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Allstate’s retirement survey finds that just keeping up with peers isn’t enough if others are saving too slowly

NORTHBROOK, IL, August 9, 2006—Most Americans see themselves just cruising into retirement with their peers, regardless what kind of savings and spending habits they have in place now, according to Allstate’s 2006 “Retirement Reality Check” survey.

The sixth-annual survey, which measures Americans’ attitudes toward and savings for retirement, showed that, regardless of age, gender, education, income or geography, Americans generally consider themselves only “somewhat” prepared financially for retirement, and thus they have some fears about the years ahead. But when specifically asked, “If saving for retirement were like driving on the highway, where would you be?” almost half (48 percent) said they are “in the middle lane, keeping up.” 

Other responses were:
In the fast lane, passing others (20 percent of total respondents)  
On the on ramp, still getting started (14 percent)  
In the slow lane, watching others go by (13 percent)  
Lost and looking for a map (5 percent)

However, the Allstate survey did show clear links between the “lane” respondents say they are in, and specific actions they have taken—or not taken—to prepare financially and emotionally for retirement.

Life in the fast lane

For example, most people who describe their retirement savings as “in the fast lane” are saving aggressively, while those who are “lost” admit they aren’t saving much at all. “Fast laners” are more aggressive than any other group in making sure they and their spouses or partners have adequate life insurance and in establishing an emergency fund that could support their families for at least three months. The only step that a majority of “losts” have taken in making sure they have adequate auto and homeowners insurance.

Among the “middle lane” respondents, 88 percent said they have secured adequate homeowners and auto insurance, and 55 percent said they’ve saved enough money to support their families for at least three months. And 69 percent said they’ve made sure that they and their spouse or partner have enough life insurance.

In addition, 57 percent of the “fast-lane” respondents say that in terms of their retirement readiness they are “very prepared,” and another 38 percent say they are “somewhat prepared.” Among those in the “middle lane,” 78 percent say they’re “somewhat prepared,” and only 14 percent say they are “very prepared” financially for retirement.

Overall, 21 percent of respondents say they are “very prepared” and 59 percent say they are “somewhat prepared.” 

“The good news is that most people do have time to find a map and get on the right road,” says Casey Sylla, president, Allstate Financial, a subsidiary of Allstate Corp. “As with driving, doing nothing won’t get you to your destination. And to continue with that analogy, people should work to move over one lane at a time rather than thinking they need a plan to take them instantly from the on ramp to the fast lane.”

On a road to nowhere

The “lost” respondents are a significant departure from the general optimism, with 1 percent calling themselves “very prepared” and 26 percent saying they are only “somewhat prepared.” A sobering 57 percent of the “losts” say they are “very unprepared” financially, and another 17 percent say they are “somewhat unprepared.”

At the same time, more than 70 percent of the “lost” drivers say they expect retirement to be fulfilling, fun and relaxing. More than 90 percent of respondents in the “slow lane,” “middle lane” and “fast lane” say that, as well as more than 80 percent of those on the “on ramp.”

Driving demeanors

Despite overall optimism, the Allstate survey did identify some attitudinal differences among those on the road to retirement. For example, “lost” respondents were significantly more likely to anticipate a retirement that is boring (39 percent), depressing (34 percent) or lonely (26 percent). All other groups were significantly less likely to describe retirement in this way.

“Fast-lane” respondents were more likely to call themselves disciplined (97 percent) compared with the overall (93 percent), and compared with the “lost” (81 percent) and “on-ramp” (91 percent) respondents. Respondents in the “middle lane,” closely mirrored the overall figures, with 94 percent saying they are disciplined.

Differences among the various “lanes” were even more pronounced when questions concerned financial issues. Not surprisingly, the “losts” were most nervous, with 83 percent saying retirement will be “uncertain,” and 87 percent saying it will be “financially difficult.” A majority of “on-ramp” and “slow-lane” respondents said those things as well, but not to the extent of the “losts.”

By comparison, 25 percent of the “fast laners” and 43 percent in the “middle lane” said retirement will be uncertain; 15 percent in the “fast lane” and 31 percent in the “middle lane” said retirement will be financially difficult.

The “losts” are clear on why they are so worried; 48 percent admit they are not saving at all for retirement, and another 38 percent say they’re saving some money, but not seriously. That compares with the majority of “middle-lane” and “fast-lane” respondents, who say they are saving seriously for retirement. The majority of “on-ramp” and “slow-lane” respondents said they are saving, but not seriously.

