Many Baby Boomers Concerned About Retirement Savings, Taking Less Action Study Shows
Too Much Debt — Not Enough Savings is causing “extreme stress for many boomers”
St. Louis (Vocus) March 13, 2008 — Sixty-one percent of baby boomers say they are spending less in the current economy, but the money they are saving is not going toward retirement, according to the Scottrade/BetterInvesting 2008 American Retirement Study. The survey was sponsored by Scottrade, the leading online investment firm with 340 branches in the U.S., and BetterInvesting, a leading provider of investment education, and a pioneer of the modern-day investment club movement.
The Scottrade/BetterInvesting study shows that only 40 percent of Americans between 45 and 64 years of age are saving more to alleviate their financial concerns, yet more than half of those polled do not believe they have saved enough for retirement. Even more alarming, 38 percent of baby boomers are not even sure how much they should have saved or need to save and nearly a quarter (24 percent) have less than $25,000 saved so far.
“The survey shows a trend of extreme stress for many boomers, especially in the current uncertain economy,” said Chris X. Moloney, Scottrade’s Chief Marketing Officer. “Everyone knows that they should be putting money away for retirement, but according to our survey, 57 percent of all Americans plan to put away less than 5 percent of their income in 2008, and 26 percent don’t expect to save anything.”
Even if confronted with a small wind-fall of $5,000, only 15 percent would deposit the money in an IRA or other retirement account, and almost half (48 percent) would pay down debt, while 32 percent would put the money in a savings account. Just three percent would go on a shopping spree. “People think more about their finances when the economy is shaky, but it appears most people are not saving like they know they should be for their future,” Moloney added. “What kind of future they are going to have is pretty dependent on a long-term savings strategy in most cases.”
The Fog of Retirement
In 2007, 83 percent of Americans had begun saving for retirement, but in 2008 that number has dropped to 78 percent. Less than a third of Americans say that they have thought about retirement more than a few times in the last year.
Yet 51 percent of Americans remain very or extremely concerned about retirement. Other top financial concerns include managing day-to-day expenses (46 percent) and being able to pay for unexpected major expenses (47 percent).
“It’s hard to think about retirement when day-to-day expenses become a priority,” said Bonnie Reyes, President of BetterInvesting. “But getting out of the habit of putting even a small amount into an IRA, or other type of retirement account, is like not going to the gym for a few weeks; it’s hard to start up again.”
The study shows Americans are still concerned about their finances in 2008, as compared with this time last year, but they are doing less to reduce their financial concerns. “Generally, the study shows Americans are more focused on short-term objectives. Yet, they know they need to be saving and investing in their IRAs,” Moloney said.
Could’ve, Would’ve, Should’ve
One of the most telling parts of the survey may be asking Americans over 55 how they feel about their retirement planning. Fifty-one percent say they wish they had started at a younger age and 40 percent say they wish they would have saved more. While hindsight is always clear, the Scottrade/BetterInvesting study shows that more than 43 percent said they could have saved more than they did.
“The power of compounding has been lost on each and every dollar that ‘could’ve’ been invested. The impact of that is significant. Time, disciplined investing and compounding are a retiree’s best friends,” Moloney said.
“Economic cycles — good or bad — are no strangers to Americans over 55 years of age, and are a fact of life for any long-term investment strategy,” Reyes said. “Contributing only during the good times, and sitting on the sidelines during the bad, will have a significant negative impact on retirement strategies. When you’re investing for retirement, especially when you’re young, just being in the game can be more important than the score.”
About The Scottrade/BetterInvesting 2008 American Retirement Study
The 2008 American Retirement Study by Scottrade and BetterInvesting polled 1,000 Americans 18 years of age or older using Synovate’s national online research tool, eNation®, in early January 2008 to gauge Americans’ attitudes and behavioral information about retirement and retirement planning. The sample was balanced to be representative of the general population based upon region, gender, age and household income data from the U.S. Census Bureau. The margin of error was +/- 3 percent. The survey asked questions about a wide range of retirement topics, such as the respondents’ feelings toward Social Security and the amount of money people feel they need for retirement. More data from the survey will be made available in the coming weeks.