All Know the Need, but Few Save Enough

Orange County residents are keenly aware of the need to save money for the future. The bad news is most are nowhere near to meeting their goals.

In a Times Orange County Poll conducted in March, saving for retirement was identified as the top financial goal, with 30% of respondents naming it as their main objective.

That was followed by 16% who said that saving for their children’s education was their chief financial goal.

But more than one-quarter of the people responding had less than $5,000 in total savings outside any equity in their house. An equal percentage had from $5,000 to $25,000 saved.

Only 22% had $100,000 or more stashed away.

Having little in savings might be of less concern to young people. But the poll also showed a shortfall among those in the older age brackets.

Nearly two-thirds of county residents 35 to 54 years old had less than $100,000 in total savings. And among the 55-and-older crowd, 54% had less than $100,000 saved.

The gap between people’s aspirations and what they’ve achieved so far is a problem that is growing more acute, financial experts say.

People are living longer, which raises the bar significantly in terms of how much they’ll need to maintain a comfortable lifestyle after retirement.

At the same time, college costs are rising rapidly, making it imperative for parents to begin putting money away for their children’s education many years before they’ve earned their high school diplomas.

“If college costs continue to grow at 7% to 8% a year, the numbers are really astronomical what it’s going to cost,” said Mike Hulley, a manager with Merrill Lynch in Santa Ana.

“You really need to start early--I mean, very early.”

Coping With Today

In the Times Orange County Poll, six in 10 adults with children said they were saving less than $1,000 a year for their children’s college education, and 38% said they weren’t satisfied with the amount they’d set aside.

Some county residents say it’s been tough enough coping with the present, much less trying to stow money away for tomorrow.

“I’m a middle-aged, white, Anglo-Saxon male baby boomer who had pretty much worked all his adult life and got downsized out on the pavement,” said Wayne Russell.

The 50-year-old Costa Mesa resident has a master’s degree in public administration and worked for years in the capital planning departments at various universities, most recently at Cal Poly Pomona.

Since he lost that job to budget cuts in 1995, he’s been trying to make ends meet by doing some contract work for a construction management firm and through a variety of home-based businesses.

He’s tried signing up customers for telecommunications services, selling food supplements and marketing photo packages to schools. His latest venture is operating vending machines.

With all that, Russell has been able to pull in about $25,000 in annual income, far below the $80,000 he earned before he was laid off.

The divorced father of three said his biggest goals are saving for retirement and helping send his 16-year-old daughter to college. But his retirement savings were wiped out in his divorce settlement, and so far he hasn’t been able to put any money away for his daughter’s education.

“It’s a really rough way to go, because our generation was brought up learning if you go to school and work hard, you’re going to be a success,” Russell said.

“It’s a rude awakening.”

Economists say that people are in for an even ruder eye-opener if they don’t increase their savings.

Recent data show that Americans are taking such warnings to heart.

For the last two years, personal savings have climbed steadily. By the end of 1996, savings represented 4.9% of disposable income, up from 3.8% two years before, according to the Commerce Department. That’s still below the 8% to 9% rate of the early 1980s, but the upswing was widely viewed as a positive development.

In Orange County, half of the Times poll respondents said they were putting money into their employers’ 401(k) plans. Financial advisors say that’s one of the best investments any individual can make.

Scott Walker, a financial planner who designs retirement plans for large employers such as the city of Costa Mesa, said he’s encouraged by a pronounced trend the past couple of years of more people participating in 401(k) plans and other savings vehicles.

“I just see a big mind-shift in the baby boom generation as far as focusing now on savings,” he said.

But Americans still need to save more, experts say.

Savings are “slightly better than they were, but they’re not nearly enough,” said Michael J. Boskin, former chairman of the President’s Council of Economic Advisers and now a Stanford University economics professor.

In a Merrill Lynch survey published last year, the proportion of people nationwide who said they were saving actually decreased from 1995, after growing steadily through the first half of the decade.

Also, the amount of income allocated to retirement savings had not increased throughout the decade, the study found. And well over half of those surveyed said they were “very concerned” about their ability to fund their children’s education.

Retirement Needs

Tom Boyle knows how difficult it is to save, even with a steady job.

Boyle, 50, lives in Tustin and works for a health-care company enrolling seniors in a Medicare plan. He sees firsthand the dire straits some seniors are in today, and that makes him appreciate his own need to prepare for retirement.

“It’s real dismal, the way these people live now,” he said. “I’ve got 15 years before I retire, so I’m in a terrible situation.”

Boyle put $5,000 into a college fund for his 14-year-old son as part of a divorce settlement eight years ago. But during lean times he cashed out his former 401(k) fund. Now he’s investing in another 401(k), but “it’s not enough, nowhere close” to what he’ll need, he said.

Having to scrape by after retirement is a reality Cecilia Feldman knows all too well.

The 71-year-old Cypress widow, a former census taker, lives on Social Security payments and a small pension. She finds each day a struggle to get by.

One grandson, a college student, lives with Feldman, and she helps watch some of her other grandchildren while her own children are at work.

Feldman also cared for one of her daughters during a five-year bout with cancer. By the time her daughter died, Feldman had gone through her savings and accumulated more than $30,000 in debt. She declared bankruptcy at the end of last year.

An upcoming knee transplant will be covered by Feldman’s medical insurance, but even the $5 she pays for each of her various prescriptions is difficult to manage.

