A recent American Association for Retired Persons (AARP) report argues against the perception that retirees are better-heeled than the rest of the population. The author of the report says that while Census data for any given year finds retirees less likely than younger groups to be living in poverty (10.1% of those 65+ vs. 12.1% of persons under 65 according to a 2002 Census report), other data tracking individuals' financial situations over a 10-year period reveal that seniors are more likely to fall into poverty for long stretches of time.
Against this backdrop, Gallup's annual economy and finances poll delivers the provocative finding that retirees are less likely than non-retired persons to indicate having financial strain in their lives. Most retirees in the April 7-9 nationwide telephone survey say they have enough money at present to live comfortably. They also express less concern than non-retirees do about each of several financial issues measured in the poll.
With the broad stock indexes down roughly 30% since their peak in January 2000, potential threat to current retirees' solvency, and to those soon to be retired, is the condition of the U.S. stock market. Fortunately, the Gallup Poll finds that while a majority of retirees own stock, stock investments are not an especially important source of retirement income for them. Rather, Social Security and work-sponsored pensions are the major financial workhorses for the current generation of retirees.
The Gallup data presented here focuses on retirees, not seniors per se, but most of the retirees surveyed (74%) are aged 65 and older. Another 23% are between the ages of 50 and 64, and a small number (3%) are younger than that. The survey does not represent the roughly 1.5 million older Americans (4.5% of the 65 and older population) living in nursing homes.
Most Retirees Living Comfortably Right Now
A basic assessment of financial well-being in the new poll comes from a question asking: Right now, do you have enough money to live comfortably, or not?
The great majority of Americans, 73%, say they do have enough money to live comfortably right now. However, this response is higher among retirees than among non-retired adults: 83% vs. 70%. Just one out of six retirees (16%) say they do not have enough money to live comfortably, compared with 29% of non-retirees.
Retired men and women report equal comfort in retirement: 84% of retired men and 83% of retired women.
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Have Enough Money to Live Comfortably? |
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|
Yes |
No |
No opinion |
|
|
2003 Apr 7-9 |
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|
National Adults |
73% |
26 |
1 |
|
Retirees |
83% |
16 |
1 |
|
Non-retired adults |
70% |
29 |
7 |
Emergency Medical Costs Top Retirees' Financial Worry List
While relatively few retirees appear to be in financial distress today, many do harbor concerns about their financial futures. All respondents -- retired and non-retired -- were asked about the degree to which they worry about various financial matters. Despite the fact that 16% of retirees say they are living comfortably right now, 32% say they are either very or moderately worried about having enough money for their retirement. This is similar to the percentage worried about being able to pay the medical costs for normal healthcare (30%). An even bigger concern, however, is not being able to pay for medical costs in the event of a serious illness or accident. Nearly 4 in 10 (39%) retirees worry about this, making it their top financial concern of the seven issues rated.
Lesser, but still significant, worries for retirees include maintaining the standard of living they enjoy (27%) and not having enough to pay normal monthly bills (20%).
Two issues generate relatively little concern among retirees: housing costs and credit card debt. The vast majority of retired persons tell Gallup they are not at all worried about paying housing costs or making minimum payments on credit cards. In the case of housing this is almost certainly because a majority of seniors own their homes outright rather than owe money on a mortgage.
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Retirees
|
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|
Very worried |
Moderately worried |
Total Worried |
|
|
% |
% |
% |
|
|
Not being able to pay medical costs of a serious illness/accident |
11 |
27 |
39 |
|
Not having enough money for retirement |
11 |
21 |
32 |
|
Not being able to pay medical costs for normal healthcare |
11 |
19 |
30 |
|
Not being able to maintain the standard of living you enjoy |
7 |
20 |
27 |
|
Not having enough to pay your normal monthly bills |
5 |
15 |
20 |
|
Not being able to pay your rent, mortgage, or other housing costs |
3 |
11 |
14 |
|
Not being able to make the minimum payments on credit cards |
4 |
5 |
9 |
Retirees Less Anxious Than Non-Retired Adults
While several issues are worrisome for a substantial number of retirees, this group is relatively comfortable about financial matters -- or at least more accepting of their financial situations -- compared with non-retired adults.
