lMPLICATlONSgFOR FAMILY FiN‘ANClA’L MANAGEMENT? - BASED‘UPON CURRENT RETIREMENT pLANSOF A; .- 5 SELECTED GROUP OF MICHIGAN RESIDENTS ' ‘ Thesis for-the Degreeof M. A.. ‘ T MICHIGAN STATE UNIVERSITY RUTH MILLER REINOEHL 1953‘ Truss ’mpgAhx.‘ \ W 115%, m gm . l ABSTRACT INPLICATIONS FOR FANILY FINANCIAL MANAGEMENT BASED UPON CURRENT RETIREMENT PLANS OF A SELECTED‘GROUP OF MICHIGAN RESIDENTS by Ruth Miller Reinoehl The purpose of this study was to analyze the anticipated financial resources and plans for retirement of a selected group of lichigan residents and to draw implications from the findings for teaching family financial nanagement. A revies of the literature shoved that many studies were concerned with the sociological and psychological aspects of retirement, but few focused on individual financial planning for retirement. is the aged segment of the population becomes larger and the span of retirement years becomes longer, adequate financial planning for this period is of greater importance. Pensions of various types and Social Security benefits provide most of the income for retired persons, but since the vast majority of these are fixed dollar incomes they are adversely affected by inflation making supplemental income necessary if the level of living for the retired is to remain constant throughout the retirement years. The sample for this study consisted of 403 persons employed in various capacities at a university. The date, originally gathered for another purpose, was collected by means of a mailed questionnaire. Ruth Miller Beinoehl The following hypotheses were developed as focal points for the analysis of the data: 1. A significant relationship exists between the estimated retirement income and the distribution of sources that make up the estimated retirement income. 2. A significant relationship exists between the estimated retirement income and the amount of that income that comes from variable dollar sources. 3. The higher the expected level of estimated retirement income the earlier the retirement income planning occured with respect to the age of the recipients. Vithin the limits of the data. hypotheses one and two were supported. 0f the 158 persons expecting estimated retirement incomes from five or more sources, 59 percent were in the higher range of expected retirement income ($6000-310,000 and over) and only 13 percent in the lower range ($0-35999). The data did not distinguish between all variable and fixed dollar sources of expected retirement income inasmuch as stocks and bonds were combined into one category and Teachers Insurance ‘ and Annuity Association and College Retirement Equities Fund combined in another. However, the results of the statistical , testing of the second hypothesis strongly suggested the existence of a significant relationship between the estimated retirement income and the amount of that income derived from variable dollar INICOI s Ruth liller Reinoehl Hypothesis three was neither supported nor negated by the data, since information on when the older respondents started their financial planning was not available. The analysis of the data does show a trend in the timing of the accumulation of assets in relation to age. For the respondents under 50 years of age, real estate and life insurance were the major areas of investments. For those persons over 50 there was a considerable increase in investments in stocks, bonds and savings, real estate remained fairly constant, and life insurance became less impor- tant as the age of the respondent increased. The evidence suggests some important implications for those interested in the teaching of family financial management. Among these are the need for encouraging an active interest in including preparation for this part of the life cycle in the family financial plans long before the actual retirement age is reached, and for emphasising the necessary skills for making and carrying out realistic financial retirement plans. IMPLICATIONS ma nan! rmumun. umcnmrr ' mam) UPON 0mm RETIREMENT runs or A smc'rnn snow or neuron mmms by Ruth Killer Reinoehl A THESIS Submitted to 7 Iichigan State University in partial fulfillment of the requirements for the degree of EASTER OF ARTS Department of Family and Child Sciences 1968 \1’ ‘ '1 (aw/b 7;..- .3’“/ ;* *1 If '~" I - r TABLI or CONTENTS 2 Page Ac gamma“ e O I O O O O O O O O O 0 I I O 0 £ ‘ LIST or TABLES. . . . . . . . . . . . . . . . . ; iv Chapter I. INTRODUCTION . . . . . . . . . . . . , . 1 11. anvxsv or LITERATURE . . . . . . . . . . a 111. METHODOLOGY. . . . . . . . . . . . . '.' 28 IV. trunxxas ann.axlnrsxs. . . . . . . . .P. 34 v. summer ARD xupucuxons . . . . . . . . 95 BIBLIOGRAPHY. . . . . . . . . . . . . . . . .i. 3 110 mmnnm.................:,..‘114 ”pmnBCOOIOOOOOOOOOO0000:00118 111 TABLE I. 5. 6. 7. 10. ll. 12. 13. 14. 15. LIST OF TABLES Income Expected From University Pensions by Estimated Income Categories. Age: Under 40. . . Income Expected From TIAA-CREF Pensions by Estimated Income Categories. Age: Under 40. . . Income Expected from Social Security Benefits by Estimated Income Categories. Age: Under 40. . . Income Expected From Civil Service by Estimated Income Categories. Age: Under 40. . . . . . . . Income Expected From Other Sources by Estimated Income Categories. Age: Under 40. . . . . . . . Cash Value of Life Insurance (in thousands) by Estimated Income Categories. Age: Under 40. . . Value of Stocks and Bonds (in thousands) by Estimated Income Categories. Age: Under 40. . . Value of Savings (in thousands) by Estimated Income Categories, Age: Under 40. . . . . . . . Value of Real Estate (in thousands) by Estimated Income Categories. Age: Under 40. . . . . . . . Income Expected From University Pensions by Estimated Income Categories. Age: 40-49 Years . Income Expected From TIAA-CRI! Pensions by Estimated Income Categories. Age: 40-49 Years . Income Expected From Social Security Benefits by Estimated Income Categories: Age: 40-49 Y.‘r. O O O O O O C O O O O O O O O D O O O O 0 Income Expected From Civil Service by Estimated Income Categories. Age: 40-49 Years. . . . . . Income Expected From State of Iichigan by Estimated Income Categories.- Age: 40-49 Years . Income Expected From Royalties and Patents by Estimated Income Categories. Age: 40-49 Years . Page 35 36 37 38 39‘ 42 43 44 45 47 48 49 50 51 52 TABLE 15. 17. 18. 19. 20. 21. 22. 23. 24. 25. 27. 29. 30. Income Expected From Other Sources by Estimated Income Categories. Age: 40-49 Years. . . . . . . Break-down of Aggregate Estimated Retirement Income (in percentages) by Estimated Income CltegOrAOI. ‘80: ‘0‘49 Ye‘r. e e e s e e e e e e Cash Value of Life Insurance (in thousands) by Estimated Income Categories. Age: 40-49 Years. . Value of Stocks and Bonds (in thousands) by . Estimated Income Categories. Age: 40-49 Years. . Value of Savings (in thousands) by Estimated Income Categories. Age: 40-49 Years. . . . . . . Value of Real Estate (in thousands) by Estimated Income Categories. Age: 40-49 Years. . . . . . . Income Expected From University Pensions by Estimated Income Categories. Age: 50-94 Years. . Income Expected Prom TIAA-CREF Pensions by Esti- mated Income Categories. Age: 50-64 Years. . . . Income Expected From Social Security Benefits by Estimated Income Categories. Age: 50-04 Years. . Income Expected From Civil Service by Estimated Income Categories. Age: 50-64 Years. . . . . . . Income Expected From State of Richigan by Esti- mated Income Categories. Age: 50-54 Years. . . . Income Expected From Royalties and Patents by Estimated Income Categories. Age: 50-04 Years. . Income Expected From Other Sources by Estimated Income Categories. Age: 50-04 Years. . . . . . . Break-down of Aggregate Estimated Retirement Income (in percentages) by Estimated Income Categories. Age: 50-64 Years . . . . . . . . . . Cash Value of Life Insurance (in thousands) by Estimated Income Categories. Age: 50-84 Years. . Page 53 54 56 57 58 60 52 63 64 65 66 67 68 89 71 TIBLE 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 4a. 43, 44. 45. 