“It’s impossible to save,” she said.

“I don’t know, I honestly don’t know what I would do” if an emergency arose.

No Cushion for Crisis

She is not alone.

Not only are county residents finding it tough to prepare for their long-term goals, but they also have little to cushion them if disaster strikes.

In the Times Orange County Poll, 22% said they had less than $1,000 available in case of a crisis such as the loss of a job or a medical emergency. A total of 44% had less than $5,000 saved for such an event.

Still, people in Orange County are more positive about the future than is the nation as a whole.

More than eight in 10 county residents feel at least somewhat secure economically, the poll found, compared with 66% who responded similarly in a national poll last fall.

Ben Gehrman is one of those who feels secure.

Gehrman, 54, sells cigars for a living, and the income from his wife’s job in a doctor’s office goes toward their savings in CDs and IRAs. He doesn’t buy anything unless he can pay cash, and hopes to keep working until he’s 70.

But does the Cypress father of two have enough saved for his 16-year-old’s college education?

“From what I’ve read, it’s not enough,” he said. He’s hoping that she’ll win a scholarship, but when it comes time to support her through college, “we’ll just do it,” he said.

College Fund Woes

For John Driver, 36, saving for retirement and the education of his seven children are his biggest goals. With his oldest daughter starting college in the fall, one of those bills is coming due soon.

Despite earnings of about $95,000 a year, the Cypress postal union official has been able to put away only about $20,000 for college costs, and he knows that’s not enough. As it is, he works overtime or helps people with their taxes to bring in a little extra money to cover birthday and Christmas gifts.

He wishes he could do more to give his kids the little extras they crave. “Everyone wants a TV in their room,” he said sighing.

Now Driver figures the only way he’ll be able to save all he needs is to boost his income through career advancement, more outside work, or by investing more in real estate or the stock market.

But for many people, said Merrill Lynch’s Hulley, the best way to save is to have money taken out of every paycheck and automatically deposited into an investment account.

“The key,” he said, “is getting started.”

That’s a painful prospect for Russell, the laid-off university planning official who said he’d gladly start saving if he could find another full-time position. He’s blanketed the country with resumes, but so far has had no bites.

Retirement, he said, “is a big dragon sitting out there, and it’s pretty scary.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Secure for Now; Retirement Troubling

A feeling of economic security pervades Orange County despite little savings by many residents and small amounts available to meet a financial emergency. Older adults have more savings and rainy-day funds than younger people.

How economically secure do you feel?

Very secure: 29%

Somewhat secure: 52%

Somewhat insecure: 12%

Very insecure: 6%

Don’t know: 1%

*

All together, how much do you have in total savings, excluding your house but including your retirement?

*--*

55 and Total 18-34 35-54 older Less than $5,000 26% 41% 15% 17% $5,000-$10,000 12% 16% 11% 8% $10,001-$25,000 14% 17% 12% 10% $25,001-$50,000 10% 9% 13% 9% $50,001-$99,999 10% 6% 14% 10% $100,000 or more 22% 6% 28% 42% Don’t know 6% 5% 7% 4%

*--*

*

How much savings do you have that is available for special needs, such as a loss of income or salary for three to six months, or a medical emergency in your family?

*--*

55 and Total 18-34 35-54 older Less than $1,000 22% 33% 14% 19% $1,000-$5,000 22% 27% 22% 13% $5,001-$10,000 19% 15% 25% 16% $10,001-$20,000 11% 9% 10% 15% More than $20,000 20% 11% 22% 34% Don’t know 6% 5% 7% 3%

*--*

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Future a Problem?

Having enough money for retirement is the top financial goal of Orange County adults. Most are at least somewhat worried about having enough savings and do not believe Social Security will be there for them. Half would like to leave the work force before age 60. That seems unlikely, though, because half of those not already retired say they are contributing nothing to a retirement account.

What would you say is currently your biggest financial goal?

Money for retirement: 30%

Money for children’s education: 16%

Pay off loans and debts: 15%

Buy a house: 14%

More money to live on: 13%

Other: 7%

None: 4%

Don’t know: 1%

*

How worried are you about not having enough savings for retirement?

Very worried: 16%

Somewhat worried: 42%

Not worried: 42%

*

Do you think the Social Security system will have the money available to provide the benefits you expect for your retirement?

Yes: 22%

No: 70%

Don’t know: 8%

*

At what age would you like to retire?

Younger than 50: 12%

50-59: 39%

60-64: 25%

65-69: 14%

70 or older: 7%

Don’t know: 3%

*

About how much are you contributing to an IRA, Keogh account or other retirement account each year? (excludes retirees)

Nothing: 49%

$1-less than $1,000: 9%

$1,000-$3,000: 16%

$3,001-$5,000: 5%

More than $5,000: 10%

Don’t know: 11%

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College Bound?

Saving for their children’s education is also a financial concern for residents, but parents are not particularly satisfied with the money they are putting away for that purpose.

Overall, how satisfied are you with the amount of money you have set aside for their college education?

Very satisfied: 22%

Somewhat satisfied: 32%

Somewhat dissatisfied: 16%

Very dissatisfied: 22%

Don’t know: 8%

*

About how much are you saving for your children’s college education per year?

Nothing: 35%

$1-less than $1,000: 24%

$1,000-$3,000: 17%

$3,001-$5,000: 6%

More than $5,000: 9%

Don’t know: 9%

Source: Times Orange County Poll