“The link between ‘being lost’ and not saving is so clear it should be a wake-up call to people who feel concerned about their futures,” said Mathew Greenwald, Ph.D., president of Mathew Greenwald and Associates Inc., the Washington, D.C. firm that conducted the survey for Allstate. “There’s a reason for that concern—not having enough money could have severe consequences.”

Driving hazards

Regardless of which lane they believe they’re in, a majority of all respondents worry about affording health care after retirement. “On-ramp,” “slow-lane” and “lost” respondents also are concerned about not having enough money for the extras that make retirement worthwhile. These two groups also worry most about having to ask children or friends for money.

Not surprisingly, a whopping 85 percent of “losts” say they expect they’ll have to work after retirement, with 52 percent saying it’s “very likely” they’ll do so. That compares with 68 percent overall who say they may work after retirement, and 25 percent saying that scenario is “very likely.” Among the fast-lane respondents, 56 percent said they may work, but only 19 percent said it’s “very likely.” And among those in the “middle lane,” 22 percent say it’s very likely they’ll work after retirement, while 47 percent say it’s somewhat likely.

Lane shift

When they read stories in the media about Americans not saving enough for retirement, those on the “on ramp,” “slow lane” and “middle lane” say they think about saving more. And 39 percent of  those who are “lost” say they think about saving more—but the same percentage admit they think they’ll deal with it another time.  “Fast laners” say those stories don’t apply to them.

Savers on the “on ramp” and in the “slow lane” said that learning more about investments would be the most effective way to encourage them to save for retirement (38 percent and 34 percent respectively). But those in the “middle lane” and “fast lane” said having a payroll-deduction system at work would be the most effective. Interestingly, those who are “lost” most strongly supported a workplace payroll-deduction plan—44 percent.

“It is frustrating to see people consistently admit they don’t save enough, but at the same time say they’re optimistic about the future,” says Sylla. “The key is to find a way of thinking that drives people to act—in this case, to save more for their retirement.  Perhaps using this comparison will help Americans think differently and lose the ‘blind spot’ when it comes to preparing for retirement.”

For more details regarding the Allstate “Retirement Reality Check” survey on highway lanes, read the mini executive summary.

Allstate created the sixth-annual Allstate “Retirement Reality Check” survey in conjunction with Mathew Greenwald & Associates. Using a random digit dialing methodology, Greenwald & Associates polled 1,603 people born between 1946 and 1978, with household incomes of $35,000 or more. Retirees were accepted with incomes of at least $20,000.  The margin of error (at the 95 percent confidence level) for the total number of respondents in this study is ±2.5 percent, ±3.8 percent for information specific to Gen Xers, ±4.5 percent for Baby Boomers, and ±5.0 for Silent Generation.
Now celebrating the 75th anniversary of the founding of Allstate Insurance Company, The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate®” slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 14,100 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at allstate.com and 1-800 Allstate®. EncompassSM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. The Allstate Financial Group provides life insurance, supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.

RANCHO CORDOVA, Calif. (Sept. 1, 2006) –  Allstate Insurance Company filed today with the California Department of Insurance (CDI) a new rating plan for homeowners insurance designed to preserve the company’s ability to write homeowners insurance in California given the state’s vulnerability to natural disasters.

If approved by the CDI, Allstate’s new rating plan will more accurately reflect the capital required to write California homeowners insurance and increase rates by an average of 12.2%, or an estimated $96 million in annual premium, the company’s first rate increase in more than three years. 

“Our top priority is to protect our policyholders by ensuring we have the resources to be there for the hundreds of thousands of Californians who look to us for homeowners insurance protection,” said Robert H. Barge, III, field vice president for Allstate’s California region. “If approved, this rate filing will put Allstate in an improved position to deal with the volatility of natural catastrophes in the California homeowners insurance market.

Since Allstate’s California homeowners rates were last approved by the CDI in 2003, a number of factors have combined to significantly increase costs and exposure to risk in California:

Based on scientific study and analysis, professional catastrophe risk modeling firms have revised their models to reflect higher insured losses as recent disasters have revealed that those models previously underestimated post-catastrophe rebuilding expenses especially in large metropolitan areas.

