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 NEW YORK, July 13 /PRNewswire/ -- As things stand, most Americans will only have between one-third and one-half of the annual income that they will need to comfortably retire, according to a major research study released here today. But the study also found that use of retirement savings plans, increased savings rates and greater use of longer-term investments can greatly narrow or even eliminate the shortfall in most cases.
 The research -- conducted jointly by the consulting firms of Arthur D. Little, Inc. and The WEFA Group -- was commissioned by Oppenheimer Management Corporation (OMC), one of the nation's leading mutual fund companies. It was designed to quantify potential deficiencies in retirement income and to illustrate what individuals can do to maximize their retirement savings.
 Based on the study, it is estimated that 76,000,000 U.S. households -- nearly 8 out of every 10 -- will have less than one-half the annual income they will need to comfortably retire.
 "Most Americans today did not live through the Great Depression, but at this rate, that's exactly what most people's retirements will be like," said Jon S. Fossel, OMC chairman and chief executive officer. "Relatively few Americans will be able to maintain their pre-retirement lifestyle once they stop working, and many will find themselves struggling simply to make ends meet."
 "This isn't just a financial planning issue; it's a public policy issue," Fossel said. "Left unaddressed, retirement funding has the potential to dominate the political and economic agenda for generations to come."
 For purposes of the study, Arthur D. Little, Inc. and The WEFA Group developed a computer model that calculates the annual income Americans currently aged 20 to 64 can expect to have at retirement versus what they will need to retire comfortably (which Arthur D. Little/WEFA define as 70 percent of pre-retirement income)(A). The model uses age-group demographics, income and asset accumulation data, historical savings and investment performance rates and WEFA's long-term economic forecast. Results are reported in five-year age groups from 20-24 to 60-64 and are broken out by gender, household status, income level and pension coverage.
 The model also looked at the effects that various savings and investment scenarios -- including increased savings rates, greater stock market exposure and use of home equity -- may have on the retirement income gap. It is the first all-age group study to quantify retirement savings gaps and to demonstrate the effects of various savings and investment approaches.
 "The retirement crisis is typically seen as a Baby Boomer issue," Fossel said. "But that notion is both untrue and dangerous. As our study demonstrates, almost all Americans are at risk -- from those about to retire to the recent college graduate. It's even an issue for the fortunate few who believe they have adequately prepared for retirement, as they may well be asked to pay for the millions of Americans who will come up short."
 Retirement Savings Plans Crucial:
 According to the study, individuals who are not covered by company pension plans or who do not participate in an employer-sponsored retirement savings plan -- such as a 401(k) or 403(b) plan, a SEP-IRA or pension or profit-sharing plan -- generally will have only one-quarter of the income they will need to retire.
 For Americans without employer-sponsored retirement plan coverage (estimated by The WEFA Group to be 47 percent of all U.S. households), comfort ratios -- the percentage of individuals' retirement needs that they will be able to fund -- ranged from a low of 22 percent for Americans aged 20 to 24 to a high of 30 percent for those 60 to 64.
 Comfort ratios for Americans with both defined benefit and defined contribution plan coverage, while much higher, still only ranged between 55 and 65 percent.
 "Participation in a tax-advantaged retirement savings plan is the sine qua non of retirement planning," said the Arthur D. Little, Inc. report on the study, entitled America's Retirement Crisis: The Search for Solutions. "An individual who ignores these vehicles has almost no chance to retire comfortably."
 "While there is growing public acknowledgment that Social Security will play an increasingly smaller role in funding one's retirement," the report said, "most people have not fully grasped the importance of full and informed participation in an employer-sponsored retirement plan."
 Said Fossel, "The responsibility for retirement planning has shifted squarely from government and corporate America to the individual, who, unfortunately, has generally failed to recognize this fact."
 It has been estimated that as many as 25 percent of all eligible employees make no contributions to their company-sponsored retirement plans. But even those who do participate frequently either dip into those savings or liquidate them when they change jobs, paying an IRS penalty in the process.
