New Survey On Retirement Planning Reveals That More Than 2/3 Of The Baby Boomer

• For Immediate Release: November 16, 2005
• Kim McKeown
• Public Relations Project Manager
• 847.706.3528
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• Anne Glauber
• 212.593.6481

Over 50% Are Underestimating Lifespan

New York, NY,–A huge majority of the baby boomer population is underestimating life expectancy, has no financial plans for retirement and yet expresses a higher concern about long term risks than people already retired, according to a new study commissioned by the Society of Actuaries (SOA) and discussed at its annual meeting this week.

The SOA 2005 "Risks and Process of Retirement Survey" was designed to evaluate Americans' awareness of retirement risks and then compare the financial preparation between current retirees and the generation about to retire.

What emerges from the study is a shocking percentage of both retired and pre–retirees who report having no financial plans for retirement. The study also reveals that although the majority of baby boomers are very concerned about health costs, inflation and long term nursing care, less than a third have plans in place to deal with these issues. In addition, the study shows a huge change in work expectations between retirees and pre–retirees. The majority of boomers believe that they will be working past the age of 65.

According to the SOA study:

• 68 percent of pre–retirees have no plans for financing their retirement. Among this group are more singles than married people. Only 20 percent of single baby boomers have financial plans compared to 31 percent of married.
• People already retired are not in a much better position. A surprising 55 percent of retirees report having no financial plans for their retirement years.
• A large majority of both retirees and pre–retirees underestimate life expectancies. 61 percent of pre–retirees underestimate and 67 percent of retirees underestimate life spans. One consequence is that they believe they are accurately planning for life expectancy, but in fact are underestimating. While four in 10 think they're estimating accurately, the reality is that over 50% of them are actually predicting they'll live shorter than average lifespan, while only three in 10 believe they may live longer than average.
• Despite lack of financial planning, pre–retirees express more concern about retirement risks than those already retired.
• Pre–retirees are significantly more likely than retirees to be highly concerned about health care costs (75 percent pre–retirees; 46 percent retirees); inflation (65 percent pre–retirees; 51 percent retirees) and long term care (61 percent pre–retirees; 52 percent retirees).
• A huge majority of pre–retirees expect to work longer then the previous generation. 54 percent of retirees report they retired before the age of 60; only 8 percent of pre– retirees expect to do the same. The largest share of pre–retirees (4 percent) say they plan on retiring between the ages of 60–65. Thirteen percent of pre–retirees do not expect to retire at all.

According to Emily Kessler, FSA, Staff Fellow, Retirement Systems of the Society of Actuaries, "With increasing life–spans, pre–retirees have the right idea to plan to work longer. However, working longer can't be the only solution, because you might not be able to do that: you may not be able to work physically, you may not be able to find work, or you may have other obligations preventing you from working. You need to be prepared, physically and financially, for the retirement process."

The different pressures on pre–retirees are evidenced in how they expect to gain retirement income. According to the SOA study, retirees' major sources of retirement income and pre–retirees' expected major sources of income differ significantly.

While fifty–four percent of retirees report that Social Security is a major source of income, only 43 percent of pre–retirees expect that Social Security will provide a major source of income to them. In contrast, 37 percent of pre–retirees are counting on an employer's retirement savings plan, such as a 401(k) arrangement as opposed to only 14 percent of retirees. In summing up, the results of this study point to a new retirement phenomenon: longer life expectancies, longer work expectancies and a shift away from reliance on an employer or the government to be the major source of support during retirement.

The telephone survey was conducted among Americans ages 45 to 80 by Mathew Greenwald & Associates, Inc. and the Employee Benefit Research Institute who co–sponsored the study on behalf of the Society of Actuaries during June and July 2005. A total of 602 interviews were conducted. Margin of error is plus or minus 5.6 percentage points.

The Society of Actuaries is an educational, research and professional organization dedicated to serving the public and its 18,000 members. The SOA's vision is for actuaries–business professionals who analyze the financial consequence of risk–to be recognized as the leading professionals in the modeling and management of financial risk and contingent events. The SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems involving uncertain future events.