PR Newswire

November 27, 2001, Tuesday

SECTION: FINANCIAL NEWS

DISTRIBUTION: TO BUSINESS EDITOR

Allstate Financial 'Retirement Reality Check' Reveals Financial Crisis for Baby Boomers Heading into Retirement

DATELINE: NORTHBROOK, Ill., Nov. 27

America's largest generation ever may be headed for a financial crisis, as Baby Boomers have saved, on average, only 12 percent of what they believe they will need to meet basic living expenses during retirement. In addition, unless Baby Boomers address this challenge, they will be burdened with significant debt and financial obligations in retirement, and are relying far too heavily on Social Security.

(Photo: http://www.newscom.com/cgi-bin/prnh/20011127/CGTU010 )

These were among the sobering conclusions in the Allstate Financial "Retirement Reality Check" survey, released today.

"This is a call to action for a generation that is in a critical financial situation," said Tom Wilson, president of Allstate Financial, a business unit of The Allstate Corporation. "While this is certainly unsettling news, the message we want to tell people is that it's never too late to start planning and saving."

Seventy-six million strong, Baby Boomers (ages 37-55) make up 29 percent of the U.S. population. By the year 2030, there will be 70 million people aged 65 and older -- more than twice the population for that age group in 1999, according to the U.S. Bureau of Labor Statistics. Baby boomers under false impression that they are prepared. Fully 78 percent of the Baby Boomers surveyed believe they are prepared to meet the financial aspects of retirement, and 69 percent say they are confident that they know how much money they need to save in order to maintain the retirement lifestyle they want. However, the survey data indicates they are severely unprepared:

-- Reality check: On average, those surveyed said they would need $30,000 per year for basic living expenses during retirement. To have $30,000 per year, Baby Boomers will need approximately $1 million upon retirement, factoring in an 8 percent return on savings and an average 4 percent rate of inflation.

But surveyed Baby Boomers have saved an average of approximately $120,000 -- a mere 12 percent of what they'd need for a 20-year retirement, spending $30,000 a year (adjusted for inflation).

-- Even the $30,000 that Baby Boomers think they'll need per year may be too low, as predictions suggest that the cost of living will double over the next 20 years. Of survey respondents, 46 percent thought that living expenses would increase less than 20 percent over the next 20 years, and only 6 percent agreed that the cost of living expenses would double.

September 11 events have not changed saving or investing habits The survey found that despite market volatility, a possible recession, and the likelihood of a long-term war, the majority of Baby Boomers (81 percent) do not plan to significantly increase the amount of money they are saving for retirement. In fact, 66 percent of those surveyed plan to make no change whatsoever to the amount they are currently saving.

Likewise, the majority of Baby Boomers surveyed (74 percent) have not made significant changes to their investment style after September 11, as only 10 percent said they would invest much more conservatively and 3 percent much more aggressively. The balance of respondents said they were not sure how September 11 events would impact their savings or investing habits.

Looking forward to golden years - but will they be free and clear?

The majority of those surveyed say they look forward to retirement, with 63 percent believing that retirement will be the best years of their lives.

-- Reality check: Retirement may be the best years, but they may not be free and clear. Sixty-eight percent of the survey respondents say that saving for their future will continue to be an obligation, even while they're retired.

-- According to the survey, sixty percent of Baby Boomers anticipate that, in their retirement, they will have more financial obligations than their parents' retirement, and nearly three out of five Baby Boomers (58 percent) surveyed will be in debt during retirement.

-- Twenty-seven percent expect to pay on a mortgage, 37 percent on car payments, and 25 percent on credit card debt during retirement.

-- Many Americans expect to be responsible for some kind of financial support for family members during retirement. Fifteen percent of those surveyed will provide for elderly parents and/or in-laws, and 29 percent will be financially responsible for children or grandchildren over 18 years old.

-- One in five Baby Boomers surveyed expects to pay tuition for one or more of their children during retirement.

Social inSecurity

Despite prevalent questions concerning the future of Social Security, one in three (32 percent) Baby Boomers surveyed plans to use Social Security as the bulk of their retirement income.

-- Reality check: According to the Federal Consumer Information Center, Social Security only replaces approximately 40 percent of the average person's salary.

-- The public trustees of the Medicare and Social Security Trust Funds have warned that Social Security Trust Funds will be depleted by 2037 if no changes are made.(1) "The magnitude of the savings gap is stunning. These findings should be a wake-up call," said Wilson. "At Allstate Financial, we will use this information to help and encourage our customers and all Americans to educate themselves and their families about the need to save and plan realistically, so they can enjoy a long and fulfilling retirement."

The Allstate Financial "Retirement Reality Check" was conducted in an effort to learn how Americans are planning for, and what types of financial challenges they anticipate during their retirement.

The Allstate Financial "Retirement Reality Check" survey was created by Allstate Financial in conjunction with Harris Interactive. Using a random digit dialing methodology, Harris polled 1,004 people born between 1946 and 1961, with household incomes ranging from $35,000 to $100,000. The margin of error is plus or minus 3.1 percent. For the data related to September 11, Harris surveyed 294 respondents who met the same criteria. The margin of error for the second sample is plus or minus 5.7%.

Allstate Financial Group is a business unit of The Allstate Corporation (NYSE: ALL), representing the affiliates that provide life insurance, retirement, investment and health and disability insurance products.

Allstate Financial is the marketing name for Allstate Life Insurance Company, its subsidiaries and certain affiliates. Widely known through the "You're In Good Hands With Allstate(R)" slogan, Allstate Financial can help its customers achieve a secure financial future with a broad array of retirement solutions. Allstate Financial is also a premier provider of variable annuities and long- term care insurance. In addition, through workplace marketing, Allstate Financial offers life, health and disability insurance through employee payroll deductions.

Customers can access Allstate Financial products and services through approximately 60,000 financialprofessionals, including Allstate agents, independent agents, and banks and securities firms.(1) Source: Social Security Administration. http://www.ssa.gov (March 31, 2000).