Retirement Not the Golden Age for All

Survey Reveals That Lifestyles and Finances Fall Short For Many Seniors Experts
Say Reality of Life in Retirement Offers Lessons for Current Workers

While senior citizens are often portrayed as well-to-do folks playing on golf courses or living in luxury retirement centers, many find retirement to be far from a picture-perfect dream. According to a survey released today, most seniors associate retirement with positive things, such as freedom and time for traveling and family, but nearly one-in-five think of retirement as a time of depression, poor health or finances, and a feeling of uselessness.

The survey found that 24 percent of retirees say they are not confident that they will have enough money to live comfortably throughout their retirement years. More than one-in-five say their lifestyles are worse than when they first retired (with nearly one-in-ten calling them "a lot worse") and a similar share expect their standards of living to worsen soon. Those who say their lifestyle has gotten worse, cite health and financial problems as the major reasons.

The findings are part of an extensive, sixth annual survey of American attitudes and behaviors concerning retirement savings that was co-organized by Mathew Greenwald & Associates, the Employee Benefit Research Institute (EBRI), and the American Savings Education Council (ASEC). Unlike most surveys dealing with retirement issues, the poll also did extensive research concerning retired Americans. It debunks many myths about seniors -- from how well off they are to how well they prepared for their retirements.

"Americans are constantly bombarded by words and images -- from advertising and the entertainment and news media -- that create myths about the lives of retirees," said Dallas Salisbury, the President of EBRI. "Painting an idealistic and unrealistic picture of the lives of senior citizens may encourage a false sense of confidence among current workers. And it influences the way people make personal decisions about retirement savings and view public policy questions."

"If today's retirees are worried about their standard of living, it should serve as a wake up call and a reality check for the millions of Americans who need to prepare now for their financial security," Salisbury said. "It offers important lessons and insights that should help Americans better understand, and prepare for, the future."

Low Confidence, High Uncertainty

Only 30 percent of retirees say they are "very confident" that they will have enough money to live comfortably in retirement. Concern about the future is due to fears about medical expenses, the way they prepared for retirement, and the future of Social Security and Medicare. For example, only a third (34 percent) are very confident that they will have enough money to take care of medical expenses. And only seven percent are very confident that Social Security and Medicare will continue to pay the same benefits as they do now.

Expectations about the future of these two key programs are critical, because 38 percent say Social Security is their most important source of income and an additional 26 percent say it's a major source.

Nearly half of all retirees also report that they retired earlier than planned. But most did so for negative reasons that they couldn't control. Health problems, company layoffs, or family reasons (such as a spousal health problem or retirement) are the most commonly cited reasons for early retirement.

Saving Patterns, Sources of Retirement Income

Another often-repeated myth is that earlier generations were frugal savers and good financial planners, while Baby Boomers fail to prepare for the future. But more than four-in-ten retired Americans report that they didn't regularly save money for their retirement when they were working. Three-of-four retirees never even tried to figure out how much money they would need before they retired.

Surprisingly, today's non-retired Americans have a better track record. More are saving for retirement (64 percent compared to 56 percent of retirees), and more have taken the important step of estimating what they'll need in retirement (32 percent compared to 24 percent of retirees).

Given these findings, it's not surprising that retired and non-retired Americans view retirement income differently. By wide margins, far more non-retired people than retirees say savings will be the "most important" or a "major" source of retirement income. (61 percent of the non-retired say money saved through work plans will be the most important or a major source of income, compared to only 29 percent of retirees. Likewise, 56 percent of the non-retired, but only 36 percent of the retired say personal savings will be the most important or a major source or retirement income.) On the other hand, 64 percent of retirees say Social Security is the most important or a major source of income, while only 26 percent of non-retired Americans say it will be.

"Some of the differences in experiences and expectations about income should be expected, because of the growth of 401(k)s and the relative decline in traditional defined-benefit plans," said Greenwald. "The statistics also underscore that there are more savings opportunities and vehicles today. The real question is whether enough younger people are saving enough based on a calculated financial plan."

Good News: Confidence Drops Among Workers

Nearly two-thirds of working Americans express some degree of confidence that they will have enough money to live comfortably in retirement. But confidence has dropped sharply in the last year -- from 74 percent to 62 percent. Today, only 19 percent of non-retired Americans say they are "very confident" about their ability to live comfortably in retirement.

"Fewer than one-in-five people are really confident about their futures," Greenwald said. "From these responses, we know that everyone else either has little or no confidence or only holds out hope if everything else goes right for them, which they know is a tenuous situation."

At the same time, only one-in-three American workers feel they have "a great deal of control" over having a financially secure retirement. A surprising two-thirds of current workers predict they'll work after they "retire," and nearly 40 percent of those say they think they'll need to for financial reasons, to pay the bills and make ends meet.

"The sharp drop in confidence levels may actually be good news," said Salisbury. "It shows that people are being more realistic about their prospects and may be coming to terms with what they need to do to secure their own futures. Lower confidence levels are more in line with other reported behaviors, including the significant numbers of people who aren't saving. If their uncertainties about their economic futures can spur them save more and plan better, that's good for them and for all of us."

According to the survey, only 62 percent report saving regularly and more than one-third have saved nothing for retirement. Only a third have ever tried to figure out how much money they'll need to be secure.

Interestingly, a staggering 86 percent of the non-retired say Americans are not saving enough money for retirement. The survey analysts, however, say this may be a more realistic indicator of their own view that they need to save more. Undoubtedly, it is part of the pervasive perception that hardly anyone is saving enough.

"While the facts show that many people are doing the right thing and saving, clearly many Americans need to do more," said Don Blandin, the Executive Director of ASEC. "The drop in confidence may be a sign that public education efforts are beginning to pay off. There seems to be a better understanding that Americans need to take personal responsibility for securing their financial futures," he said. "The public may be beginning to understand that they aren't planning or doing enough to prepare for retirement."

"Our challenge now is to help people move from anxiety to action," Blandin said. "We hope that if they look beyond the myths and have a better understanding of the realities facing current retirees, it will spur them on."

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The sixth annual Retirement Confidence Survey was conducted by Mathew Greenwald & Associates through 20-minute phone interviews with 1,000 adults nationwide during July 1996. It was co-organized by the Employee Benefit Research Institute (EBRI), a nonprofit and nonpartisan public policy research organization, and the American Savings Education Council (ASEC), a public- and private-sector partnership of more than 170 organizations dedicated to raising public awareness of what is needed to ensure long-term personal financial independence.

The 1996 survey was funded by grants from The Aid Association for Lutherans, Alexander and Alexander Consulting Group, American Academy of Actuaries, American Association of Retired Persons (AARP), American Council of Life Insurance, AT & T, BZW Barclays Global Investors, Citicorp Global Investment Products, Fidelity Institutional Retirement Services Co., Investment Company Institute, John Hancock Mutual Life Insurance, MassMutual Life Insurance Co., Paine Webber Retirement Plans, The Principal Financial Group, Prudential Insurance Company of America, State Street Bank & Trust Co., TIAA-CREF, UNUM Life Insurance Co., and Zurich Kemper Investments, Inc.