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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 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 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.

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 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 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 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 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, however, they risk being on a collision course 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 `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 goal. Seventy percent of Boomers say they are worried about their financial futures, 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 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 Investment Program from Scudder, a family of mutual funds designed for people age fifty and older. "In addition, the significant increase in life expectancy 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 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: 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 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 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 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 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. 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 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 in 1928 in the nation's first international fund in 1953. Scudder currently manages nearly $37 billion in two families of open-end funds, the Scudder Funds, AARP Investment Program from Scudder.

The National Center for Women and Retirement Research, a non-profit organization 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 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
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Date:Apr 7, 1997
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