46. Value of Stocks and Bonds (in thousands) by Esti- mated Income Categories. Age: 50-64 Years. . . . Value of Savings (in thousands) by Estimated Income Categories. Age: 50-64 Years. . . . . . . Value of Real Estate (in thousands) by Estimated Income Categories. Age: 50-64 Years. . . . . . . Income Expected From University Pensions by Esti- mated Income Categories. Age: 65 Years and Over. Income Expected From TIAA-CREI Pensions by Esti- mated Income Categories. Age: 65 Years and Over. Income Expected From Social Security Benefits by Estimated Income Categories. Age: 65 Years and Over. Income Expected From Civil Service by Estimated Income Categories. Age: 65 Years and Over. . . . Income Expected From State of Michigan by Esti- mated Income Categories. Age: 65 Years and Over. Income Expected From Royalties and Patents by Esti- mated Income Categories. Age: 65 tears and Over. Income Expected From Other Sources by Estimated Income Categories. Age: 65 Years and Over. . . . Break-down oi Aggregate Estimated Retirement Income (in percentages) by Estimated Income Categories. Age: 65 Years and Over . . . . . . . . Cash Value of Life Insurance (in thousands) by Estimated Income Categories. Age: 65 Years and Over. Value of Stocks and Bonds (in thousands) by Esti- mated Income Categories. Age: 65 Years and Over. Value of Savings (in thousands) by Estimated Income Categories. Age: 65 Years and Over . . . . . . . Value of Real Estate (in thousands) by Estimated Income Categories. Age: 65 Years and Over. . . . lean Increase in Annual Retirement Income Derived From FinancialfiRetirement Planning by Estimated Income Category. Age: 40-49 Years. . . . . . . . V1 Page 72 73 76 77 78 79 80 81 82 83 84 87 88 89 91 93 TABLE 47. 48. 49. 50. 51. 52. 53. Mean Increese in Annual Retirement Incone Derived Free Financial Retirement Plsnning by Estinnted Income Category. Age: 50-64 Years. . . . . . . . Iean Increase in Annual Retirement Income Derived From rinsncial Retirement Plnnning by Eetinated Income Category. Age: 65 Years and Over. . . . . Comparison of Expected Sources of Estimated Retirement Income for 403 Hichigen Residents and the Actual Sources of Retirement Income tor the 65 and Over Age Group for the General Population as Found by the 1963 Survey of the Aged. . . . . . . Relationship between the Estimated Retirement Income and the Distribution of Sources of Retire~ ‘ont Incm. O I O O O O O O O O O O O O O O O I O Estimated Retirement Income and Observed Frequen- ciesoilncoael'ron'l‘IM-CREF. .. . .. .. .. Estimated Retirenent Income and Observed Frequen- cies oi Income Iron Stocks and Bonds. . . . . . . Asset Accumulation by Age Group . . . . . . . . . vii Page 93 93 97 100 101 101 103 ACKNOWLEDGEMENTS The writer wishes to express her sincere appreciation to Dr. Carol Shatter, chairmen of her Guidance Committee, for her encouragement and generous assistance. She also wishes to express gratitude to the other members of her Consittee, Dr. Beatrice Pnolucci and Dr. James Shatter. for their counsel and interest in the study. In addition thanks are extended to Dr. Frances M. lagrabi for her assistance. CHAPTER I INTRODUCTION Retirement is a complex phenomenon - no one area of study can deal with .11 of its ramifications. The basic problem is one of change. Eugene Freidman and R. J. Havighurst have identified five functions of work and employment as providing for income. expenditure of time and energy, meaningful life experience, social relations and identity.(26) Retirement means that a substitute must be deve10ped to fill these functions if a successful adjustment to retirement is to be achieved. A study of this portion of the life cycle is becoming increasingly important as this segment of the population becomes larger. In an investigation of the changes in social and economic characteristics of the 65 and over age group, Daria Davidson found that while the population as a whole had increased two and one-half times between 1900 and 1960, the 65 and over age group had increased more than five tises.(l3) In an article reviewing recent research projects, Otto Reid sets the proportion of the population in the 65 and over age bracket at slightly more than nine percent of the total population.(24) Elaborating further, in 1900 a man of 60 could expect less than three years of retirement, 2 but by 1961 a man of 60 could expect more than eight retire- ment years.(6, p.117) The lengthening of the retirement period adds to the complexity of the problems faced by this group of people, their families, and, indeed, the society as a whole. Harold Lm Orbach and Clark Tibbitts, writing in the introduction to a collection of essays on aging, say, "The dramatic impact which aging has thus had and continues to have upon the economy in economic terms is matched by the corresponding impact on the political and social structure of society. Questions of economies are rapidly transformed into questions of social policy and underlying these are basic political and social values."(5. p.11) Retirement means a change in the socio-psychological situation of the individual. lriting in the International §gcia1 Sgience Journal, Hans Thomas sees the relationship between aging and adjustment as a problem of the whole life- span. He states that changes of this type call for many adjustments and that success in making these adjustments depends on an individual learning, with increasing age, "the art of making compromises with his imperfect life."(28) Peck identifies the most important factors in a successful adjust- ment to old age as "deveIOping a varied set of activities and enriching attributes" so that after the individual leaves the labor force be has provided himself with a set of alter- natives that can be pursued and that will provide a sense of satisfaction and fill the hours that were formerly filled by work with other worthwhile activities.(28) 3 During the life cycle stages which precede retirement, roles and status are fairly well defined. Through education and social activities, the individual prepares for changes throughout the growing up and employment periods. In contrast to this, society provides no preparation for retirement. The social definition of old age is abrupt and there is no schooling to prepare for this drastic change. Many find the reduction of roles and the decrease in the number of groups to which one belongs very upsetting. The old tend to be isolated, and very often isolated from the values most prized by Americans, such as achievement, success, activity, work and progress.(l7) Retirement has other implications. xStudies conducted in 1948 by Sheldon, in 1953 by Batchelor, and by Anderson and Cowan in 1956, state that in many instances retirement is actually harmful to health.(20) Other studies show increases in illness in the ten years prior to retirement and also indicate that physical illness at this time of life is highly psychological and related to the imminence of retirement.(2o) These studies show only a few of the many adjustment problems faced by the retiree. They indicate the far-reaching nature of the changes that must be met, and the importance of thorough preparation for this stage of the life cycle. Obviously, there is no one solution to assure successful and happy retirement years; the White House Conference on the 4 Aged stated, however, that the factor that seems to provide the most help toward this goal is an adequate and assured income.(6, pp.117-125) ' Since the 1930's many improvements have taken place in the form of income maintenance programs to insure some income to the aged. Even so, by today‘s standards the level of living for a great many of these peeple is far below that of the younger segments of the population. For most persons who have completely left the labor force, Social Security alone. or in addition to private pensions from their places of employment, makes up all or the major portion of retirement income. The benefits paid to the retired and the aged survivors under Social Security and related income maintenance programs have increased since the initiation of the programs, but at a slower rate than the increase in average income of the total population. As a result, the retiree has had a smaller share of the total consumer income in each of the years since 1945 than he did in that year.