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Only Half of Non-Retirees Expect to Be Comfortable in Retirement

Lowest percentage in last five years

GALLUP NEWS SERVICE

PRINCETON, NJ -- Gallup's annual poll on personal finances reveals that most Americans -- both retired and non-retired -- report to be living comfortably now. However, many non-retirees expect a downturn in their lifestyle once they stop working. Fewer than half of non-retirees have full peace of mind about their finances, saying they have enough money to live comfortably now and expect to do so in the future. In comparison, the vast majority of current retirees say they have enough to live comfortably now.

The April 10-13, 2006 poll identifies retirement as the most significant financial concern for Americans. Sixty percent of Americans say they are very or moderately worried about not having enough money for retirement. The only issue that comes close to this is being able to pay for medical care in the event of a serious accident or illness.

Seven in 10 Living Comfortably Now

At the moment, most Americans (71%) say they have enough money to live comfortably. That includes 77% of current retirees and 69% of non-retirees.

In the five years this question has been asked, more retirees than non-retirees have always said they are comfortable now. Whether that is a reflection of a better overall economic situation for retirees, or lower standards on their part for what constitutes "comfortable," is unclear. It is also possible that the expectation by many non-retirees, especially younger ones, that Social Security will not be available to them contributes to this gap between current and future retirees. Indeed, the poll finds 55% of current retirees saying that Social Security is a "major source" of their retirement funding, whereas only 25% of non-retirees expect it to be. Current retirees are also more likely to cite a work-sponsored pension plan as a major source of their income, while non-retirees are less likely to expect the same.

Many non-retirees expect their level of economic comfort to decline once they retire. Just 50% of all non-retirees expect to have enough money to live comfortably at that time. This measure is the lowest Gallup has recorded in the past five years, down from 59% between 2002 and 2004, and 53% last year, paling in comparison to the 77% of current retirees who report financial comfort.

Combining the two items -- living comfortably now and expecting to live comfortably in retirement -- yields the following distribution among non-retirees.

Forty-four percent of non-retirees are living comfortably now and expect to do so in retirement. These respondents' economic forecast calls for "clear skies."

Twenty-five percent say they are living comfortably now, but do not expect to be doing so in retirement. The economic forecast for these people is sunny now but has "clouds on the horizon."

Twenty-five percent are not living comfortably now and do not expect to be doing so in retirement. These people's forecast calls for "persistent rain."

Six percent are not living comfortably now, but expect they will be in retirement. The forecast for this group of non-retirees is "clearing rain."

As one might expect, a person's economic forecast largely depends on the amount of economic resources he or she has:

  • The percentage of respondents falling into the clear skies group increases significantly by household income. Just 18% of those in low-income households (less than $30,000) say they are comfortable now and will be in retirement, compared with 45% in middle-income households ($30,000 to $74,999) and 61% among those in upper-income households ($75,000 or above).
  • More than half (51%) of those in low-income households fall into the persistent rain group.
  • Nearly one in three non-retired Americans living in upper-income households fall into the clouds on the horizon group. The corresponding figure is 26% among those in middle-income households.

Among non-retirees, 401(k) plans and Individual Retirement Accounts (IRAs) are the most commonly cited major source of expected retirement income. As such, it would stand to reason that those invested in the stock market would have more optimistic views of their financial situation during retirement. The majority of stockowners, 53%, fall in the clear skies group, while only 31% of non-owners do. The greatest number of non-retirees who do not own stock are classified in the persistent rain grouping.

The data show that among stockowners, the performance of their stock investments last year is related to their economic forecast from now until retirement. Sixty-four percent of stockowners whose investments made money last year fall into the clear skies group, compared with 39% whose investments lost money or stayed even. Thirty-two percent of this latter group is classified as seeing clouds on the horizon.

Just under half (49%) of those who are married or living with a partner fall into the clear skies group, as do 44% of those who have never married. The picture is bleaker among those who are divorced or separated -- just 23% fall into the clear skies group, while nearly half (45%) are in the persistent rain category. The relatively small percentage of widowed non-retirees is as positive as (or more so) than currently married couples.

There are small but not meaningful differences by age in the percentage of non-retirees who are in the clear skies group (48% of 18- to 29-year-olds, 40% of 30- to 49-year-olds, and 42% of 50- to 64-year-olds). However, younger non-retirees are more optimistic about being comfortable in retirement: 12% in this age group fall into the clearing rain category, while the percentages falling into this group among older non-retirees is small (5% of 30- to 49-year-olds and 2% of 50- to 64-year-olds).

Survey Methods

These results are based on telephone interviews with a randomly selected national sample of 1,005 adults, aged 18 and older, conducted April 10-13, 2006. For results based on this sample, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ±3 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For results based on the sample of 702 non-retirees, the maximum error attributable to sampling and other random effects is ±4 percentage points.

For results based on the sample of 303 retirees, the maximum error attributable to sampling and other random effects is ±6 percentage points.

25. Right now, do you have enough money to live comfortably, or not?

Yes

No

No opinion

%

%

%

2006 Apr 10-13

71

28

1

2005 Apr 4-7

72

28

*

2004 Apr 5-8

74

25

1

2003 Apr 7-9

73

26

1

2002 Apr 8-11

75

24

1

* Less than 0.5%

26. When you retire, do you think you will have enough money to live comfortably, or not?

BASED ON 702 NON-RETIRED ADULTS

Yes

No

No opinion

%

%

%

2006 Apr 10-13

50

43

7

2005 Apr 4-7

53

40

7

2004 Apr 5-8

59

35

6

2003 Apr 7-9

59

36

5

2002 Apr 8-11

59

32

9

Gallup http://www.gallup.com/poll/22606/Only-Half-NonRetirees-Expect-Comfortable-Retirement.aspx Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A +1 202.715.3030