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From Spending To Savings: Ten Years Shows Shift In Mind-Set Of Nation's Baby Boomers

Affluent Boomers Confront Realities of Retirement Planning, Express Concern For Protection of Income and Show Increased Optimism For American Dream

New York, N.Y. - Affluent baby boomers have shifted their financial focus towards the future and retirement planning, according to the latest AXA Nest Egg Study, commissioned by AXA Financial, Inc. The study, which was first conducted in 1993, revealed there is a new focus on retirement planning, a concern for the protection of income for a surviving spouse, an increase in financial sophistication, and a greater belief in the American dream of success among baby boomers compared to ten years ago.

Today, with an uncertain economy and the impact of 9/11 contributing to attitude and behavior, surprisingly, some 75% of those surveyed agree that the American dream of success is alive, vs. 58% who agreed in 1993, and the proportion who believe that it is unrealistic to think their children will be better off than they are dropped by 13 percent (from 57% in 1993 to 44% in 2003).

The survey also indicates a shift in the financial mind-set and behavior of baby boomers. In 2003, 43% -- compared to only 26% in 1993 -- said that their single greatest economic concern was having adequate resources in retirement. The proportion putting a higher priority on providing a financial base for their retirement grew from 43% (1993) to 55% (2003).

The AXA Nest Egg Study polled 701 baby boomers born from 1946 to 1964, with annual household incomes of $75,000 and above. The AXA Nest Egg Study, conducted by the independent research firm Mathew Greenwald & Associates, was administered over a four-week period in August, 2003. The comparative data from the 1993 Equitable Nest Egg Study is based on a survey of 600 baby boomers in households earning $50,000 a year at that time.

Financial Planning and Advice

Three quarters of baby boomers either have or would likely use a financial professional for planning advice, and six in ten (63%) reported that they currently have a formal financial plan vs. 62% in 1993. Half of those who do not have a financial plan say they intend to develop one.

Those with a financial plan have higher goals for setting aside money ($43,000 for those with a plan vs. $27,000 for those without a financial plan) and are more likely to achieve those goals (86% of those with a plan vs. 74% without a plan).

Furthermore, this group has maintained their strong savings orientation. 84 percent reported that they have tried to save in the past year or two vs. 81% in 1993. Most respondents attempt to set aside either a specific dollar amount or a fixed percentage of earnings for savings. The typical annual savings objective is $10,000 vs. $7,843 or 10 percent of earnings in 1993 (1993 dollar values have been adjusted for inflation).

In order to "feel financially secure," affluent baby boomers continued to indicate they need substantial assets - $1 million in 2003 and $1.2 million in 1993 - and about 30 percent of that amount should be in liquid form (savings and investments minus real estate) vs. 20 percent in 2003.

"One of the reasons we commissioned the study was to determine how the baby boomers’ attitudes towards personal finances, setting priorities and achieving their future financial goals for themselves and their children have changed over the past ten years," stated Christopher "Kip" Condron, president and CEO, AXA Financial. "It’s clear they are more sophisticated about investing and place a greater importance on financial planning."

Boomers’ Saving/Spending Strategies

There are strong signs of increased financial sophistication among baby boomers. Fewer cited balancing savings and financial security as their single greatest financial concern (9% in 2003 vs. 17% in 1993), indicating that they had this area of finances under control. Almost all, and more than in 1993 (90% now and 81% in 1993), indicated that they intend to live within their means and depend less on credit in the future. They are using more sophisticated financial vehicles. The usage of IRAs as a primary investment has risen strongly, (40% in 2003 and 17% in 1993), while reliance on CDs and money market accounts went down to 14% from 23% in 1993. The second most frequently mentioned primary investment vehicle is mutual funds (44%) and a third tier includes life insurance and individual stocks and equities.

"These findings seem to indicate baby boomers are seeking wiser investments for savings – vehicles that offer diversity, long-term growth potential and tax-deferred benefits," commented Mr. Condron.

Additionally, although most baby boomers did not characterize social security as a key source of retirement income, 56% vs. 44% in 1993 indicated it had some importance in planning for retirement.

Looking Ahead

A large majority of respondents acknowledge that their spouses’ lifestyles would diminish upon their deaths (82%) and their own lifestyles would diminish upon their spouses’ deaths (87%) – especially women who believe their lifestyle would be severely diminished -- 19% vs. men 3%.

Additionally, a large share of baby boomers -- 66% -- feel it’s important to create an inheritance for their heirs or for a charity. Among those who plan to leave behind an estate, 76 percent said they plan to leave at least $100,000 and three-quarters of respondents (76%) believe they will be able to achieve their goal.

"The findings indicate that many boomers are interested in preserving more of what they’ve earned for the people and things they care about," commented Mr. Condron. "Additionally, there’s an opportunity for life insurance to play a greater part in addressing their desire for protection against a decline in lifestyle upon the loss of a spouse."

AXA Financial, Inc., with approximately $458 billion in assets under management as of June 30, 2003, is one of the world’s premier financial services organizations through its strong brands: The Equitable Life Assurance Society of the United States, AXA Advisors, LLC, Alliance Capital Management, L.P., Sanford C. Bernstein & Co., and its premier wholesale distribution company, AXA Distributors, LLC. AXA Financial is a member of the global AXA Group, a worldwide leader in financial protection and wealth management.