(7, p.93) Honey incomes are meaningful only in terms of the goods and services they can supply. Since 1946 there has been a significant inflation, and consequently dollars have bought less and less. Most private pensions provide for fixed-income payments and increases in Social Security benefits have not kept pace with the rising cost of living. Therefore the burden of inflation weighs heavily on most retirees. Family economics must concern itself with learning more about the financial position of this group of people. The 5 retired make up an increasing preportion of the population. Their savings and investment programs initiated earlier in the life cycle have an important influence on their period of retirement. A realistically planned program, if developed during the productive years, can have far-reaching effects on the financial position of retirees. It is the task of family economists to help persons become aware of these facts and to provide information for making and carrying out such plans. The purpose of this study is to analyze the expected retire- ment incomes and the financial plans for retirement of a group of Michigan residents. This analysis will provide valuable information about the plans for retirement income which are being made by employed persons in the three decades prior to retirement. Analyzing the timing of accumulation of pension funds, assets, and the size and composition of the expected retirement income, by age categories, will provide information about the long-range retirement plans of this group. It will also show the kinds of supplemental retirement income that have been included in retirement planning, and suggest the age at which such planning is most effective. 6 Objectives The objectives of this study are: 1. To study the anticipated financial resources and plans for retirement of a selected group of Michigan residents. 2. To draw implications from the findings for teaching family financial management. hypotheses l. A significant relationship exists between the esti- mated retirement income and the distribution of sources that make up the expected retirement income. 2. A significant relationship exists between the esti- mated retirement income and the amount of that income that comes from variable dollar sources. 3. The higher the expected level of estimated retirement income the earlier the retirement income planning occurred with respect to the age of the recipients. Operational definitions 1. Estimated retirement income: This is the sum of the respondents estimation of the amount he will receive from the following sources after retirement (university pension, TlAA-CREF, Social Security, Civil Service, State of Michigan, royalties and patents, and other sources). 7 2. Potential estimated income: This is made up of the estimated income plus the potential yield from the following assets (cash value of life insurance, savings, and stocks and bonds). This yield is computed by projecting the sum of these assets at four percent per year. 3. Hodified estimated income: This is made up of the estimated income minus the income from the category termed "other sources." 4. Social Security: This term, as used throughout the text, refers to the Old-Age and Survivors Insurance program. CHAPTER 11 REVIEW OF LITERATURE There is much literature dealing with the financial position of the aged citizen. Studies show both the income distribution for the aged and the sources of this income. However, little information is available on plans for retire- ment. Lenore Epstein discussed some of the problems in assessing the economic status of the aged in the United States in a paper presented at the fiftieth International Congress of Gerontology. Retirement brings a cash income reduction but this is partly offset by savings and property. This pre- sents the problem of how to ”add" assets to current income for a real measurement of economic status. Another problem arises from the fact that not all studies use the same termi- nology and, thus, comparisons between studies are difficult. However, a broad generalization emerges: that "aged persons, families or spending units whose incomes are lowest and who would benefit most from assets that could be converted into cash are the least likely to have them."(9, p.248) The review of literature falls into five natural divisions, made up of: income distribution, sources of income, assets, impact of inflation and preparation for retirement. I... 9 Income Distribution A very high percentage of persons 65 and ever have incomes far below the latest estimate by the Bureau of Labor Statistics of the amount required for a moderate living standard ($3840 for the aged couple with the head of the family 65 or older in late 1966).(40) Different studies provide somewhat different income distributions because of variations in definitions of spending units, but all agree on that point. The 1960 census includes 15 million persons 65 and over who were not residing in institutions. The individual income distribution of this group shows 55 percent with incomes of less than $1000, 23 percent with incomes between $1000 and $2000 and nine percent with between $2000 and $3000 per year. Only 13 percent received more than $3000 per year. Of the 6.2 aillion families in this survey with the head 65 or over, more than half had incomes under $2830 and one~fourth had less than $1620 per year.(34) Gladys White found, in research conducted in 1961, that the incomes of the 65 and over group were less than half those of younger persons. In spite of increases that had taken place prior to her study which improved the income status of the aged, the economic gap between the old and the young widened. The median money income in 1961 was listed as $3028 for the older families and $6099 for families in which the head was under 65 years of age. or the total of 6.7 million 10 older families in the study, 31 percent had incomes of less than $2000 per year. This same research reported that, among single consuming units, three percent of the 7.5 million males and 21 percent of the 9.1 million females had no money income. The median income for single women 65 and over was $854 per year.(32) White also listed three factors involved in the unfavorable income position of the old. These were: a lack of employment earnings, fewer income recipients in the family, and a prepon- derance of women among the old.(32) The 1961 Survey of Consumer Finances examined the income position of Spending units. A spending unit was defined as "a group of persons residing together who are related by blood, marriage or adoption and who pool their income."(5, p.70) The preportion of spending units with incomes less than $3000 headed by persons from 55 to 64 years of age is twice that of spending units with the head from 44 to 54. This proportion nearly doubled again for the units where the head is 65 or over. Sixteen percent of all spending units had incomes of under $2000 per year and of this income level 47 percent were spending units where the head was 65 or over.(5, pp.73-74) Findings from the 1963 Survey of the Aged show that the median income of couples with the head 65 or over was $2875 and single persons in this age group had median incomes of $1130. Families in this aged group made up one—third of all families counted as poor.(15) By the 1963 Bureau of Labor 11 Statistics standards. 58 percent could have provided a "modest but adequate" level of living for themselves out of their actual 1963 income, six percent could have met this level by prorating their assets (not including their house) and adding to their money income. This left 36 percent below this level and who could not be considered economically independent.(10) To maintain this "modest but adequate" level of living an aged couple needed $2500 per year. Hollie Orshansky looks at poverty among the aged using the United States Department of Agriculture economy food level as a basis for identifying the poverty group and determining a total minimum income requirement for different types of families. This economy food level as of January. 1964 provided for foods costing $4.60 a week per person. It amounts to 75 to 80 percent of the United States Department of Agri- culture hass: low cost food plan, which has been used for many years by agencies concerned with needy families as a basis for food allotments. The economy plan was designed for "temporary or emergency use when funds are low."(39) The computation involved in using this food level to determine a definition of poverty uses the cost of food per person, adjusted for family size. It defines poverty as "income less than three times the cost of the economy food plan for families of three or more persons." A standard of roughly $3130 per year for a four person family results. Orshausky suggests this method as an eligibility criterion for some poverty programs. 12 However, most of the aged persons live in either one or two unit households and this presents added problems. Households of this size have relatively larger fixed costs relative to per capital income. At the economy level, the two member family requires about 54 percent of the four persdn allowance and the added diseconomy of the single person household demands an income of 80 percent that of the two member family. Orshansky suggests the poverty cut off level at $1855 for the non-farm couple aged 65 and over, $1480 for the sale. and $1465 for the female single unit households.