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Perception vs. reality: despite good intentions, Baby Boomers' visions of retirement lifestyle on collision course with their financial preparedness.

BOSTON--(BUSINESS WIRE)--April 8, 1997--

Major New Scudder Survey Identifies Boomers' Attitudinal

Obstacles to Adequate Financial Preparation

Scudder, Stevens & Clark, Inc. released today the results of a major new survey of the nation's Baby Boomers See generation X.  that reveal expectations of a retirement experience that diverges significantly from their parents' view of the later years of life. Boomers anticipate they will switch from their primary careers earlier than their parents' generation did, or not retire at all. Boomers plan to live more actively in retirement than their parents and view the period in terms of opportunity, not as a "state of exile." The survey results also point to a collective consciousness among Baby Boomers that financial planning Financial planning

Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against
 is essential for this period of life, while underscoring a failure to actually be preparing adequately, as well as a surprising lack of financial literacy Financial literacy is the ability of individuals to make appropriate decisions in managing their personal finances. Raising levels of financial literacy is now a focus of government programmes in countries including[1] Australia, Japan, the United States and the UK. .

The Scudder survey is the first part of a three-year research effort by Scudder to gain a deeper understanding of the Baby Boom generation. It was conducted by the National Center for Women and Retirement Research (NCWRR) at Southampton College of Long Island University, under the direction of Dr. Christopher Dr. John R. Christopher, known popularly as "Dr. Christopher" was one of very few nationally prominent doctors of herbal medicine of the middle third of the 20th century, a "dark ages" of herbalism and was responsible for the herbal renaissance of the 1960s.  L. Hayes, executive director of NCWRR. The survey polled 1,140 Baby Boomers with household incomes of at least $30,000. Unlike previous research of this group, the Scudder survey explores not only Baby Boomers' current financial habits and attitudes about retirement, but also examines factors that have shaped these behaviors. These factors include environment, education, lifestyle, work experience and their overall outlook on life.

"Data suggests that there are significant attitudes, habits or behaviors at various life stages that influence saving and retirement preparation," said Dr. Hayes. "This is an important finding, because in the past we have tended to ignore that impact of early development in understanding the reasons why some Boomers are less prepared than others."

The Good News: The Importance of Financial Planning is Beginning to Sink in for Boomers, Who are Envisioning Active Older Years Full of Work or Play -- "Not My Parent's Retirement"

Baby Boomers' parents were a generation with few expectations about retirement, unlike their children, who fully expect to enjoy an active, healthy post-current career period. "Just as Baby Boomers spirited a vision different from their parents' of what the world should be, they are now forging a new view of retirement," said NCWRR's Dr. Hayes, who is also Professor of Psychology at Southampton College.

According to according to
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

 the survey nearly half (48%) of Baby Boomers believe they will retire before 65 and an equal percentage anticipate some type of paid employment in retirement. In addition, 13% said they're planning to stay with their current careers past 65, and 20% aren't planning to retire at all. Only 18% said they'd retire at the traditional age of 65.

"One of the challenges of the Baby Boom Generation involves re-constructing a work identity that provides income later in life. Although many Boomers want to retire before age 65, that does not mean they will truly disengage dis·en·gage  
v. dis·en·gaged, dis·en·gag·ing, dis·en·gag·es
1. To release from something that holds fast, connects, or entangles. See Synonyms at extricate.

 from work. They will, perhaps, take on paid activities that better reflect both their personal values and what they truly want to do," Dr. Hayes added.

Whether at work or play, Boomers are planning active retirements. Thirty-eight percent of Boomers plan to travel in retirement, 27% to pursue hobbies, 24% to spend time with family or home-related activities, and 10% look forward to volunteer work or education. Indeed, almost all Boomers (98%) describe retirement as offering new opportunities, leisure or freedom; and nearly half (49%) expressed little concern about growing old, and 12% said they looked forward to it.

Even with paid post-retirement pursuits, Baby Boomers acknowledge -- albeit tentatively -- that expectations for their later years require financial planning today, according to Scudder Managing Director Dudley H. Ladd. Eighty percent of Boomers say they have begun to make plans for a financially secure retirement, 79% consider retirement their primary investment goal, 73% say they "usually" save for retirement, 70% contribute to a 401 (K) or 403 (B) plan, and 63% have established another savings or investment plan.

