WASHINGTON - In two studies commissioned jointly by the Consumer Federation of America (CFA) and on-line financial planner DirectAdvice.com, findings indicated that not only did higher income levels and access to company-based retirement plans correlate positively with retirement adequacy but also-in the case of one study-that a household's use of a financial plan also was a strong predictor of lifestyle upkeep into retirement. The research findings were released to the public in a CFA/DirectAdvice.com press conference April 26. In the first study, an analysis of projected post- and pre-retirement expenses of American households based on 1998 data in the Federal Reserve System's (Fed) "Survey of Consumer Finances," Ohio State University Economist Catherine Montalto concluded that only 44% of American households "with a currently employed householder" will accumulate adequate retirement savings. In that study Montalto not surprisingly found that income variance was the demographic variable most closely related to levels of retirement savings, as only 27% of households earning less than $10,000 per year would have adequate retirement savings while 54% of those with incomes between $50,000 and $100,000 and 69% with incomes over $100,000 would be able to retire in their accustomed style. "The bad news is that most U.S. households will not be able to sustain their present standard of living into retirement," said CFA Executive Director Stephen Brobeck. "The good news is that most of the unprepared households could get ready by taking advantage of the magic of interest compounding." "Saving just $25 a week for 40 years," Brobeck explained, "with a 5 percent yield, will result in an accumulation of more than $165,000." DirectAdvice.com President Brian Hollander agreed with this simple saving strategy but added, "Research shows that people with a financial plan have twice the money saved for retirement as those without." "The key is to develop and follow a comprehensive financial plan that maps out your strategy for retirement and all of your other financial goals.The good news is that technology and the Internet make it easier than ever today to develop a financial plan that will work for you...." "Financial planning," Hollander continued, "has always been available to the wealthiest individuals in America but not always to the less fortunate." "Now that has all changed.The power and efficiency of the Internet brings comprehensive, affordable financial planning to all levels of American society." Hollander was referring to his business and to the second study (as well as to a related 1996 NationsBank/CFA study)-a opinion poll of 1,006 adult Americans conducted by Opinion Research Corporation International (ORC)-which found that households utilizing a financial plan accumulated twice as much wealth as those that did not. The poll also found that, between those who did and did not use a financial plan, 49% of the users believed their retirement preparations were adequate as compared with only 23% of non-users. In the other major finding of the Montalto research, 55% of those participating in an employer-sponsored retirement plan were projected to have a post-retirement lifestyle on a par with that of their working years whereas only 24% of those without such a plan would be so prepared. Lower-income Americans, the study found, were least likely to be participating in such a plan. (According to 1998 Fed data, 54% of working Americans participate in an employer-sponsored retirement plan.) "Retirement savings would dramatically increase if all workers had access to a retirement plan at work," said Brobeck. "Payroll deductions are the easiest way to save, and matched contributions provide a powerful incentive to do so." The Montalto study generally was backed up by the findings of the ORC poll, which found in part that only 36% of adult Americans expecting to retire at age 65 believed they would do so with the same of better lifestyle than their working years. Forty percent said they expected to retire with a "lower but adequate" lifestyle, and 19% said their retirement savings would be "less than adequate." As part of the study release Brobeck announced that on-line "toolkits" for assessing an individual's retirement preparations could be accessed on CFA's web site. -
gmcorrigan@mindspring.com