(39) According to Orshansky‘s statistics there are 34.6 million poor and among them about 5.2 million aged persons. The poorest of these are the elderly relatives living in homes of younger family members. In larch, 1964, there were about 2.5 million with these living conditions. Naturally there are many reasons for arrangements such as these. but the financial position of these persons was a major factor.(39) In 1963 more than 40 percent of the men and 80 percent of ‘the women living alone had incomes below the economy level; I If the aged poor from all living arrangements were added, those living in families too well off to be included in the economy level, the number would rise to almost 1 million. Orshansky concludes, "Two-fifths of the population aged 65 or older (not in institutions) are thus presently subject to poverty, or escaping it only by virtue of living with more fortunate relatives."§39) Su— l3 Epstein sees the low income of the aged as caused in large measure by the fact that so few of these peeple are employed. Her research shows that in 1960 only one-sixth of the men 65 and ever worked for 50 weeks or more and only 43 percent worked at all during the year.(5. p.95) Sources of Income A closer look at the sources of income reveals that employ- ment plays an important part in the aggregate income of the aged in spite of the fact that only a few are full time employees and that less than half are part time workers. In 1953 the largest single source of income of the aged was regular employ- ment.(l6) Between 1947 and 1952 the average monthly percentage of men over 65 in the labor force declined from 47 percent to 42 percent. During the same period the proportion of aged dependent in whole or in part on social insurance and related benefits almost tripled.(16) A staff report to the United States Senate special committee on aging provides a break down of the number of persons receiving public retirement benefits in 1961. This report shows 11 million receiving Social Security benefits. 2.3 million receiving Old Age Assistance and three-quarters of a million receiving assistance to supplement Social Security payments. This survey found that most of those aged who were employed also received Social Security benefits.(34) 14 The 1963 Survey of the Aged reports that earnings still make up a sizable share of the income of the aged. In 1962, 32 percent of the aggregate money income of all persons and their spouses aged 65 and over came from earnings from either part or full time work.(l5) Benefits from public income maintenance programs made up 46 percent of the total aggregate money income of the aged. Of this amount 30 percent came from Social Security benefits, twelve percent from public assistance and four percent from veterans benefits. Benefits from private retirement programs accounted for about three percent of the aggregate. There is such overlapping in this area of sources of income.(15) .Old Age Assistance was reported more often by the none married than the married persons in the 1963 survey. Nearly 90 percent.of the couples and 80 percent of the non-married reported income from some type of income maintenance program.(l5) David Eppley reports that the liberalization of the income maintenance provision of the Social Security Act in 1950 and further changes in more recent years have expanded the coverage of this program by reducing the eligibility requirements and raising the benefit levels. This has increased the number of recipients of Old Age Assistance and also the proportion that receive this aid concurrently with Social Security benefits. The number of persons receiving both Old Age Assistance and Social Security benefits rose from 146,000 in June, 1948 to 816,100 in February, 1963. However, even with this large increase the group receiving both benefits is declining in proportion to all Social Security beneficiaries.(14) The average payment to Old Age Assistance recipients in 1963 was $85.79 per month and for those on bot&_prcgrams it was $107.09 per month.(14) The states limit the payment to the Old Age Assistance recipients(14) and an individual must be in need as defined by the state in which he resides to qualify for this income maintenance program.(31) White defined being in need as having "insufficient income or other resources to meet the requirements necessary to maintain a standard of living compatible with decency and health.“ More than half of the states failed to meet this definition of need. In 1960 the unmet needs of the Old Age Assistance recipients averaged $9.46 per person per month.(31) Heat as a source of funds for the 65 and over group were interest, dividends and rents. These items made up fifteen percent of the aggregate money income. Slightly more than three~fifths of the total persons in the survey reported some income from these sources, but for more than half of this number, the amount received was $150 per year or less.(15) It is clear that the two main sources of income for the aged are continued employment and pension benefits. However, 16 continued employment, as an option, may not be open to all. There is a small group of older peeple, made up mainly of some professional and craft groups, that have such rare skills that they can continue in their work as long as they are capable of working or wish to do so.(5, p.36) Others may be able to extend their employment for a few years past the age of 65 if they so desire, but these too are mainly professionals. In most employment situations retirement at 65 is compulsory. so continued employment for these individuals means finding a new Job. This majority of older workers have no special skills. (5, p.36) A study by Davidson investigating changes in labor force participation of the aged found a gradual decline to age 64 and after 64 a sharp drop in the number of persons in the labor force.(13) Research findings described by J. A. Jaffe and J. R. nilavsky indicated that it was much more difficult for the aged to find new Jobs than it was for younger workers. Among the reasons for this were the reluctance of the employers to hire the aged and much less voluntary mobility displayed by these workers. This was also found to be true of the group Just under the retirement age. The unemployment rates were high for those close to retirement age and a large proportion of these persons exhausted their unemployment benefita.(9, pp.279- 93) Some of the 65 and over age group may be denied an Opportunity to work for reasons of health. Palmore reports that in 1962 three out of four aged did not work. Even so, there were more aged workers in 1962 than in 1960, but because of the greater total number of the aged they represented a proportional decline. He also found that the proportion working full time decreases sharply with age.(23) A recent survey of activities of old people in Bennie County, Michigan, conducted by Jeannette Shauko, found that two—fifths of the male aged were still engaged in either full or part time employment, but that only those engaged in agri- culture and related occupations had continued to work in the same occupations after retirement age.(8, p.68) Assets The assets of the retiree, accumulated during his productive years, make a potential source of income. There is general agreement throughout the studies dealing with this tepic that most of the savings of this group of people are tied up in homes or life insurance rather than in forms that produce an income or are readily convertible into cash. The studies support the general conclusion that those most in need of supplemental incomes are least likely to have any assets. A 1959 Federal Reserve Board survey investigated the liquid assets (defined as bank accounts or savings bonds) of some 8 million spending units with the head of the unit 65 or over. The findings showed that 29 percent had no assets of this kind, 17 percent had $500 or less, 21 percent had from $500 to $2000 18 and 33 percent had over 82000. i then these percentages were related to income, it was found that in the units with an incose. of less than 83000, 47 percent had less than $200 in liquid assets and 44 percent had assets Of 8500 or sore. Only eleven percent of the total nusber of spending units owned any cor- porate stocks and bonds or marketable government securities. All of this eleven percent were asong the group that reported having at least 82000 in other liquid assets.