"Baby Boomers have an opportunity to rewrite re·write  
v. re·wrote , re·writ·ten , re·writ·ing, re·writes
1. To write again, especially in a different or improved form; revise.

 the book on retirement," said Mr. Ladd of Scudder. "It's encouraging that they have given this issue a great degree of thought and that they view the experience so positively. On the flip side Flip side

In the context of general equities, opposite side to a proposition or position (buy, if sell is the proposition and vice versa).
, however, they risk being on a collision course collision course
A course, as of moving objects or opposing philosophies, that will end in a collision or conflict if left unchanged: two planes on a collision course; dissidents on a collision course with the regime.
 with reality unless they take further steps to prepare for their retirement years. While they are not yet in crisis mode, the time to act is now."

The Bad News: Reality Check Essential Before Boomers Can Achieve Retirement Lifestyle Goals

"The major question facing this generation is a simple economic one: Are they going to be able to afford the retirement they envision and also meet their responsibilities as a parent and as a child with dependent parents? Based on the findings of the Scudder study, the answer -- despite Boomers' overall optimism -- is a resounding re·sound  
v. re·sound·ed, re·sound·ing, re·sounds

1. To be filled with sound; reverberate: The schoolyard resounded with the laughter of children.

 `no,'" commented Dr. Hayes.

The statistics paint a troubling picture: 58% of Baby Boomers have no idea how much savings they will need for retirement, 46% tap savings and investments now to meet expenses, one-fifth have less than $10,000 and two-thirds less than $50,000 in their 401(k) plans, and only 21% have established a nest egg Nest Egg

A special sum of money saved or invested for one specific future purpose.

Examples of the purposes for which nest eggs are usually intended include retirement, education, and even entertainment (vacations and cruises).
 goal. Seventy percent of Boomers say they are worried about their financial futures financial futures

Obligations to buy or sell particular positions in financial instruments. The features of financial futures are identical to those of any futures contract except that the asset for delivery is of a financial nature.
, and three-quarters regret not having begun to plan for retirement sooner. Interestingly, 40% of Boomers cite lack of knowledge as the main reason their retirement planning Retirement financial planning refers to a collection of systems, methods, and processes which, in their aggregate, support a family unit's (client's) desire to achieve a state of financial independence, such that the need to be gainfully employed is optional.  lags, 44% consider themselves investing "novices," and 54% say they feel "stupid" asking financial questions.

"Compounding the problem is that Boomers cannot necessarily count on their parents' safety net of federal entitlement and generous pensions, nor can they expect to benefit from participating in the ground floor of a real estate boom or see the same kind of gains in real income as their parents," said Linda C. Coughlin, Chairman of the AARP AARP, a nonprofit, nonpartisan national organization dedicated to "enriching the experience of aging"; membership is open to people age 50 or older. Founded in 1958 by Ethel Percy Andrus as American Association of Retired Persons, AARP now has over 30 million  Investment Program from Scudder, a family of mutual funds designed for people age fifty and older. "In addition, the significant increase in life expectancy Life Expectancy

1. The age until which a person is expected to live.

2. The remaining number of years an individual is expected to live, based on IRS issued life expectancy tables.
 represents five or ten more years in retirement for Baby Boomers than their 1940s counterparts. This makes adequate planning even more essential."

"The data suggests a serious discrepancy between Baby Boomers' aspirations aspirations nplaspiraciones fpl (= ambition); ambición f

aspirations npl (= hopes, ambition) → aspirations fpl 
 for an action-packed retirement experience and the reality of the lifestyle they will actually be able to afford given their present level of knowledge and planning," said Dr. Hayes. "However, it also implies that Boomers' long-observed denial regarding planning is beginning to diminish as they begin to acknowledge that the time has come to put their money where their mouths are, so to speak."

Defining the Disconnect disconnect - SCSI reconnect : Survey Identifies Attitudinal Obstacles to Financial Planning, Presenting "Golden Key" to Boomers and Financial Providers Alike

Despite and average annual income of $56,000 among survey respondents, 73% said lack of money was the main obstacle to adequately planning for retirement. (See Table 1 below.) With this income, regular investing should not be very difficult, but Dr. Hayes said, "When faced with media and financial providers telling them that they will need a million dollars to retire and hundreds of thousands of dollars for their children's education, many Boomers become overwhelmed o·ver·whelm  
tr.v. o·ver·whelmed, o·ver·whelm·ing, o·ver·whelms
1. To surge over and submerge; engulf: waves overwhelming the rocky shoreline.

 and conclude, `Why bother?' this is learned financial helplessness. The financial industry still doesn't appreciate that most Boomers don't have the resources of the vantage point to respond to the industry's way of calling for wealth accumulation -- particularly when such daunting daunt  
tr.v. daunt·ed, daunt·ing, daunts
To abate the courage of; discourage. See Synonyms at dismay.

