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Optimism Surges Among Retirement-Thinking Baby Boomers
NORTHBROOK, Ill. -- The past year brought a surge of financial and emotional optimism to Baby Boomers contemplating retirement, according to the fourth annual Allstate "Retirement Reality Check" survey. Baby Boomers, the generation shaped by post World War II optimism, are particularly hopeful about the emotional benefits of retirement. At the same time, the survey highlighted some areas of discomfort for Boomers, particularly concerning health-care costs and the financial viability of government programs such as Medicare and Social Security. Optimism, though, is on the upswing, although short of the high levels of the 2001 survey, in which 63% of Boomers agreed, "the best years of my life will come after I retire." This year, 57% agreed with that statement, up from 55% in 2003. And only 9% responded this year that they worry about being lonely or life passing them by after retirement, down from 14% a year ago. The majority -- 74% -- said they are very or somewhat prepared for retirement in terms of savings and investments, little change from previous years (75% in 2003, 74% in 2002 and 78% in 2001). The annual survey, which began in 2001, tracks attitudes toward and savings for retirement. This year and last, the survey was expanded to include Generation X, those born from 1965 to 1978. An additional generation was included in this year's survey, the Silent Generation, or those born before 1946. What a Difference a Year Makes Gen X respondents generally showed increasing optimism as well. For example, 43% of Boomers and 34% of Gen-Xers said they likely will have to postpone retirement because of the recent economic downturn. In 2003, more than half -- 59% of Boomers and 56% of Gen-Xers -- agreed with that statement. At the same time, the anticipated retirement age of survey respondents has changed very little. The median age at which respondents said they expect to retire was 63, compared with 62.5 in 2003, age 64.6 in 2002 and age 63 in 2001. Both generations said they expect to work for pay after retirement. This year, 76% of Boomers and 72% of Gen-Xers said that, compared with 61% of Boomers and 55% of Gen-Xers a year ago. "However, our survey shows that people who expect to work after retirement plan to do so because they want to, not because they have to," says Casey Sylla, president, Allstate Financial. Emotional Reasons for Wanting to Work During all four years of the survey, respondents emphasized emotional benefits over financial ones as reasons to work after retirement. This year, emotional responses surged among respondents of both generations. By far the top reason for working was to "stay mentally active," cited by more than 90% of both generations. A year ago, 59% of Boomers and 63% of Gen-Xers cited that reason. "Social interaction" and the chance to "work on something I feel passionate about" were cited by more than 80% of both generations this year; both up significantly from year-ago levels. Financial Matters are Magnified Specifically, 41% of Boomers and 47% of Gen-Xers said they'll likely work after retirement because they'll need the health benefits; a year ago, 29% of both generations said that. And, 42% of Boomers and 44% of Gen-Xers said they'll work to make ends meet. In 2003, only 26% of Boomers and 23% of Gen-Xers said the same. This year, 64% of Boomers surveyed said that rising health-care costs is a major concern about retirement, up from only 39% when the survey began in 2001. And 50% said they worry about getting sick, compared with 27% in 2001. A significant number of both generations -- 53% of Boomers and 44% of Gen-Xers -- also said they have increased their retirement savings in recent years to catch up to where they believe they should be. Those figures are up slightly from last year. "The significant gap between what people believe and how they are acting is troubling, because it suggests that too many Americans plan to retire and just hope for the best," Sylla said. "Hope is not a substitute for having a well thought-out plan for retirement and sticking to it." Confidence in Government Savings Programs Wanes One anomaly identified in the Allstate survey is mixed attitudes among Baby Boomers about Social Security. Among Boomers, 38% said they plan to use Social Security for a large part of retirement income, up from 29% in 2003. At the same time, 66% of Boomers admitted they do not believe the federal government will make the necessary changes in Social Security to ensure their retirement needs are met. Last year, 64% of Boomers said they lack confidence in Social Security. Fully 60% of Boomers admitted that Social Security benefits being cut or eliminated is a major concern -- up from 25% in 2001. Generation X respondents also are pessimistic about Social Security; 74% said they don't believe the federal government will make necessary changes, but they are slightly less likely to plan on relying on the program for retirement income. Both generations expressed similar pessimism about the financial health of Medicare. Visit Allstate Corp.: www.allstate.comThis report is new this week in The Business Journal's small business how-to section. To see what else is new, click here or click on the "how-to" tab at the top of The Daily Business Journal Online home page."