 "Retirement plans should be next to untouchable," Fossel said. "Borrowing against them mortgages a person's future well-being; it should be done only as a last resort."
 But participation in a retirement plan does not ensure a comfortable retirement, as most individuals invest their plan assets much too conservatively. For example, according to the Employee Benefit Research Institute, equities (other than company stock) account for less than 30 percent of defined contribution plan assets.
 "Participation in a retirement plan is unlikely to provide a secure retirement if one's portfolio is misallocated," said Robert C. Doll, Jr., OMC executive vice president and director of equity investments. "Individuals have historically avoided stocks and to a lesser extent bonds because of the perception that they are too 'risky.' The irony is that the greatest risk to a secure retirement may be reliance on low- return, fixed-income investments to fund it."
 Changing Demographics, Shifting Responsibilities:
 One of the reasons the retirement crisis looms so large is changing demographics, the study points out. Americans will live longer in retirement than they have before and longer than they probably anticipate. According to the Social Security Administration, a 40-year- old male and female who retire at 65 can currently expect to live another 16.1 and 20.1 years, respectively, after they retire.
 Not only will people live longer, but they will be more active in retirement. That means they are likely to spend more money in retirement than previous generations -- some of it on the medical attention required to maintain their active lifestyles.
 Moreover, as a result of this increase in lifespans, families could have up to four generations alive at the same time. This could mean that in addition to securing their own retirement, individuals will have to think of providing, at least in part, for parents, children and grandchildren as well.
 At the same time, the aging population -- the Census Bureau projects that by 2010 the median age of the general population will be 37.4, up from 33.7 presently -- will place increasing strain on the retirement support infrastructure, affecting, among other things, health care, Social Security and corporate retirement benefits.
 "Americans can't afford to wait to plan their retirement nor can they wait for government to step in and fix it for them, because it's not going to happen," Fossel said. "Government entitlement programs -- from Social Security to Medicaid -- are being cut left and right, and the pressure to do so will only grow greater. It's time for Americans to assume individual responsibility for their retirement planning."
 "The days of bountiful and secure corporate pensions and a robust Social Security system are gone," Fossel said. "The world has changed, and when it comes time to retire, we don't want people to say 'But no one told me.'"
 Single Women, Middle-Aged/Middle-Income Families Face Toughest Times:
 The retirement funding burden will not be borne equally, according to the study. Middle-aged/middle-income households and households headed by single women are facing the largest potential shortfalls.
 For example, the study estimates that households headed by single females currently in their 30s with no retirement plan coverage will retire with an income approximately one-fifth of what they will need. Even those with retirement plan coverage will only have about half the required income(B).
 "In terms of retirement planning, women face the double-edged sword of earning less and living longer," Fossel said. "Their challenge is made even more formidable by their low savings rates and historical aversion to investment risk. A woman in America today can have few higher priorities than putting her financial house in order."
 Middle-aged/middle-income households -- members of the so-called "Sandwich Generation" -- will also be hard-pressed to close the gap. For example, the study estimates that a couple in their 50s with representative defined benefit and defined contribution plan coverage has a comfort ratio of only 48 percent.
 "Young households, who have more time to make their assets grow, stand a better chance of retiring comfortably than many middle-aged households," Fossel said. "In many respects, adults currently in their late 40s and 50s are worse off than the Baby Boomers."
 Asset Allocation, More Savings Make a Big Difference:
 While most Americans fall far short of their retirement funding needs, the study found that a program of increased savings and smarter asset allocation can greatly narrow -- or perhaps even eliminate -- the financial shortfall many people face in retirement.
 "The good news in this study is that as severely underfunded as most people's retirements are, the right approach to financial planning, particularly early in one's work life, can greatly reduce -- or even eliminate -- that deficit," Doll said.