(34) Data free a lichigsn survey show very sinilar findings. This study was conducted by the University of Michigan and published in Btudz_of hospital and ledical Iconosics. lichi‘ag Population Survey.(9, p.240) Epstein sees the relationship between assets and income as not unexpected since both income and assets available after rstirsssnt are related to the earnings of earlier years and to the opportunity afforded by these earnings to accusulats savings. Further-ore, the extent to which these assets are incose pro— ducing affects the potential incose after rstirsssnt.(9, p.2d9) The 1963 Survey of the Aged found that the vast majority of the aged had small asset holdings.(15) These people either found it impossible to save during the years before retire-ant or their savings were used for other purposes. Reasons given in the survey for using retire-ant savings were ssergencies. education of the fanily, or to help their children to establish a home. This study found that the value of all assets (including all real property other than hoses) anounted to loss than $1000 for two-fifths of the aged couples. Thirty percent of the aged 19 couples had holdings worth $10,000 or more, while less than 30 percent of the non-narrieds had assets of as much as $5000. These findings indicated that few aged spending units had financial aeseta such as savings, checking accounts, stocks, bonds and noney loaned to othennthat could be drawn on in case of emergency or for current living expenses.(15) Charles Lininger. using the 1961 Survey of Consumer Finances as the source. reports that one-fifth of all spending units with the head 85 or over had assets of under $1000 or none at all. About 40 percent of the aged group in this study with incomes below $2000 had "very limited" assets.(5, pp.74-78) Life insurance in a fairly cannon asset asong older persons, but a government study done in 1961 found this type of saving less often among the 65 and over aged group than among other age groups. Seventy-nine percent of all spending unite owned life insurance as compared to 56 percent of the units where the head was 85 or over. The general conclusion was that the policies of the aged were of relatively low face value and many had no cash surrender value. These could be used to pay burial cost or to seet some of the hills of terminal illness, but would not help meet current expenses.(34) Insurance holdings of Social Security beneficiaries were analyzed in this study. Seventy- one percent of the married beneficiaries carried some life insurance with a median face value of $1850. Fifty percent of the non~narried beneficiaries carried insurance with a median value of less than half that amount. Only nine percent of the sarried beneficiaries had insurance valued at $5000 or nore.(34) 20 Home ownership is the nest cannon fora of saving for the aged. The 1959 census data shows 66 percent of the non-fare aged owned their own homes and of these, 83 percent were owned free.and clear. This data also found that, asong the aged group with liquid assets of $200 or less, half lived in rented housing or shared the homes of relatives.(34) A The 1963 Survey of the Aged reported hone ownership for three-fourths of the couples in the 65 and over age group and for two-fifths of the aged non-married.(15) Epstein concludes that a paid-up hose is a financial advantage enjoyed by nanyxretired persons, but here too, as was the case with the other assets, those with the seat limited financial resources are the ones least likely to have this advantage.(9, p.253) Impact of Inflation It was found at the White House Conference on Aging that the question of inflation worried those individuals who were retiring as much or more than any other probles they would have to face.(5, p.218) In the past, the fare or small businesses played a prominent role in the income for the retiree, but today dependence has shifted from such noney incomes to savings, the benefits from Social Security, and/or private pensions. To a great extent these are fixed-dollar incomes, and this, combined with the longer expected retirement period, makes the effects of inflation very serious. 21 Adjustments in differing degrees and at different time intervals have been made in most public income maintenance programs. Old Age Assistance programs and Social Security benefits are among those that have been adjusted. For example, the White House Conference on Aging reports that a man retiring in December, 1940 would have received Social Security benefits of $22.60 per month. As a result of adjustments in Social Security payments a man retiring under the same conditions, in December, 1959, would have received $55.00. 'In tori. of 1959 dollars the buying power of the 1949 $22.60 would have provided $47.10 worth of goods and services.(37) Relatively few private pension plans make any.provisions for inflation adjustments nfter retirementJE However, a few plans of this type provide for an automatic adjustment to the consumer index.(37) lhat these reports reveal is that many programs provide only a minimum level of living, and this fact makes the effect of any lessening of their purchasing power a serious problem for the aged. Data were not available to show what changes the aged make in their spending patterns when prices rise.(37) Both Goldstein and Youmans found that the aged were more success- ful in living with available funds than were other groups, but concluded that this may in fact be due to having no other choice.(2, pp.56—63; 33) Inflation affects the value of savings as well as income. Most kinds of financial assets are much more subject to loss in value than is income since there is a much greater time lag 22 between the acquisition of the savings or other assets and the time of liquidating and spending them.(37) The greater this time lag the greater the possibility and degree of loss due to inflation. Debt can be used as one fare of hedge against inflation,» but the aged are at a disadvantage in using it effectively. This is true because the aged find it difficult to obtain credit. They are considered a poor credit risk since theyohave lower and less dependable incomes as well as a short life expectancy.. The Federal Reserve Board survey found only 31 percent of the aged reporting any debt as compared to 68 percent of all age group.(37) The National Advisory Committee found that while hose ownership served as nonamoney income and in a sense was a hedge against inflation, it failed to give as much protection as might be expected. In times of rising prices this non-money income was reduced through rising taxes and higher maintenance costs. The increased value of the capital assets only partially offset this increase. This survey reported median value of the equity in home ownership for the aged at $9100. The National Advisory Committee report indicates that fear of inflation say he a factor in the postponement of retireuent when this option is possible.(37) Conpounded over the past ten years, prices have risen about one and three-fourths percent per year. A conservative estimate of the price increases between now and 1975 are set at one and two-tenths percent per year. These statistics shoe how important 23 it is for the individual to include plans hedging against inflation when making his retirement plans.(21) Preparation“forWRetirement In general, the literature points to the advisability of careful planning for the retirement years. In a study con~ ducted at Cornell, William xhor found that individuals were more willing to retire if retirement income was expected to be high. The reluctance to retire seemed to be less related to negative feelings toward the new activities that retirement would bring than to feelings of apprehension over the economic position it would bring.(24) Similarly, Aaron Rosenblatt found that both the amount and source of income have an important social and psychological effect on the aged. ~Socia1 Security benefits were looked upon asnrewards and earning of past efforts." However, there was a feeling of inferiority by many recipients of Old Age Assistance programs.(26) A study by Dorothy Wedderburn and recent research projects reported by Reid indicate that the aged individual sets a high value on being able to help himself and meet his own needs. (30; 24) A portion of the subjects in the Shadko study offered recommendations to persons in the younger age group looking toward their retirement period. Included among these suggestions was the planning of financial arrangements for the retirement years.