The Ariel-Schwab Black Investor Survey: The 00 Retiree Survey October 11, 00
BACKGROUND, OBJECTIVES, AND METHODOLOGY Ariel Mutual Funds and The Charles Schwab Corporation commissioned Argosy Research to conduct a study on and retirees in conjunction with the annual Ariel-Schwab Black Investor Survey. The main objectives of this research are the following: Gain an understanding of the attitudes, behaviors, and financial situations of middle class retirees (those with a household income of $50,000 or more prior to retirement). Compare and contrast and retirees. Uncover insights that will aid in formulating recommendations for helping middle class s, particularly s, to plan and save for retirement. Methodology: 300 s and 304 s were interviewed by phone between June and July 11, 00. All respondents identified themselves as being retired between one and ten years. Additionally, their annual household income was $50,000 or more prior to retirement. The survey ran for an average of 11 minutes and was national in scope.
RETIREE STUDY KEY HIGHLIGHTS Overall, both and early retirees are happy about their retirement. Only 1 of s and 11 of s rate their happiness as a five or below on a scale of ten. retirees, however, are in a precarious position relative to retirees when it comes to their financial futures. Blacks are drawing a somewhat lower income than s during retirement: the Black retiree median income is $51,000 and the retiree median income is $5,000 retirees have on average (median) $3,000 saved, whereas retirees have saved an average of $,000. Even after controlling for financial and human capital factors (peak income, education, and so on), s are still 1. times less likely than s to have over $0,000 in savings during retirement. s who say they are living comfortably in retirement are likely to be doing one or more of three key things: drawing income from stock, bond or mutual fund investments (3.6 times more likely); drawing income from a 401(k) or another employer sponsored plan (.3 times more likely); or being married (twice as likely). 3
RETIREE STUDY KEY HIGHLIGHTS (CONTINUED) Only 45 of s and 5 of s calculated how much savings they would need to retire. Half of the retirees surveyed were primarily employed by the government, as compared to one-third of s. Consequently, 59 of s, compared to 4 of s, retired before the age of 60. Compared with the expectations of not-yet-retired s, Black retirees are relying more on Social Security and pensions for retirement income, and less on employer sponsored retirement plans, real estate investments, and other savings or investments. 4
DETAILED RESULTS 5
HAPPINESS IN RETIREMENT On a scale of 1 to, with one being very unhappy and being very happy, how would you rate your feelings about your retirement today? 0 0 -Very happy 49 4 9 11 13 6-4-5 1-3 1 0 9 9 Mean Median 9 9 6
FINANCIAL SITUATION Would you say that in retirement, you have enough money to live comfortably, or you are having trouble making ends meet? 0 0 Live comfortably 5 Trouble making ends meet 15
PLANNING FOR RETIREMENT It usually takes some financial planning and preparation to retire. Thinking back to the things you did and knowing what you know now, what grade, A through F, would you give yourself for retirement planning? 0 0 A 0 4 B C 33 30 D F 13
SOURCES OF RETIREMENT PLANNING INFORMATION Which of the following sources of retirement planning information and education did you use? Information received from your employer 5 0 A financial planner, investment advisor or accountant 4 5 A class, seminar, or workshop you attended Advice from friends, family or colleagues A retirement or financial planning book 36 33 39 45 44 45 Information found on the Internet 14 Other 5 3 9
MOST IMPORTANT SOURCE OF RETIREMENT PLANNING INFORMATION And which of these sources of information and education would you say was most useful to you? ( of those who used source) Information received from your employer A financial planner, investment advisor or accountant 4 45 44 5 A class, seminar, or workshop you attended 1 33 Advice from friends, family or colleagues 34 A retirement or financial planning book 14 1 Information found on the Internet 14
ATTITUDES ABOUT RETIREMENT AND MONEY Agreeing with following statements: You wish you had saved more when you were working 3 You wish you had begun saving earlier for retirement 6 4 You expect to leave an inheritance to friends or family 9 You worry that a medical issue could impact you financially 53 51 Paying for your children s education affected your ability to save for retirement You expect to leave money to charity You worry that you will outlive your retirement savings 30 5 3 36 11
FINANCIAL ACTIONS Which of the following things have you or your spouse ever done? Significantly increased the amount of money you were saving in the years leading up to retirement Consulted with a financial advisor about retirement Calculated the amount of savings you would need in order to retire 45 4 50 53 51 5 Downsized your home 1 1 Delayed retirement in order to accrue additional benefits 15 Moved in with your children or other relatives 4 1