Independent rating agencies have increased the capital requirements for property and casualty insurers to retain acceptable financial strength ratings.

The cost of catastrophe reinsurance has increased significantly.  Allstate spent nearly $70 million on reinsurance in California in 2006, a cost that is not reflected in current rates.

The cost of rebuilding homes increased dramatically in the state, increasing property insurance exposure.

Allstate remains accountable for as much as $800 million in potential earthquake claims through the California Earthquake Authority’s industry assessments.  The cost of ensuring the availability of that capital is not reflected in Allstate’s current rates.

The recent trend of drier, warmer summers leaves California increasingly susceptible to the threat of more frequent and intense wildfires.

“We have been fortunate that California was spared any major catastrophes in 2004 and 2005, but we only need to look back one more year to the Southern California Firestorm of 2003, which cost Allstate approximately $300 million,  to be reminded of how tragic and costly catastrophes can be in California,” said Barge.  “It would be a poor gamble to continue to hope for good fortune to protect the state from catastrophes.” 

In April of this year, independent rating agency A.M. Best Company, Inc. published a paper detailing their revised methodology for evaluating insurers’ financial strength and ability to meet obligations to policyholders. Calling catastrophic loss “the No. 1 threat to the financial strength and credit quality of property and casualty insurers,” Best increased capital requirements to maintain the same rating. 

In June, the CDI initiated a process to review homeowners insurance rates in California, including those of Allstate.  As part of that process, the CDI has indicated it is looking to determine whether it should order a reduction in homeowners rates.  Allstate and the CDI have agreed to use a homeowners rate filing to examine Allstate’s homeowners rates.  The outcome of the rate filing and the review process remains uncertain. 

“We appreciate the opportunity to present Allstate’s view on how to determine appropriate homeowners insurance rates including how to factor in new capital reserve requirements from independent rating agencies and new data from modeling firms showing increased risk for catastrophic loss,” Barge said.  

Today’s rate filing comes at a time when The Allstate Corporation has been reviewing its exposure for catastrophic property losses in high risk states nationwide.  Allstate has already announced actions in multiple states designed to help ensure its ability to be there for the millions of Americans who look to it for home, auto and life insurance protection.

Now celebrating the 75th anniversary of the founding of Allstate Insurance Company, The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate®” slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 14,100 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at allstate.com and 1-800 Allstate®. EncompassSM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. The Allstate Financial Group provides life insurance, supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.

Allstate Survey Also Shows Women Need to Adopt Tougher Attitude As They Approach Saving for Retirement to Avoid the Poverty Trap

NORTHBROOK, IL, Oct. 16, 2006—Women clearly have gotten the message that they are likely to spend at least some of their retirement years alone because of divorce or the high probability of outliving their husbands. The U.S. Department of Labor has estimated that nearly 90 percent of women will end up managing their finances alone. Unfortunately, this realization has not translated into concrete steps—including frank financial discussions with their husbands or partners, according to the sixth annual Allstate “Retirement Reality Check” survey.

The 2006 survey, which measures Americans’ attitudes toward and savings for retirement, showed that almost half of women (48 percent) have considered the financial implications of retiring alone, compared with 36 percent of men.

Not surprisingly, the Allstate survey showed that women are slightly more likely than men to say they are planning for retirement separately from their spouse or partner (37 percent of women versus 32 percent of men). The steps these women are most likely to take are making sure their spouse or partner has adequate life insurance (84 percent of women versus 75 percent of men) and a will (54 percent of women versus 52 percent of men).

Among women, 49 percent said they invest money separately from their spouse or partner, compared with 43 percent of men. And 42 percent of women said they maintain a separate savings account, compared with 28 percent of male respondents.

But the survey also highlighted two potential barriers between women and a financially comfortable retirement. First, almost half of the women respondents (45 percent, as well as 65 percent of men) said the husband or partner takes the lead in planning for retirement. Second, couples appear to believe that just “a simple conversation” keeps their plan on track; 48 percent of women and 58 percent of men said that’s all that is needed to get their partner to take a specific action regarding saving for retirement. But, that confidence may conceal serious defects in planning for retirement.

