Cited
Many Boomers, citing a "lack of time," acknowledge
that they are worse money managers than their parents, according to a
new national AARP poll.
The survey shows that 27 percent of Boomers—aged 40
to 57—say that they are worse financial managers than their parents,
more than twice as many as the percentage of those aged 58 and over (10
percent).
The Boomers mention a variety of reasons for their
alleged shortcomings, but more than a quarter (27 percent) blame the
time problem. Other culprits include "no information" (11 percent) and
"confusion about advice" (10 percent).
The survey, done for AARP by ICR of Media, PA,
involved 1,900 individuals interviewed by phone between March 25 and
April 3, 2004.
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