PERCEPTIONS OF BEST INVESTMENTS OVERALL Which of the following do you think is the best investment overall? 0 Real estate 3 9 Mutual funds 34 40 Individual stocks Individual bonds Whole life insurance Don t know 9 15 4 5 13
MARKET PARTICIPATION Do you personally, or with a spouse, have any money invested in the stock market right now, either in individual stocks or in a stock mutual fund? 0 0 Yes 5 6 No 43 4 14
IMPETUS FOR INVESTING Which of the following statements best describes how you started investing? 0 0 On your own With the help of a friend or a family member With the help of a broker or financial advisor 1 1 5 11 3 As a result of having a 401(k) or another employer sponsored plan 45 41 15
EMPLOYER SPONSORED PLAN OWNERSHIP Did you or your spouse ever have money in a 401(k), 403(b), or any other employer sponsored retirement plan? 0 0 Yes 4 6 No 6 4 16
BORROWING FROM EMPLOYER SPONSORED PLANS Did you ever borrow money from your employer sponsored retirement plan before you reached the age of 59 1/? Base: Have owned an employer sponsored retirement plan 0 0 Yes 14 No 6 1
SOURCES OF RETIREMENT INCOME Which of the following sources are helping to pay for your retirement? Pension from a former employer Social Security A money market or savings account An employer sponsored retirement plan, such as a 401(k) or 403(b) An IRA or Individual Retirement Account Stock, bond, or mutual fund investments Fixed or variable annuities Income from work currently done by your spouse or partner Income from work you are currently doing Rental income from a property you own Other 1 4 1 16 16 13 31 3 40 39 33 3 4 45 49 54 55 59 6 69 0 4 1
MOST IMPORTANT SOURCE OF RETIREMENT INCOME Which of these items is your most important source of retirement income? Pension from a former employer Social Security A money market or savings account An employer sponsored retirement plan, such as a 401(k) or 403(b) An IRA or Individual Retirement Account Stock, bond, or mutual fund investments Fixed or variable annuities Income from work currently done by your spouse or partner Income from work you are currently doing Rental income from a property you own Other of total population of those using source 3 0 3 1 1 6 4 4 3 4 1 1 1 3 4 36 5 4 1 15 0 5 9 13 15 14 0 1 31 6 5 53 53 Caution: small sample sizes (n=<0) 19
REAL ESTATE OWNERSHIP Which of the following kinds of real estate do you own? Your primary residence 96 A second home or vacation home One or more rental units 14 1 14 11 Commercial property 3 5 Land 16 15 None of these 0
EXPECTATIONS OF HEALTH CARE EXPENSES Would you say the money you have been spending on health care during retirement is. 0 0 More than you expected to spend Less than you expected 41 9 11 About the same as you expected 51 60 1
DEMOGRAPHICS
DEMOGRAPHIC PROFILE MARITAL STATUS GENDER AGE Male Female Under 50 50-54 55-59 60-64 65-6 6-0 1-3 4+ Mean Median 33 6 4 19 9 1 13 64 64_ 45 55 1 13 3 1 0 11 14 66 6 Single/never married Not married/living together Married Divorced/separated* Widowed NON-SPOUSES LIVING IN HOME Other people present No other people present EDUCATION Some HS or less HS graduate Some college College graduate Postgraduate study 34 4 19 61 15 1 * Of those married, widowed, or living together, 3 of s and of s have been divorced 33 6 0 3 4 1 5 <1 5 13 1 9 3
RETIREMENT PROFILE YEARS RETIRED One Two Three Four Five Six Seven Eight Nine Ten 1 1 1 5 4 3 9 19 13 9 1 AGE RETIRED 30-39 1 40-49 9 50-59 49 60-64 9 65-69 1 0-4 0 5+ 0 Median 5 1 5 41 3 16 4 1 60_ Mean Median Business* Government Not-for-profit 41 49 6 6 FORMER EMPLOYMENT 53 33 13 * Of those who worked in business, of Blacks and of s were self-employed 6 _6_ RETIREMENT VS. PEAK HH INCOME Peak during retirement 9 Peak at retirement 4 45 Peak 5 or fewer year prior 5 1 Peak over 5 years prior 4 6 4
FINANCIAL PROFILE VALUE OF SAVINGS AND INVESTMENTS (ex. real estate) >$1,000,000 $500,00-$999,999 $50,000-$499,999 $0,000-$49,999 $50,000-$99,999 $5,000-$49,999 $5,000-$4,999 <$5,000 Mean Median 1 6 11 19 14 13 14 $151K $3K 11 16 1 0 13 $33K $K Note: The multivariate analysis cited in this report holds the following demographic factors constant so that with all else being equal, various correlations can be uncovered: # of people in household Education Peak earnings Current HH income Value of savings/investments Gender # of years retired Marital status CURRENT HOUSEHOLD INCOME Less than $5,000 $5,000-49,999 $50,000-4,999 $5,000-99,999 $0,000-149,999 $150,000-50,000 Over $50,0000 Mean Median PEAK HOUSEHOLD INCOME $50,000-4,999 $5,000-99,999 $0,000-149,999 $150,000-50,000 Over $50,0000 Mean Median 11 1 9 4 3 0 $5K $51K 43 31 1 $95K $0K 1 3 11 5 1 $6K $5K 36 30 3 3 $K $K 5