Baby Boomers Find Retirement Tough to Achieve

Dec. 4, 2001 -- Baby Boomers who already feel sandwiched between financial obligations to children and aging parents can look forward to more of the same, plus unprecedented levels of debt for themselves, in retirement. That is the sobering conclusion of the Allstate Financial ``Retirement Reality Check,'' a survey released by Allstate Financial, a business unit of The Allstate Corporation.

According to the survey, more than one in three Baby Boomers (37 percent) will be financially responsible for parents or children during retirement. And 7 percent of boomers will be financially responsible for both parents and children in retirement.

That is on top of the extensive debt that three out of five Baby Boomers (58 percent) surveyed expect to pay off during retirement:

     -- 25 percent paying credit card debt
     -- 37 percent paying car notes
     -- 27 percent paying a mortgage on their house

The survey also revealed that Baby Boomers have saved an average of only 12 percent of the total they will need to meet even basic living expenses in retirement.

``Our research paints a very serious picture as far as the many obligations tomorrow's retirees will face. But it is never too late to start planning and saving,'' said Tom Wilson, president of Allstate Financial. ``Partners like Allstate Financial can help people meet their obligations, secure their retirement, and enjoy financial independence.''

According to the survey, one in five retired Baby Boomers will pay college tuition for one or more children. Fewer than one in ten (8 percent) of the boomers surveyed said they expect financial support from their children in retirement, though twice as many Boomers (16 percent) said they currently support their parents.

Baby Boomers not prepared to foot the bill

On average, those surveyed said they would need $30,000 per year for basic living expenses during retirement. Factoring in a return on savings and inflation, to have that, Boomers will need approximately $1 million upon retirement. But surveyed Baby Boomers have saved only a fraction of that amount. Any benefits generated from the Social Security fund would lighten the savings need, but not nearly as much as Boomers would expect.

Even the $30,000 that Baby Boomers think they will need per year may be too low, as experts agree that the cost of living will likely double over the next 20 years. Of survey respondents, 46 percent thought that living expenses would increase less than 20 percent over the next 20 years, and only 6 percent agreed that the cost-of-living expenses would double.

Don't Quit Your Day Job

To defray costs associated with retirement, most Baby Boomers simply won't retire completely. Seventy-three percent of the respondents said they will continue to work in some capacity during retirement. And the majority of boomers surveyed (68 percent) said they would have to save money during retirement.

Astonishingly, despite numerous financial obligations and a massive savings shortfall, according to the survey, 67 percent of Baby Boomers still anticipate they will have money left over to leave as an inheritance to their children.

``This survey is a call to action for Americans,'' said Wilson. ``The level of financial responsibility and obligation that this generation will face is unprecedented. When you compare what they have saved with what they will need, both for themselves and the others who will rely on them, this generation is woefully unprepared.''

September 11 events have not changed saving or investing habits

The survey found that despite market volatility, a possible recession, and the likelihood of a long-term war, the majority of Baby Boomers (82 percent) do not plan to significantly increase the amount of money they are saving for retirement. In fact, 66 percent of those surveyed plan to make no change whatsoever to the amount they are currently saving.

Likewise, the majority of pre-retirees surveyed (74 percent) have not made significant changes to their investment style after September 11, as only 10 percent said they would invest much more conservatively and 3 percent much more aggressively.

The balance of respondents said they were not sure how September 11 events would impact their savings or investing habits.

    Snapshot of Current Financial Obligations
    According to the survey:

      -- A third of Baby Boomers (33 percent) currently pay tuition for their
         children or provide some financial support for children or
         grandchildren over 18 years of age (32 percent).

      -- One in six (16 percent) Baby Boomers currently assists elderly
         parents or in-laws financially.

      -- Of the boomers who currently fund tuition for their children as well
         as save money for the future, a third (33 percent) contribute more
         money to savings than to tuition, another third (30 percent) put more
         aside for their children's tuition than to saving, while the
         remaining third (36 percent) allocate the same amount to both.

The Allstate Financial ``Retirement Reality Check'' survey was created by Allstate Financial in conjunction with Harris Interactive. Using a random digit dialing methodology, Harris polled 1,004 people born between 1946 and 1961, with household incomes ranging from $35,000 to $100,000. The margin of error is plus or minus 3.1 percent. For the data related to September 11, Harris surveyed 294 respondents who met the same criteria. The margin of error for the second sample is plus or minus 5.7%.

Allstate Financial Group is a business unit of The Allstate Corporation (NYSE: ALL - news), representing the affiliates that provide life insurance, retirement, investment and health and disability insurance products. Allstate Financial is the marketing name for Allstate Life Insurance Company, its subsidiaries and certain affiliates. Widely known through the ``You're In Good Hands With Allstate®'' slogan, Allstate Financial can help its customers achieve a secure financial future with a broad array of retirement solutions. Allstate Financial is also a premier provider of variable annuities and long-term care insurance. In addition, through workplace marketing, Allstate Financial offers life, health and disability insurance through employee payroll deductions. Customers can access Allstate Financial products and services through approximately 60,000 financial professionals, including Allstate agents, independent agents, and banks and securities firms.

SOURCE: Allstate Financial Corporation