As Savings Go Up, Worries Go Down (A Little)

By: John O'Neil and Marjorie Connelly
The New York Times, March 21, 2001 

THE number of Americans saving for retirement has jumped sharply in the last few years, a recent New York Times poll has found. And while a majority of those questioned worry about setting aside enough money, anxiety on the subject appears to have eased, at least a bit.

The poll shows a significant change in savings habits and attitudes since similar questions were last asked, in 1995. Back then, many Americans were jittery over the new responsibilities that came with the widespread shift from old-style pensions to new-style savings programs, like 401(k)'s, in which employers contribute dollars but make no long- term promises.

The new poll showed that far more people had become active in shaping their financial future. In interviews after the poll was completed, many indicated they had come to terms with the idea that their nest egg would depend less on an employer or Social Security than on themselves.

"These decades to come are going to be more about what you do for yourself, as opposed to what you allow people to do for you," said José Aguado, a 37-year-old self-employed audio engineer in Chicago. "It's not pro-government, not anti-government — just me, myself and I."

While people close to retirement age continue to be the biggest savers, people of all ages — and races and income levels — reported putting more away. Over all, the number of people who said they were saving for retirement jumped to 73 percent from 47 percent in 1995. And the number who say they expect their own nest egg to be their main source of support has risen significantly as well, to 56 percent from 39 percent, the poll found. The telephone survey was conducted Feb. 10 to 12 with 1,124 adults, of whom 823 have not yet retired. The poll has a margin of sampling error of plus or minus three percentage points.

Economists and experts on retirement finance pointed to several factors behind the changes, primarily the baby boom generation's approach to retirement, its entrance into peak earning years, the shift from pensions to 401(k)-style plans and the strong performance of both the economy and the stock market until recently.

Some experts did question how much of the money described by poll respondents was actually new savings — more money being set aside — and how much represented either a shift of money an employer used to put into an old-fashioned pension, or the growth of an individual's existing investments. "A lot of savings might be in the form of capital gains," said John R. Gist, the associate director of the Public Policy Institute at AARP. "That money might not be there forever." 

In interviews, however, people almost invariably described themselves as long-term investors not fazed by the market's recent turmoil. "My husband is of the philosophy that whenever the market goes down, it will eventually go up," said Laura Joseph of Rockaway, N.J., a former teacher who left work to stay home with her children. Bob Roy, 44, of Bridgewater, Mass., said: "People were looking for a quick buck and they went into dot-coms. When people are more conservative, they do all right."

Over all, the string of good economic news over the last decade appears to have had more of an effect on attitudes than this winter's slowdown. While the percentage of Americans who described themselves as very worried about finances in retirement was nearly unchanged between this year and 1995, rising to 19 percent from 17 percent, the percentage of those who said they were "not at all" worried rose by a far larger amount, to 39 percent from 27 percent. And the number of respondents who called themselves "somewhat" worried dropped to 42 percent from 55 percent. 

But that new confidence was not evenly distributed. Among those making less than $30,000 a year, 32 percent described themselves as "very" worried about their financial future; that figure dropped to 6 percent among those making more than $75,000. David Laibson, an associate professor at Harvard University who studies economic behavior, said that the bulk of capital gains in recent years has gone to "a very small fraction of households."

"No wonder they feel secure," he said. "But it's hard to know if the middle class is getting enough to make a difference in their retirement."

Robert J. Willis, an economist at the University of Michigan who is overseeing a large study tracking household finances, said that question is hotly debated and has no clear answer. On the other hand, he said, that murkiness is a step forward from a consensus in the mid-90's among those who tracked savings data that Americans were not putting enough aside. 

Certainly plenty of Americans remain concerned about their personal prospects. The number who said they were planning to retire later than age 65 rose to 20 percent this year from 15 percent in 1995, with more than half of those who plan to keep working saying they will do so primarily for financial reasons.

"I think I'll just continue working," said Henry Kellerhals, a 44- year-old truck driver from Ringgold, Ga., who described himself as "very worried" about retirement, although he said he would switch to "a more enjoyable job." 

And the number of people who thought they had started saving too late also rose to 46 percent from 40 percent in 1995. 

This mix of confidence and concern was also reflected in responses involving Social Security. Americans are less pessimistic about the program's future than they were in the 80's and 90's: the number who thought it would fail to meet its obligations peaked in 1996 at 60 percent and is now 48 percent.

But poll respondents also described Social Security in ways that made it sound less important to their retirement planning. Currently, two- thirds of retirees depend on Social Security for more than half their income, and one-third get more than 90 percent from the program, according to government data. By contrast, only 15 percent of people polled said they expected Social Security to be their major source of income — a figure that drops to 9 percent among those under 30. Even among those over 45, the figure dropped to 21 percent from 34 percent in 1995. 

In interviews, even those who think Social Security will survive said they expect changes in its requirements and benefits, and are not counting on it as a future mainstay. "There will be some Social Security, but I'm not losing sleep over it," said Mr. Roy of Bridgewater, Mass. 

IF anything, the 401(k) is replacing Social Security and the traditional pension as the center of the nation's retirement planning: in the latest poll, 63 percent of people with retirement savings said that at least some of that money is in 401(k)'s, and 41 percent said that the bulk of such savings is in these accounts.

David Wise, an economist at Harvard University, said that he thought that the switch from old-style pensions to 401(k)-style plans benefited workers in two ways. One is that the new savings accounts are being offered to many workers whose employers had never provided any kind of pension. The other is that the combined employee-employer contributions to 401(k)'s are "much higher" than the average per-worker contributions made by companies alone to pension funds, he said.

William Gayle, a senior fellow at the Brookings Institution in Washington, also said that the 401(k) plans were thought by many people to be a better fit in a time of "increased job mobility and decreased job tenure." The old plans, he said, "really penalized people who changed jobs."

On the other hand, he added, the decline of plans that promise a pension for life has brought with it new risks, "because people may find themselves outliving their resources."

In interviews, the poll respondents were aware of how new realities in the workplace were changing the task of saving. Mr. Aguado, the audio engineer in Chicago, said, "The days of working for one company for 30 years and then retiring are pretty much done.

"Things are much more competitive these days," he added, and saving for retirement on your own has become a matter "of self-preservation."

Faith Bornoff, a 30-year-old child- care provider in Sandston, Va., also expects that she and her husband will depend primarily on the funds they have already started, but finds the new world of do-it-yourself saving a worrying one. "People usually want to help their kids, and I think that by the time our kids have grown, we will be able to retire but we won't have enough to help them," she said. "We've been able to save, but we've also had to switch companies. That makes it harder to plan. That's how it is these days. I can't imagine staying in one place for very long."

But even those who say they are worried often put such anxieties in some perspective. 

Patrick Horgan, 53, a fund-raiser for a nonprofit theater organization who lives in Middletown, N.J., thinks he and his wife started saving late. But he said that he is not worried "about basic survival."

"I worry about being able to hang onto my house or having to downsize to something else," he said. "We're not panicking, but we're realizing that we should have found a way to do more earlier."