Not surprisingly, non-retired adults are much more worried than are retirees about having enough money for retirement: 60% of non-retired adults worry about this versus 32% of retirees. But fairly large differences are also seen between the two groups in their level of concern about maintaining their standard of living (a 14-point gap), paying housing costs (14 points), and paying normal monthly bills (13 points).
Smaller differences are seen relative to medical costs and making payments on credit cards.
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Financial Worries: Retirees vs. Non Retired Adults
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|
|
Non-retired adults |
|
|
|
% |
% |
||
|
Not having enough money for retirement |
32 |
60 |
-28 |
|
Not being able to maintain the standard of living you enjoy |
27 |
41 |
-14 |
|
Not having enough to pay your normal monthly bills |
20 |
33 |
-13 |
|
Not being able to pay your rent, mortgage, or other housing costs |
14 |
27 |
-13 |
|
Not being able to pay medical costs of a serious illness/accident |
39 |
48 |
-9 |
|
Not being able to pay medical costs for normal healthcare |
30 |
39 |
-9 |
|
Not being able to make the minimum payments on your credit cards |
9 |
17 |
-8 |
Half of Retirees Rely on Social Security as Major Income Source
Gallup's economy and finances survey also asks retirees about their main sources of income in retirement. Social Security and work-sponsored pension plans top the list, and stand out as the only sources relied on as "major sources" of income by large numbers of retirees. Fully half of retirees describe Social Security as a "major source" of their current income, with another 35% calling it a "minor source." Work-sponsored pensions are a major source for 41% and a minor source for another 14%.Regular savings accounts and CDs are used by a slim majority of retirees (53%), but only 14% calls these a major source of income. Retirement savings accounts such as a 401k, IRA or Keogh are slightly less likely to be used overall (46% rely on these), but with 20% calling them a major source, they are more heavily relied on than regular savings accounts.
Lending truth to the adage that a home is one's most important investment, the U.S. Administration on Aging reports that the median value of homes owned by seniors in 2001 was $107,398, and that 58% of seniors owned their homes outright. That value is coming in handy for the 40% of retirees who tell Gallup that they rely on the equity built up in their homes as either a major (25%) or minor (15%) source of income.
While many retirees may own stock or stock mutual funds through their retirement accounts (indeed 54% tell Gallup they own stock either in an individual stock, a stock mutual fund, or in a self-directed 401k or IRA), only 39% report using direct stock investments as an income source to any degree. Less than a third of retired adults say annuities or insurance plans, rent and royalties, inheritance, or part-time work is source of income for them. Fewer than 1 in 10 rely on any of these as a major income source.
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2003 Retirement Income Sources |
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|
Major source |
Minor source |
Total rely on as source |
|
|
% |
% |
% |
|
|
Social Security |
50 |
35 |
85 |
|
A work-sponsored pension plan |
41 |
14 |
55 |
|
Other savings such as a regular savings account or CDs |
14 |
39 |
53 |
|
A 401k, IRA, Keogh or other retirement savings account |
20 |
26 |
46 |
|
The equity you have built up in your home |
25 |
15 |
40 |
|
Individual stock or stock mutual fund investments |
12 |
27 |
39 |
|
Annuities or insurance plans |
6 |
23 |
29 |
|
Rent and royalties |
5 |
17 |
22 |
|
Part-time work |
1 |
18 |
19 |
|
Money from an inheritance |
4 |
11 |
15 |
Retirees' reliance on these various income sources sharply contrasts with non-retired persons' expectations about what they will depend on in retirement. In particular, current retirees have much greater reliance on Social Security and pension income than future retirees expect to have. Future retirees are much more likely than those currently retired to expect to rely on income from retirement accounts such as 401ks, as well as from part-time work. (See "Retirement Income Biggest Financial Worry for Americans" in Related Items for more detail on these findings.)
Bottom Line
While there is no doubt that America's retired population has special financial concerns, and in fact lives on less income than non-retired persons, their advanced stations in life also turn out to be more financially secure. With apparently fewer bills to pay, and with the pressure of saving for retirement off of their earnings, retirees are more financially content than their non-retired counterparts. Their direct exposure to the stock market appears to be limited, although the continued solvency of Social Security and employer pensions is critical to their standard of living.
