Social Security Important to Retirement Planning

May 22, 2001 -- The importance of ensuring the long-term solvency of the United States’ Social Security system is clear in a recent Gallup poll dealing with Americans’ personal finances. Roughly one in four non-retired adults -- 28% -- told Gallup in an April 6-8 survey that they are counting on the system to be a major source of income in their retirement.

This anticipated reliance on the Social Security Administration tends to be highest among Americans 50 years of age and older, but almost a third of baby boomers also identify Social Security as a major part of their retirement picture. Additionally, the bottom quarter of income earners in America -- those earning less than $30,000 per year -- may find themselves highly dependent on Social Security once they retire, with almost half of this group admitting they currently have no retirement savings whatsoever.

Gallup asked about a variety of possible retirement income sources in the recent survey. Retirement savings instruments such as 401(k) accounts, IRAs, and Keogh plans emerged as the real workhorses of Americans’ long-term financial planning. Close to three in five non-retired adults, 58%, tell Gallup that these types of accounts will provide them with a major source of income after they retire. No other savings mechanism comes close to this, but work-sponsored pensions rank second with 34%. Social Security follows in third place, mentioned as a major source by 28% of all Americans, but by 39% among those aged 50 and older, 29% of those in the 30- to 49-year-old bracket and 17% of those under 30.

About a quarter of the non-retired public expects stock investments -- either individual stocks or stock mutual funds -- to be a major source of their retirement funds. Other savings, such as regular savings accounts or certificates of deposit, rank fifth, with 16% describing these as a major potential source. Only 10% of the public expect to rely on part-time work as a major source of income when they retire, and even smaller numbers expect to receive substantial resources from annuities or an insurance plan, an inheritance, or rent or royalties of any kind.

Factoring in those who anticipate each item to be a minor source of income once they are out of the workforce, 85% of those surveyed expect Social Security to pay them at least some benefits, while only 14% believe it will not. Majorities also expect to receive at least some retirement income from retirement savings accounts, work-sponsored pensions, stock investments, other types of savings and part-time work.

Expected Sources of Retirement Income

Major source

Minor source

Not a source

%

%

%

A 401(k), IRA, Keogh or other retirement savings account

58

26

15

A work-sponsored pension plan

34

28

37

Social Security

28

57

14

Individual stock or stock mutual fund investments

24

39

36

Other savings such as a regular savings account or CDs

16

51

32

Part-time work

10

52

36

Annuities or insurance plans

7

34

58

Money from an inheritance

7

29

63

Rent and royalties

5

22

72

Retirement "Haves" and "Have Nots"

Of course, having retirement savings goals and meeting them are two separate issues, and the public seems to be roughly equally divided between those who are saving enough or nearly enough and those who need to save a lot more. The Gallup poll finds that only 21% of all non-retired adults believe they are currently saving enough for retirement, with another 33% saying they should be saving "a little" more. At the other end of the spectrum, 21% report they are saving "some" but believe they should be saving a lot more and 16% admit to having no retirement savings. An additional 8% say they have some savings but are not currently adding to it.

Naturally, there are strong differences in the answer to this question by age, with only 41% of young adults (aged 18-29) saying they are saving enough or need to save only a little more. This rises to 54% among those aged 30-49 and reaches 64% among those aged 50 and older. The variation in rates of saving is even stronger according to household income, with 77% of those making $75,000 or more per year indicating that their retirement savings are in fairly good shape, compared to 63% of those making between $30,000 and $75,000. This positive retirement savings situation drops to just 32% among those making less than $30,000 annually. Forty-five percent of those in the last group say they have no retirement savings at all.

Less than one-quarter of those who are saving enough or nearly enough now say they plan to rely on Social Security as a major source of income when they retire. In fact, Social Security ranks fourth in importance among this group, with retirement savings plans, work pensions, and stocks rated as more important future sources of income. Among those who are saving some but need to save a lot more, Social Security ranks third, behind 401(k)-type plans and work pensions. But for those who have not put any money away for their own retirement, Social Security is the top-ranked "major" source of expected income.

Expected Sources of Retirement Income Based on Personal Savings Rates
	Saving enough/Need to save a little more	Saving some/Need to save a lot more	Not saving
	%	%	%

401(k)/Retirement Savings Plans	69	56	26
Work Pension	39	35	10
Stocks/Mutual Funds	30	20	14
Social Security	22	32	40
Savings Account/CD	17	12	22
Inheritance	9	7	1
Annuities/Insurance	6	10	3
Part-time Work	5	14	21
Rent/Royalties	4	5	6

Survey Methods

The results reported here are based on telephone interviews with a randomly selected national sample of 1,025 adults, 18 years and older, conducted April 6-8, 2001. For results based on this sample, one can say with 95 percent confidence that the maximum error attributable to sampling and other random effects is plus or minus 3 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

Which of the following statements best describes your household’s retirement situation -- [ROTATED: you are saving enough for retirement, you are saving some for retirement, but should be saving a little more, you are saving some for retirement, but should be saving a lot more, you have some savings for retirement but are not currently adding to it, (or) you have no savings for retirement]?

BASED ON -- 730 -- RESPONDENT OR SPOUSE/PARTNER EMPLOYED; ±4 PCT. PTS.

Saving enough for retirement

Should be saving a little more

Should be saving a lot more

Some savings but not adding to it

No savings for retirement

No
opinion

2001 Apr 6-8

21%

33

21

8

16

1

When you retire, how much do you expect to rely on each of the following sources of money -- will it be a major source of income, a minor source of income, or not a source at all? How about -- [READ A-I IN ORDER]?

BASED ON -- 730 -- RESPONDENT OR SPOUSE/PARTNER EMPLOYED; ±4 PCT. PTS.

A. Social Security

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

28%

57

14

1

B. A 401(k), IRA, Keogh or other retirement savings account

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

58%

26

15

1

C. Individual stock or stock mutual fund investments

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

24%

39

36

1

D. Money from an inheritance

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

7%

29

63

1

E. Other savings such as a regular savings account or CDs

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

16%

51

32

1

F. A work-sponsored pension plan

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

34%

28

37

1

G. Rent and royalties

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

5%

22

72

1

H. Annuities or insurance plans

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

7%

34

58

1

I. Part-time work

Major source

Minor source

Not a source

No opinion

2001 Apr 6-8

10%

52

36

2

RETIREMENT INCOME SOURCE SUMMARY TABLE

2001 Apr 6-8
(sorted by "major source")

Major source

Minor source

Not a source

%

%

%

A 401(k), IRA, Keogh or other retirement savings account

58

26

15

A work-sponsored pension plan

34

28

37

Social Security

28

57

14

Individual stock or stock mutual fund investments

24

39

36

Other savings such as a regular savings account or CDs

16

51

32

Part-time work

10

52

36

Annuities or insurance plans

7

34

58

Money from an inheritance

7

29

63

Rent and royalties

5

22

72