 To illustrate how people can make up the deficit, Arthur D. Little/ WEFA created a "Smart Saver" hypothetical scenario in which savings rates were doubled (from an average of 4.5 percent of disposable income currently to 9 percent) and exposure to stocks was doubled (from 42 percent currently in defined contribution plans -- much of which is in company stock -- to 84 percent, and from 6 percent to 12 percent in personal assets). The potential differences were dramatic.
 For example, a typical married couple between the ages of 30 and 34 with defined benefit/defined contribution (DB/DC) plan coverage has a comfort ratio of 70 percent, but that comfort ratio grows to 118 percent if they double their savings rate and exposure to equities. Similarly, under the study, a household headed by a single male between the ages of 25 and 29 with DB/DC coverage has a comfort ratio of 72 percent, but that ratio climbs to 112 percent in the Smart Saver scenario.
 "The Smart Saver is but one of a variety of scenarios that can help individuals close their retirement funding gap," Doll said. "The point is to demonstrate to people that if they save more and seek higher returns, they can make meaningful progress towards a more secure retirement."
 Doll said that for most people, a retirement plan should start with increased savings, preferably in a tax-advantaged plan.
 "Clearly, Americans need to save more," Doll said. "Our savings rate is one-third that of the Japanese, and, ironically enough, it's not even half of what it was here 20 years ago, when Social Security was a much better safety net. The conspicuous consumption of the '80s is over; these are the Prudent '90s."
 The older you are, however, the harder the retirement shortfall is to make up. Consider that according to the study, a 55-year-old single male head of household with DB/DC coverage making between $25,000 and $50,000 will still have a comfort ratio of only 72 percent at retirement even after doubling his savings rate and stock exposure.
 But because Americans -- particularly those in their 40s, 50s, and 60s -- have kept a large portion of their savings in housing, use of home equity can play a significant role in helping some individuals nearing retirement to meet their financial needs, Doll said.
 "For much of the last 25 years residential real estate has been a good investment," Doll said. "But, as in recent years, housing will not be a particularly attractive investment for the foreseeable future -- if for no other reason than demographics. The advisability of using home equity in retirement varies from individual to individual, but generally speaking, people must come to think of their home more as a place to hang their hat and less as a place to park their savings."
 "The bottom line is that there are any number of approaches to narrowing the retirement funding gap," Doll said. "The essential point is that the right job of financial planning today can make a critical difference in securing one's financial future. The key is to save more and to invest those assets with a clear understanding of where the risk really lies. The longer you wait to put your financial house in order, the harder the task becomes."
 (A) The model assumes retirement at the age in effect under Social Security legislation. This age increases gradually from 65 today to 66 in 2005 and to 67 in 2022.
 (B) The scenarios cited in this release are hypothetical examples based on certain statistical assumptions set forth in the study, including long-term rate of return assumptions on various categories of investment. Additionally, the study looks at broad household groupings; individual circumstances may vary substantially.
 -0- 7/13/93
 /NOTE TO EDITORS: Oppenheimer Management Corporation and its affiliates manage more than 50 mutual funds with assets as of 6/30/93 in excess of $23 billion in more than 1.5 million shareholder accounts.
 Arthur D. Little, Inc. is a leading international management and technology consulting firm. The WEFA Group is one of the world's foremost providers of economic consulting services to the business community. Its broad range of research capabilities resulted from the 1987 merger of Wharton Econometric Forecasting Associates and Chase Econometrics.
 For a summary of the Arthur D. Little/WEFA study as well as a copy of OppenheimerFunds' free financial planning guide, please call 1-800-228-7774 or write OppenheimerFunds, P.O. Box 173304, Denver, Colo., 80217-9557/
 /CONTACT: Rob Densen, 212-323-0597, or Bruce Dunbar, 212-323-0291, both of Oppenheimer Management Corporation/

CO: Oppenheimer Management Corporation ST: New York IN: FIN SU:

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Date:Jul 13, 1993

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