(8, p.69) In each case, a key point of the research find- ings is the desirability of careful consideration of the finan- cial problems of retirement during the working years. 24 Research, by George Katona, dealing with the saving behavior of individuals taking part in private pension plans, indicated that, contrary to expectations, these plans did not reduce the amount of money regularly saved. 'Ihere were 1853 male heads of families in this study all of whom had incomes of $3000 or more per year. Forty-two percent of the subjects were covered by private pension plans, 52 percent were not and six percent were uncertain of their status. Responding to a question dealing with the ratio between retirement income and current income they expected to receive, only one in ten replied that retirement incomes would be 70 percent or more of their current income. Those with high level incoses felt their retirement incomes would amount to two or three tines more than Social Security. The lower level group thought theirs would equal or be less than Social Security. One out of eight felt they would have problems getting along on their retirement income. All persons in the study were expecting a reduction in expenses at retirement.(24) Goldstein found expenses for the aged group less, but also found that the aged as a group were spending a higher percent of their income for food and medical attention as compared to younger aged units. Housing and household main— tenance also increased slightly as a percent of total income while clothing, transportation and furnishings remained the same or dropped.(2, pp.276-77) This study also found those with higher incomes at retirement tend to follow more closely the patterns of spending they held before retirement and that reduced income forces a sharp change in these patterns.(2, pp.56-60) 25 The Bhultz investigation, reported upon by Reid, focused on industrial counseling programs as an aid for retirement preparation. Of the 1601 plants responding, slightly more than eleven percent had such programs. Seventy-three percent of these used personal counseling and the remainder made information available or had group meetings. The results of this study indicate that when counseling was available the individuals knew more about the company policies and programs, were more involved with planning for retirement, and had more favorable expectations for the future.(24) Reid sees economic status and health as very significant factors in successful retirement. The behavior of an indivi- dual prior to retirement and the anticipation of retirement also effect this adjustment. In regard to planning programs he says: Those who successfully plan ahead are most likely to find their retirement status satisfactory. lhat emerges from several studies, however, is clear evidence that planning is not simply a matter of indivi- dual decision. It is also in good measure a function of ability to plan ahead and to convert speculative plans in actual con- crete steps capable of influencing a future situation....Those who have at least moderate economic resources seem to be the ones who are most disposed to make additional finan- cial arrangements for their retirement. It appears also that failure to plan pro- perly for the future is a function of inadequate knowledge concerning what can be done. When individuals are provided with expert advice and counseling on pro- blems of age they seem eager to make use of the services and appear to benefit from them.(24) 26 Judd Harmer and A. L. Schorr see limitations in the freedom of the individual to plan for retirement. Schorr discusses the factors that affect life income and thinks that they are largely established by the wage earner's mid- twenties. Education is the most decisive factor limiting the income of the individual.(27) Harmer focused on the stress and growing economic burdens associated with the period of middle age.(19) These factors affect the ability to make financial plans for retirement during this part of the life cycle. Leaving the work force should not mean retirement "from" life but retirement "to" a new kind of life with opportunity and freedom to enjoy useful activities that financial security will make possible. Despite this, the literature reviewed is consistent in finding the income position of most retired persons inadequate for comfortable living. The sources of large proportions of the income of retirees are of a fixed- income type and hence real income is reduced by inflation. These facts point out the importance of making plans to supplement retirement income if at all possible. Little information is available concerning what planning is done by families prior to retirement and when such plans are formu- lated relative to the age of the head of the family.‘ This study will focus on the investments that have been made and the amount and sources of retirement income expected by a group of Michigan residents who are currently in the 27 labor force. It will attempt to look at the possible effects this investment planning will have on their retirement income and to identify strengths and weaknesses in this planning. CHAPTER III METHODOLOGY The data used for this study were originally collected for another purpose, by means of a mailed questionnaire. The respondents were comprised of 403 employees of a midwestern university. Questionnaires were sent to many types of employees, such as food services, grounds maintenance, and clerical, as well as professional persons. No attempt was made to distinguish between the married and non-married or to divide the respon- dents according to sex. Four age categories were used to divide the subjects. These were: (1) under 40; (2) 40-49; (3) 50-64; and (d) 65 and over. The distribution of the respondents by age category was as follows: under 40 - 3.9 percent: 40-49 - 11.2 percent; 50-64 - 50.1 percent: and 65 and over - 35 percent. Findings will pertain only to this group of persons and no attempt at broader generalizations will be made. Only a limited number of the questions included on the questionnaire were applicable to this study. a copy of the questions used for this study are found in Appendix A. These were taken from the original questionnaire. The coding and organising of the data were done by machine. Two sets of cards were punched, one to record the questionnaire data for each respondent and the other to recode this data into the selected classification. 29 The first question used, number three on the questionnaire, was one pertaining to the age of the subject. Responses to this question were recoded to give the four age categories: under 40, 40-49, 50-64, and 65 and over. Responses to questions 54 through 60 on the questionnaire provided information concerning the sources of the subject's expected annual income after retirement. These sources were: university pension, TlAA-CREP, Social Security, United States Civil Service Retirement, State of Michigan (as public school teachers), royalties and patents, and other sources. These sources, with the exception of the last two categories represent income that accrues from automatic and set contri- butions to retirement funds during the subjects' period of employment. The recoding of these questions consisted of computing mid-points of the money range which the respondent indicated he expected from each source. The mid-points of the seven items were added and this sum was used to indicate the respondent's estimated income level. This procedure was carried through for reach subject, thus classifying each sub- Ject into one of six estimated income categories. The age groups and estimated income categories were the two general classifications used for analysis throughout the study. A series of tables were constructed by machine for the seven sources of estimated income, one series for each of the four age groups. The tables were used to analyze the sources of estimated retirement income with respect to age group and estimated income category of the subjects. 