Tough conversations needed

“The reality is that women must feel capable of handling planning for retirement on their own, because there is a strong likelihood they’ll spend at least some of their retirement years alone,” said Casey Sylla, president, Allstate Financial, a subsidiary of Allstate Corp. “Statistics show women are more at risk of ending their lives in poverty or a nursing home . And, only planning and follow-through can prevent that. The first step is a frank discussion with your spouse or partner about retirement goals, and how much you need to save to achieve those goals.”

More than half of women (54 percent) said they know “a great deal” about what their husbands or partners want out of retirement. But only 39 percent of men—the ones supposedly taking the lead in planning—said they know “a great deal” about what their wives or partners want to achieve.

More sobering, few respondents said they feel “very prepared” financially for retirement, although men are a bit more optimistic than women (23 percent of men versus 19 percent of women).

“There is a huge disconnect in people’s attitudes,” said Barbara Stanny, author, “ Prince Charming Isn’t Coming” and speaker on women and financial issues. “On the one hand people say they expect a terrific, fun and exciting retirement, and on the other hand they say they haven’t saved enough. Denial is the most dangerous habit we have to break. This isn’t just about women being alone in retirement. It’s denial about the need to start saving earlier.”

Stanny reiterates that the stakes are higher for women, since they’re likely to be alone at some point in retirement. She said women need to break planning for retirement and savings into manageable chunks rather than ignore the issue. “And you don’t have to do it alone. Talk about it with your spouse, with other women, with financial professionals.”

Conversation starters

Mathew Greenwald, Ph.D., president of Mathew Greenwald and Associates Inc., the Washington , D.C. firm that conducted the survey for Allstate, said couples need to approach the planning for retirement conversation thoughtfully. “Talking about retirement dreams is the fun part, but talking about the financial steps to achieve those dreams can be difficult, especially if part of the conversation needs to address the likelihood that the wife will outlive the husband,” he said. “Nobody wants to start a conversation by contemplating his own death!”

Greenwald suggests that couples identify broad and neutral topics to start a conversation about retirement. One starting point is an annual event, such as filing taxes, reviewing life insurance coverage or making decisions about employee benefits.

“Couples also need to understand and capitalize on the different perspectives their partners have,” Greenwald said. “For example, women tend to be responsible for day-to-day expenses, and thus are focused on current finances, while men think longer-term. Perhaps a neutral conversation-starter is for the wife to lay out the costs of running the household for a month, and asking whether their retirement savings will be adequate to cover this amount—or whether these are the expenses they expect to have in retirement.”

Because lifestyle is the driver of retirement expenses, Greenwald said any conversation ultimately needs to address how couples want to live. Those differences need to be addressed before it’s possible to budget accurately, he said.

Another key element is to decide what tradeoffs are acceptable, Greenwald said. Couples may be willing to work longer to save more for a high-cost retirement, or they may be willing to scale back lifestyle plans so they can retire sooner. Another option is to plan to reduce lifestyle, and costs, some years into retirement to stretch savings further, continues Greenwald.

The fear factor

Part of planning is recognizing fears and identifying what can be done to eliminate or lessen the possibility of the worst coming true. For all survey respondents, the top fears concerned health care costs and the availability of care. Women were more likely than men to worry about not having enough money to afford the “little things” that make life worthwhile, or to end up being a burden on children.

“Regardless of their worries, everybody needs to think of retirement in financial terms,” Stanny said. “And one gender isn’t automatically more adept than the other when it comes to finance. In my experience, men were raised to be financially successful, and women were raised to be financially dependent. But no one taught either gender how to manage money. The good news is that it’s not that difficult to learn, and it’s never too late to start.”

For more details regarding the Allstate ” Retirement Reality Check ” survey on Women and Retirement, read the Executive Summary.

Allstate created the sixth-annual Allstate “Retirement Reality Check” survey in conjunction with Mathew Greenwald & Associates. Using a random digit dialing methodology, Greenwald & Associates polled 1,603 people b or n between 1946 and 1978, with household incomes of $35,000 or m or e. Retirees were accepted with incomes of at least $20,000. The margin of err or (at the 95 percent confidence level) f or the total number of respondents in this study is ±2.5 percent, ±3.5 percent f or inf or mation specific to Gen Xers or Baby Boomers.

Now celebrating the 75th anniversary of the founding of Allstate Insurance Company, The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate®” slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 14,100 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at allstate.com and 1-800 Allstate®. EncompassSM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. The Allstate Financial Group provides life insurance, supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.