Retirement needs of Baby Boomers are different

Baby Boomers have different investment needs depending on their "retirement savings profile," but share some common regrets when it comes to money: they are uneasy about the extent to which they have saved for retirement. Despite this -- and the fact that most will carry debt into retirement -- they have expectations of a comfortable lifestyle in retirement. These are some of the key findings from the OppenheimerFunds Investing for Retirement Survey released by OppenheimerFunds, Inc., a leading asset manager. The nationwide survey examined the financial behaviors and attitudes of 1,000 retirees and pre-retirees, most of whom are baby boomers. (Related article: Americans ready for a working retirement)

"Most of the Boomers we talked to have mixed emotions when it comes to money, feeling both regret and contentment," said Jim Ruff, President of OppenheimerFunds Distributor, Inc. "Many feel they could have planned better and saved more responsibly, but did not for various reasons." The survey findings revealed that both workers and retirees are uncomfortable with how much they have accumulated during their pre-retirement years. Ninety-seven percent of workers surveyed say that they regret how they and their spouse spent their money considering how much more savings they could have accumulated; 98% of retirees regret how they spent their money before retiring. Still, both groups continue to overspend and many are not concerned about rising costs for critical expenses such as healthcare. (Related article: Americans badly need help with retirement planning)

"According to our survey, self awareness, being realistic and proper planning are some of the keys for Boomers to achieve a successful retirement," said Ruff. "Boomers need to take a step back and evaluate how they've saved so far, gain a true understanding of future expenses and either formulate a plan or re-evaluate an existing one." (Related article: Retirement planning tips for Baby Boomers)

Boomer Profiles: Four Retirement Savings Personalities

To help boomers better plan for retirement, OppenheimerFunds, Inc. and Matthew Greenwald & Associates identified four "retirement savings profiles" based on levels of confidence and preparedness among non-retired boomers: smooth sailors (21% of respondents); nervous nellies (27% of respondents); hopeful idealists (29% of respondents) and pensive procrastinators (23% of respondents). (Related article: Are you prepared for retirement?)

"It's time to stop thinking of baby boomers as a single group and start addressing their specific financial needs," said John V. Murphy, Chairman, President and CEO of OppenheimerFunds, Inc. "Advisors can help boomers identify which segment they fit into and work with them to develop goals and plans to address their specific needs." (Related article: Always make your own financial decisions based on your personal situation rather than be guided by polls or politicians)

Smooth Sailors (Prepared and Unconcerned) 21% of non-retirees

This group is the most prepared of the four. They are the most likely to have an exact dollar amount in mind as their accumulation goal for retirement (50% do) or as their retirement income goal (42% do). They are more likely than the unprepared groups to have a written financial plan. Despite this, they will carry some debt (i.e. car loan, credit card debt) into retirement. This group is less likely than Boomers in other groups to expect to have a mortgage in retirement (15% expect to). (Related article: Americans still careless about retirement planning)

Some other characteristics of Smooth Sailors:

• They are most likely to say that, considering their age, they are very prepared for retirement (87%);
• They have saved more than others -- 22% have at least $1 million;
• They enjoy investing (43%) and consider themselves excellent or good investors (82%). (Related article: Not all Americans ready for the stock market)

"Like good sailors, this group seems prepared for nearly any situation," said Ruff. "This group enjoys investing and considers themselves successful at it, giving them confidence in their ability to cruise into a comfortable retirement."

Nervous Nellies (Prepared and Concerned) 27% of non-retirees

This group of non-retirees has taken many steps to achieve a secure retirement and believe they are prepared, but are worried that events beyond their control might compromise their ability to attain financial security. They are most likely to have a written financial plan (75%) and half have done a great deal of financial planning in the past year.

Some other characteristics:

• The majority (87%) are very or somewhat concerned about the possible effects of a market downturn and 80% are concerned about rising medical costs;
• They are more likely than any other group other than the Smooth Sailors to have accumulated a high amount in savings and investments (12% have at least $1 million).

One reason for this group's higher concern may be that they lack trust in their own investing abilities. They are the most likely to have a financial advisor, perhaps as a result of their lack of confidence in investing. "While it is impossible to control things such as market downturns and rising medical costs, people who worry a lot would benefit from incorporating these "potential" events into their plans," said Ruff. "Whether it is saving more, spending less or investing in specialized financial products that can help address specific needs, it is important for this group to take steps to ease their concerns." (Related article: Even millionaires concerned about retirement income)

Unrealistic Optimists (unprepared/unconcerned) 29% of non-retirees

These investors are not prepared yet are optimistic about their prospects for a comfortable retirement. Very few (15%) consider themselves very prepared for retirement and 72% say that, considering their age, they are only somewhat prepared for retirement. Yet 99% say they are looking forward to a comfortable retirement. (Related article: Personal finance tips for retirement)

Following are some other characteristics of Unrealistic Optimists:

• 60% have done little or no financial planning for retirement in the past year; 65% do not have a written financial plan;
• 20% admit to dipping into their retirement accounts for current needs;
• 32% do not have a retirement accumulation goal and 21% do not have a retirement income goal. Those who do have goals are more likely to have a general goal in mind vs. a specific dollar amount in mind.

Unrealistic Optimists expect to work for pay in retirement (58%) and are more likely to expect that they will need to spend less money in retirement to support their lifestyle than before retirement (59%). Boomers in this group are more likely than others to expect to carry credit card debt into retirement. "This group faces the biggest hurdle as they are living for the here and now rather than thinking long term," said Ruff. "They are making assumptions about retirement that are bolstering their carefree attitudes toward retirement planning."

Pensive Procrastinators (Unprepared/Concerned) 23% of non-retirees

The pensive procrastinators have not planned well and are worried about it. They do not consider themselves well prepared for retirement and are concerned that they will be unable to save enough money for a secure retirement. Despite this, 76% of this group say they expect to live a comfortable retirement.

Some other characteristics:

• 71% say they are somewhat prepared but only 6% consider themselves very prepared;
• 28% have dipped into retirement accounts;
• 59% expect to supplement their retirement income by downsizing their homes;
• 60% expect to work for pay in retirement;
• 56% expect they will spend less money in retirement than before they retired.

The low average income levels of this group may explain why they are more likely to have lower amounts in savings and investments (40% have less than $200,000). This group is also most likely to carry debt into retirement and almost half expect to have a mortgage and car loan in retirement.

"It's encouraging that this group is self-aware enough to realize that they need to do things to make up for their lack of financial planning," said Ruff. "They are realistic about their need to compensate for low savings and ongoing debt through other sources of retirement income such as downsizing their homes or working for pay."

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Source: Oppenheimer Funds