30 Using these tables, the aggregate income was determined for the seven sources of income of each of the six income categories within the age groups. Percentages were computed to see what percent of aggregate estimated income each of these sources represented. Question 62 indicated the value of the real estate held by each subject. These data were not receded, but tables were constructed by machine putting this information in relation to the age group and estimated income category of each respondent. Questions 63 through 65 dealt with the cash value of life insurance policies, present market value of stocks and bonds, and savings accounts. These three items were taken as the subjects' individual financial preparation for retire- ment. This information was receded and analyzed in the same manner as that dealing with expected annual retirement income. A total retirement preparation was determined for each income category in the three highest age groups by adding the mid-points for all three assets. From these totals the mean retirement preparation for each income category in the age groups was computed. 'To determine the potential annual return from these investments, this mean was projected at four percent. The mean potential income was computed by adding the mean estimated income and the figure obtained from pro- jecting the mean retirement preparation at four percent. In this way the effect of individual financial retirement planning could be analyzed in relation to age and estimated income category. 31 The final two questions used, numbers 60 and 07. indicated the amounts the subject owned in trust accounts and had invested in personal property including household goods and automobiles. These data did not prove to be useful, and these tables were not included in the study. Instead, the infor- mation was summarized in the text. Two problems arose in working with the investment items. The questionnaire made no provision for a separate zero investment for any of the investment items. The first range in the questionnaire was $0 to $5000. It was assumed that the majority indicating that response would have zero investments. Thus, this response was taken as a more investment for all investment questions. As a result these data will be some— what inexact. but it is hoped that they will be less so than they would have been had this response been computed as a mid-point as was done for the other responses. The other problem concerned the computing of potential incomes. It became evident in working with the data that the category described as "other .purces" might well include sizable amounts of income from the investment sources that were being used to determine retirement preparation such as interest from savings accounts and bonds and dividends from stocks. If this were. in fact. the case, then adding the projected return from the investment to the estimated income which already contained income from these investments would lead to a highly distorted potential income figure. This would be especially true in the case of the 50-04 and the 65 32 and over age groups, where the income reported from these ”other sources" was high. It made up 18 percent of the total estimated income in the case of the 50-64 age group and 38 percent of this total for the 65 and over age group. It was not possible to tell by the responses of the subjects whether the income from investments was considered annual income or remained in the investment increasing its value. This too, would result in error in potential income. Still another source of error within this general category is the fact that not all respondents would have determined this income in the same way. in order to keep this distortion to the smallest amount possible. the income that was received - from the "other sources” was not included in the potential income. The amount received from this source by persons in each separate estimated income category was subtracted from the total estimated income for each category. Thus. the modified estimated income was used in determining the potential income and in the tables comparing estimated and potential incomes. This modified estimated income was made up of only six sources consisting of; university pensions. rxsaucasr, Social Security. Civil Service. State of Michigan retirement, and royalties and patents. While this procedure will not do away with all error it is hoped that it will reduce it to a minimum by treating all respondents in a consistent manner and in this way give an accurate relative relationship between the estimated income and the potential income. Consequently, more realistic 33 comparisons can be made between and among the four age groups in looking at the results of financial planning for retirement. All age groups were combined and the six estimated income categories were reduced to two to provide the best test of the hypotheses. The two new estimated income categories were made up of expected incomes of from $0 to $5999 and from $6000 to $10,000 and over. This handling of the data resulted in an adequate number of respondents in each category to obtain an accurate statistical test. The Chi-square test was used to test the hypotheses for statistical significance. A one percent level of significance was accepted as supporting the hypotheses. To obtain the distribution of sources of expected retire- ment income for testing hypothesis one. the number of sources making up this income, with the exception of the "other sources" category, were added to the number of investment sources for each respondent. The "other sources” category was not included in order to avoid dUplication. The respon- dents were then sorted as to whether they had less than five or more sources of expected retirement income. The data for constructing the tables for testing hypothesis two were taken from the machine made tables concerned with the variable dollar sources of retirement income. The cells were combined to give the selected classification. CHAPTER IV FINDINGS AND ANALXBIB In this chapter the findings, classified by the four age groups, are discussed and analyzed. The sources of estimated income are analyzed and where possible comparisons are made with findings reported by the 1963 Survey of the Aged. This survey refers to the actual sources of retirement income for the aged, as of 1962. The individual retirement plans which consist of the investments made by the individual are analyzed and projected at an annual yield of four percent per year in order to look at the potential supplemental retirement income this financial preparation for retirement represents. For comparing the assets of the persons in this study with the persons of retirement age in the general population, data from the 1960 Survey of Consumers Finances and from the 1959 Federal Reserve Survey of Consumers finances will be used. These too, deal with the actual assets held by the aged as of these dates. Under 40 Age Group The smallest number of respondents, 16, were in the under 40 age group. All of these persons reported estimated incomes at retirement of less than $8000 per year. Tables 1-5 show the five sources of estimated income reported by this group and the m~ , A I e , I n I Va Jeans ' .sl - 4 III ' - - .? “3° wad} ooo.o~» Income n I I I I I m mama» Ieoce» N I I I I I N mama» noose» N a I I H I I mean» Icoow» m I I I I I m mama» Ion Aesop ooomm, coca» oemaa coouw can» one: oemmmm: Iaoow» swans» tacos» Iacnc noes: eeaennaem 0v keen: um< .neuuouoaeo eaoocu oeusauamm ha uncunccm huamuo>qc9 scum peaceaxu oaoonn .H qu49 36 an N n N I I I H I I OH A483 ooo.e~» Icoow» m a I a I I I I I I I came» Ioooe» n I H a I I I I I I I mama» Ioooe» « .I I I I I I H I I a amen» . Iocome a I I I I I I I I I a mean» Io» means uo>o cane» coon» ooova coca» coon» comma ocean came one: eaooan can mace» Iueon» Iaooe» Imcom» Imoomw Isomse Ideas» . Iuoe» neon: veeenauem 3. nova: cud .nodhououso oaoonuivousidanfl .3 anode-com Evan. loam 6000".qu 230cm .N mama. 37 em a e I I I as means I I I I It I I I noeo one ooo.o~w Iooom» m a n I I I I mean» Ioocea a I n I I I I amen» Ioocv» N a I I I I a mmame Iocou» a I I I I I a mean» Io» mmasza acomm ooomw ocean .lr, coon» can» anon onooau Income Iaomaw Isaac» Imam» cues: ceueaaumm 9v have: cud .nequouevsu oaoonn consign an 330.com hedgerow «zoom noun ccuoofifl 030nm .m mama. 38 on I I I I a I I I I as cases eee.e~» Ioeem» I33» Ieeee» m I I I I a I I I I H amen» Iooow» Ia» A‘FOF h0>0 600m» OOOnW 000$” cocmwl QOONw 06mm“ OCOHW can“ GEO: .flOOflH one «cow» Iuoon» Iueov» Isaac» Iaoeme Imonae IabOm» Inca» neon: veuasaaes 0v nouns 0M4 .mouuowoudo cfioocu vow—259mm us 09255 Ada—"o loan 6000039 0800:" .v as“. 