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New Survey
Almost Al Retirees, Baby Boomers Regret Not Doing
More to Prepare for Retirement
Baby boomers may have unrealistic expectations about
retirement
March 11, 2005 – Almost all retirees (98 percent)
regret how they spent their money before retiring and an amazing 97
percent of baby boomers share this regret and are uncomfortable with how
much they have accumulated during their pre-retirement years. Still,
both senior citizens and boomers continue to overspend and show little
concern for rising costs for critical expenses such as healthcare, says
a new survey.
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 this week 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."
"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."
Information
Source Statement:
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.
OppenheimerFunds,
Inc. is one of the nation's largest and most respected 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 7 million shareholder accounts.
Before investing
in any of the Oppenheimer funds, investors should carefully consider a
fund's investment objectives, risks and charges and expenses. Fund
prospectuses contain this and other information about the fund, and may
be obtained by asking your financial advisor, calling us at 1.800.
525.7048 or visiting our website at
http://www.oppenheimerfunds.com. Read prospectuses carefully before
investing.
Shares of mutual
funds are not deposits or obligations of any bank, are not guaranteed by
any bank, are not insured by the FDIC or any other agency, and involve
investment risks, including the possible loss of the principal amount
invested.
The products and
services of OppenheimerFunds, Inc. and its controlled affiliates
include: mutual funds, hedge funds of funds, qualified retirement plans
for individuals and corporations. OppenheimerFunds is widely recognized
as a leader in educating and empowering investors and for its
award-winning customer service.
OppenheimerFunds,
Inc., Two World Financial Center, 225 Liberty Street, 11th Floor, New
York, NY 10080. OppenheimerFunds, Inc. is a member of the MassMutual
Financial Group and is not affiliated with Oppenheimer & Co, Inc. or
Oppenheimer Capital.
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