[Middle English daunten, from Old French danter, from Latin
 numbers are used. Baby Boomers do desire to invest, but they cannot respond to the current options."

Table 1: Baby Boomers' Perceived Obstacles to Adequate Retirement Planning

-- Not enough money 73% -- Do not know needs 50% -- Lack of knowledge 38% -- Lack of time 18% -- Lack of financial advisor/

broker 12%

The survey results provide a set of lessons -- the "golden key" -- with which financial planners Financial Planner

A qualified investment professional who assists individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve these goals.
 and the media can reach Baby Boomers: "They are used to controlling their lives, and because `the future' and `wealth accumulation' are areas they feel they cannot control, so Boomers often turn their backs on these topics," said Dr. Hayes. (See Table 2 below.) "But this generation is confident about being able to control the present. Thus, financial providers and mutual fund companies must show how careful investing addresses present-oriented needs. That way, preparing financially for retirement will be a priority on a par with current financial obligations -- taxes, health care, college costs and debt service."

Table 2: Baby Boomers' Attitudes Toward Retirement Planning

-- I usually save for retirement 73% -- I have not spent enough time

planning for retirement 64% -- I have no idea how much money I will

need for my retirement 58% -- I'm confident about my retirement

finances 55% -- I have plenty of time to save for

retirement 42% -- I have no time to manage money for my

retirement 27% -- I'm too young to think about saving

for retirement 3%

Compounding Boomers' learned financial helplessness is the options overload See information overload and overloading.  resulting from the great number of investment options available and the conflicting advice coming from financial providers. "This overload of options flies in the face of the generational values of economic self-reliance and individualism individualism

Political and social philosophy that emphasizes individual freedom. Modern individualism emerged in Britain with the ideas of Adam Smith and Jeremy Bentham, and the concept was described by Alexis de Tocqueville as fundamental to the American temper.
. We found that fully 68% of Baby Boomers want to research their investment choices on their own, compared to only 25% who use a financial planner, and that 61% personally assume responsibility for making financial decisions and recording financial transactions. Too many options and too much advice are making self-directed decision-making seem forbidding and complicated," Dr. Hayes said. In the survey, Boomers called for simplicity in investment products and guidance: 88% said they would welcome a single investment vehicle that allocates assets among several categories, and that offers ongoing guidance.

Said Mr. Ladd of Scudder, "The results of the survey amount to a call to action for our industry. With nearly two million shareholder accounts and nearly $37 million in mutual fund assets Fund assets

The total value of a portfolio's securities, cash, and other holdings, minus any outstanding debts.
 under management, Scudder is committed to continuing it research into the attitudes and expectations of Baby Boomers so we can fully understand how we can help them meet long-term financial needs in the context of present-day concerns. We have already seen that Boomers want help developing effective investing strategies that meet short-term goals while also planning for retirement."

Founded in 1919, Scudder Stevens & Clark, Inc. is one of the country's oldest and largest global investment management firms. Scudder introduced America's no-load mutual fund No-load mutual fund

An open-end investment company whose shares are sold without a sales charge. There can be other distribution charges, however, such as Article 12B-1 fees. A true no-load fund has neither a sales charge nor a distribution fee.
 in 1928 in the nation's first international fund in 1953. Scudder currently manages nearly $37 billion in two families of open-end funds Open-End Fund

A mutual fund that continues to sell shares to investors, and will buy back shares when investors wish to sell.

Open-end funds have no limit to the number of shares they can issue. The majority of mutual funds are open end.
, the Scudder Funds, AARP Investment Program from Scudder.

The National Center for Women and Retirement Research, a non-profit organization A non-profit organization (abbreviated "NPO", also "non-profit" or "not-for-profit") is a legally constituted organization whose primary objective is to support or to actively engage in activities of public or private interest without any commercial or monetary profit purposes.  founded in 1988, focuses on the pre-retirement planning needs of mid-life women. It is based at Southampton College, Long Island University, a multi-campus, doctoral-degree-granting institution that is among the 10 largest private universities in the U.S. in terms of enrollment. -0-

For more complete information on any Scudder Fund, including information relating to relating to relate prepconcernant

relating to relate prepbezüglich +gen, mit Bezug auf +acc 
 management fees and expenses, please call Scudder Investor Services, Inc., Distributor at 1-800-225-2470 or write for a fund prospectus. Investors should read it carefully before investing or sending any money.

CONTACT: Southampton College

Jane Finalborgo, 516/287-8313


Scudder, Stevens & Clark

Meg Pier, 617/295-2175

Ed Canaday, 212/326-6266
COPYRIGHT 1997 Business Wire
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Date:Apr 7, 1997
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