Americans Choose Middle Lane of Retirement Highway
Allstate's retirement survey finds that just keeping up with peers isn't enough if others are saving too slowly
Most Americans see themselves just cruising into retirement with their peers, regardless what kind of savings and spending habits they have in place now, according to Allstate's 2006 "Retirement Reality Check" survey.
The sixth-annual survey, which measures Americans' attitudes toward and savings for retirement, showed that, regardless of age, gender, education, income or geography, Americans generally consider themselves only "somewhat" prepared financially for retirement, and thus they have some fears about the years ahead. But when specifically asked, "If saving for retirement were like driving on the highway, where would you be?" almost half (48 percent) said they are "in the middle lane, keeping up." Other responses were:
- In the fast lane, passing others (20 percent of total respondents)
- On the on ramp, still getting started (14 percent)
- In the slow lane, watching others go by (13 percent)
- Lost and looking for a map (5 percent)
However, the Allstate survey did show clear links between the "lane" respondents say they are in, and specific actions they have taken-or not taken-to prepare financially and emotionally for retirement.
Life in the fast lane
For example, most people who describe their retirement savings as "in the fast lane" are saving aggressively, while those who are "lost" admit they aren't saving much at all. "Fast laners" are more aggressive than any other group in making sure they and their spouses or partners have adequate life insurance and in establishing an emergency fund that could support their families for at least three months. The only step that a majority of "losts" have taken in making sure they have adequate auto and homeowners insurance.
Among the "middle lane" respondents, 88 percent said they have secured adequate homeowners and auto insurance, and 55 percent said they've saved enough money to support their families for at least three months. And 69 percent said they've made sure that they and their spouse or partner have enough life insurance.
In addition, 57 percent of the "fast-lane" respondents say that in terms of their retirement readiness they are "very prepared," and another 38 percent say they are "somewhat prepared." Among those in the "middle lane," 78 percent say they're "somewhat prepared," and only 14 percent say they are "very prepared" financially for retirement.
Overall, 21 percent of respondents say they are "very prepared" and 59 percent say they are "somewhat prepared."
"The good news is that most people do have time to find a map and get on the right road," says Casey Sylla, president, Allstate Financial, a subsidiary of Allstate Corp. "As with driving, doing nothing won't get you to your destination. And to continue with that analogy, people should work to move over one lane at a time rather than thinking they need a plan to take them instantly from the on ramp to the fast lane."
On a road to nowhere
The "lost" respondents are a significant departure from the general optimism, with 1 percent calling themselves "very prepared" and 26 percent saying they are only "somewhat prepared." A sobering 57 percent of the "losts" say they are "very unprepared" financially, and another 17 percent say they are "somewhat unprepared."
At the same time, more than 70 percent of the "lost" drivers say they expect retirement to be fulfilling, fun and relaxing. More than 90 percent of respondents in the "slow lane," "middle lane" and "fast lane" say that, as well as more than 80 percent of those on the "on ramp."
Despite overall optimism, the Allstate survey did identify some attitudinal differences among those on the road to retirement. For example, "lost" respondents were significantly more likely to anticipate a retirement that is boring (39 percent), depressing (34 percent) or lonely (26 percent). All other groups were significantly less likely to describe retirement in this way.
"Fast-lane" respondents were more likely to call themselves disciplined (97 percent) compared with the overall (93 percent), and compared with the "lost" (81 percent) and "on-ramp" (91 percent) respondents. Respondents in the "middle lane," closely mirrored the overall figures, with 94 percent saying they are disciplined.
Differences among the various "lanes" were even more pronounced when questions concerned financial issues. Not surprisingly, the "losts" were most nervous, with 83 percent saying retirement will be "uncertain," and 87 percent saying it will be "financially difficult." A majority of "on-ramp" and "slow-lane" respondents said those things as well, but not to the extent of the "losts."
By comparison, 25 percent of the "fast laners" and 43 percent in the "middle lane" said retirement will be uncertain; 15 percent in the "fast lane" and 31 percent in the "middle lane" said retirement will be financially difficult.
The "losts" are clear on why they are so worried; 48 percent admit they are not saving at all for retirement, and another 38 percent say they're saving some money, but not seriously. That compares with the majority of "middle-lane" and "fast-lane" respondents, who say they are saving seriously for retirement. The majority of "on-ramp" and "slow-lane" respondents said they are saving, but not seriously.
"The link between ‘being lost' and not saving is so clear it should be a wake-up call to people who feel concerned about their futures," said Mathew Greenwald, Ph.D., president of Mathew Greenwald and Associates Inc., the Washington, D.C. firm that conducted the survey for Allstate. "There's a reason for that concern-not having enough money could have severe consequences."
Regardless of which lane they believe they're in, a majority of all respondents worry about affording health care after retirement. "On-ramp," "slow-lane" and "lost" respondents also are concerned about not having enough money for the extras that make retirement worthwhile. These two groups also worry most about having to ask children or friends for money.
Not surprisingly, a whopping 85 percent of "losts" say they expect they'll have to work after retirement, with 52 percent saying it's "very likely" they'll do so. That compares with 68 percent overall who say they may work after retirement, and 25 percent saying that scenario is "very likely." Among the fast-lane respondents, 56 percent said they may work, but only 19 percent said it's "very likely." And among those in the "middle lane," 22 percent say it's very likely they'll work after retirement, while 47 percent say it's somewhat likely.
When they read stories in the media about Americans not saving enough for retirement, those on the "on ramp," "slow lane" and "middle lane" say they think about saving more. And 39 percent of those who are "lost" say they think about saving more-but the same percentage admit they think they'll deal with it another time. "Fast laners" say those stories don't apply to them.
Savers on the "on ramp" and in the "slow lane" said that learning more about investments would be the most effective way to encourage them to save for retirement (38 percent and 34 percent respectively). But those in the "middle lane" and "fast lane" said having a payroll-deduction system at work would be the most effective. Interestingly, those who are "lost" most strongly supported a workplace payroll-deduction plan-44 percent.
"It is frustrating to see people consistently admit they don't save enough, but at the same time say they're optimistic about the future," says Sylla. "The key is to find a way of thinking that drives people to act-in this case, to save more for their retirement. Perhaps using this comparison will help Americans think differently and lose the ‘blind spot' when it comes to preparing for retirement."
For more details regarding the Allstate "Retirement Reality Check" survey on highway lanes, download the mini executive summary (PDF).
Allstate created the sixth-annual Allstate "Retirement Reality Check" survey in conjunction with Mathew Greenwald & Associates. Using a random digit dialing methodology, Greenwald & Associates polled 1,603 people born between 1946 and 1978, with household incomes of $35,000 or more. Retirees were accepted with incomes of at least $20,000. The margin of error (at the 95 percent confidence level) for the total number of respondents in this study is ±2.5 percent, ±3.8 percent for information specific to Gen Xers, ±4.5 percent for Baby Boomers, and ±5.0 for Silent Generation.
Now celebrating the 75th anniversary of the founding of Allstate Insurance Company, The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held personal lines insurer. Widely known through the "You're In Good Hands With Allstate®" slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 14,100 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at allstate.com and 1-800 Allstate®. EncompassSM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. The Allstate Financial Group provides life insurance, supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.
FOR MORE INFORMATION:
Jennifer Topolewski, Media Relations, (847) 402-5600