39 wH I I I I I a u u I nu J‘HDF Occecdw Income a I I I I I a I I I a meme» IOOOb“ N I I I I I I H I I fl maanw . Iooov» « I I I I I I I I I a mean» IOOON” a I I I I I I I a I m mama» Io» Jeans ue>o coco» coon» oooe» coon» 8onw cannw aces» can» one: . oaooan find H0050 Idcomfi IdOOVfi INCOMW IdOONfi Idcnfifi IHOOH» IAOnfi MOVGD ”Oudfldflnfl av hove: om< .seuuoueuso 0800c” voaauwm ha soon—5n .4230 Souk cesium 0.82: .r. as“ 40 amounts expected from each source. in analysis of these findings shows that the expected return from Social Security benefits, as a percent of the total estimated retirement income, is somewhat less than that received by the persons of retirement age in the population as a whole. The 1963 Survey of the Aged found Social Security making up 30 percent of the total retirement income (15) while these 16 respondents expected about 25 percent of their total estimated retirement income to come from Social Security benefits. However, in looking at this source on an individual basis, a different picture emerges. Only six persons out of the total of 16 reported expecting any return from Social Security, this is an extremely small percentage. Logically all such persons should expect some return from this source upon retire- ment. The private pension analysis also shows that only a few of the 16 persons in this group will benefit from this source of income at the time of retirement. Two persons reported expecting a return from university pensions and six persons from TIAA-CRRI. Vhile most of the retirement income expected by this group as a whole came from private pensions, only half of the group shared in this benefit. One person reported an expected retirement income from Civil Service. None of the group expected retirement benefits from the_8tate of lichigan or payments from royalties and patents. Three persons reported expected retirement income from "other sources." 41 In the area of investment assets, four persons reported a cash value of life insurance at more than $5000, three persons reported owning stocks and bonds in amounts of more than $5000, and four persons reported savings of more than that amount. A mean of the investments of this group produced a highly dis- torted picture since one individual reported a very high invest- ment in each of the three types of investments. This signi- ficantly raised the mean as all of the other amounts reported were in the lower range. Tables 6-8 show the amounts invested by the individuals in this age group by estimated income categories. One-half of the subjects reported no real estate holdings. Six reported holdings averaging $20,000 in value and the two remaining subjects had holdings averaging $40,000 in value. These two persons were both in the 86000-37999 estimated retirement income category. Table 9 shows this investment for each estimated income category by the value of the real estate owned. Looking at the investments in relation to the estimated income category shows that the persons at the 36000-37999 income level own slightly more assets than those at any other single income level. Three persons in this group own real estate as compared to two persons in any other single level, three report life insurance, two report savings, and two report stocks and bond holdings as compared to one for each of these assets at a lower estimated income level. These figures assume an investment from $0~$5000 as a 80 investment. 42 an m I I I a H I a I «a A488 ooo.om» Ieoom» m m I! I I I m I m I I «was» Ioooo» « I I I I I I I I I a moon» Ieoov» N I I I I I I I I I a amen» Iooom» a I I I I m I I I I e momma Io» memos one one eve an» one was on» one on» a» oaooaml Iowa Iowa Ion» Iowa Iowa lam» Iowa In» Io» unneeded! . me needs one .sedmoueuso ssoomu oeassqvum he Aaossssonu may communism swam Ho esns> memo .o Hausa 43 on u I I a I I I n I nu 44808 coo.Om» Ieoom» n m I I I I I I n I a some» Ioooe» a I I I I I I I I I a memo» Ioooe» « I I I m I I I I I a mean» Iooome a I I I I I I I I I a moon» Io» 44509 on» coax eve an» on» now, can use em» on caucus Iorw Ion» Ion» .InN» ION» Ina» IOH» In» Io» doadlduufl ov moons om< .eoduomoaeo enoomn oeussdaum he Aeocemsoam may modem use axUOHm «0 cans» menu .5 Hands 44 an s I I I A I I I N Na 44903 ooo.cH« Iooow» a I I I I H I I I H H some» Ioooe» « I I I I I I I I H H some» IOOOVW n H I I I I I I I I H ammo» Ioeom» Io» 4(509 cab 06% O¢W an» on» “NW ON» 0H0 Ow” nw OEOOGH Iowa Inn» Ion» Ina» ION» Inn» lad” In» Io» vousldumm an moon: 0M< .aoauoueueo oedema veusldanm he Anodemsoma may auddbsm «0 os~s> menu In “Adda 45 an d I I A I M m I I w £4909 ooo.oH» Iooom» m H I I H I I H I I I omen» Ioooe» « I I I I I H H I I I mean» Iooce» Ioocm» a I I I I I H H I I s ammH» Ice memos on» one ova one one new know» un SH» no oaeoaH Ice» Inn» Ion» Ina» Iowa ImH» IoHe In» Io» ecosaHeem or soon: 0&4 - .eoHuououmo osoonu omuamdvmm hp Amonamsomu sHv museum Heed «o osae> ammo .m mgmda 43 One subject in the under 40 age group reported owning a trust fund of over $5000 in value. The personal property held by this age group amounted to an average of $7188 per person. 40-49 Age Group The 40-49 age group contained 43 subjects. There were respondents in each of the six estimated retirement income categories. Tables 10~16 show each of the seven sources of, estimated income. They indicate the number of persons in each estimated income category by the expected amounts from each source. The percent of aggregate income for each estimated income category derived from each of the seven sources of retirement income is shown in Table 17. Here too, the findings are consistent with other research(15) in that Social Security is a major factor in the makeup of retirement income. However, it is evident for this age group that as the income increases, Social Security as a source of retirement income becomes less important and, for these per- sons, income from TILL-ORE! becomes the major source of esti- mated retirement income. Out of the total of 43 subjects, 20 were expecting retirement income from TILL-ORE! and 21 were expecting retirement income from university pensions. lhile it is obvious that some subjects will receive retirement income from both sources, it seems likely that most, if not all, of these subjects would be covered by some type of private pension. This fact puts them in a more favorable position than that of the persons of retirement age in the 1963 Survey which reported 47 we v n n v b mm Hg m u I I n a v heeo use ooo.e~» a c e n u n v mama» cocoa» e n u a u s v camp» uooeoe « u u a a u a some» ueooe» m m u H a H v mean» logo» 9 n n u a e v cease new A¢Hop coca» coon» eons» . coon» come scour; enooan uaooee unease uaoonw nacho V.‘neesc . . consensus asap» evaevmuen .aonuosouno canoe“ coca-«ans an uses-nun ace-noses: sons ease-ans canons .e~ sun‘s 48 ”v OH n N m n N I u I ha AdFOF w n .n I I m I I I I I .350 one ooc.o~e e v a H I I n I I I a meme» Iooowe a H I n n A a I I I « amen» Ieooe» N I I I w I I I I I I mean» Ieoov» Iooom» e I I I I I I I I I e mean» Io» naeoa noeo emcee econ» ooove eecmw coca» econ» .eoesw con» one: ounce" can Hooe» Iaeom» Iueov» Iseem» Income I~oe~u Ideas» Inca» noon: eouuasaam canon vaov one .uonuouoaee oaooaa eouaaaumm an uaoeuugn numoIeeua noun eeeoonxm eaooan .nn man‘s 49 av ms «A a n a , on nesca m m m .I I I « He>o was oeo.oee m e v I I I a comm» Iooow» a v a a I H g game» Ieooee « I a I I I I mean» Ieoove a a H m n I a «can» Iooou» e I I a I u v amen» Io» neaoa coon» eoomw‘ eons» coon» can» one: canonw: Isoome Incas» Ieoosm Ieem» guess eeuaaaumm acne» aonv mwe .moauoaoaeo oaoocu ooueaaumm an mnemocom.hp«usoem «swoon sock oouoonnu uneven .Nu Mamefi 5O aw a I I H N I N .n I on 4% I w oee.oHe I I I I I I I I w some» a H Ieoew» I I I H H I H I I e come» a Iocee» « I I I I I I I I I a meme» Ieoove a I I I I I I I I I a mean» Ieoea» e I I I I I I I I I . e eeoH» Io» Aesop .33w coco» cocoa, eeev» econ» coon» eean eeeH» come ones oaoonH one Heoe» IHecm» IHeev» IHeom» IHeeu» IHonH» IHeeH» IHen» noes: eons-Hans :1 annoy avIov one .uoHuououao oaooaH eoaanHaum n eoHIumm HHpHo noun ecu a Gavan .nm 349 51 av A I I I d I A I A an A¢RDB m .— I I I H I I I I 0 have one eoe.oH» a I I I I I I I I I a meme» Iooowe a I I I I I I I I H a comp» Ieooee Ieoov» a I I I I I I H I I a «can» Ieeom» e I I I I I I I I I e memH» qo oooewI econ» ooova econ» coon» oooH» oecH» some one: oaooaH can Hcoea IHeem» IHeoe» IHeom» IHeowe IHonH» IHeoH» IHom» have: eeuuaHunu scam» eeIev one .aoHuoueuuo oaoouH eounaHuam.wm emuHaoHa no ounce sans eoucmmwn oaooaH .vH sun‘s 52 no I I I H H H H I v on Aesop o I I I H H H H I H a note on. ooo.oHe o I I I I I I I I a o oooo» I83» I33» Iooov» o I I I I I I I I I o moon» Iooon» o I I I I I I I I I o oooH» Io» soaoa noon oooo» oooow‘ ooov» ooon» coon» oooHe 8onw oonm one: oaooaml_ can doom» Iuocnw Iaccvn Incon» IHOON» Inouaw IAOOMD Idcn» hOvflb vOalldHIH annoy ovIov one .eoHuououao oaoouH eooaaHuan an «ocean can aoHoHnaoc scum cocoonnu osoonH .eH asses. 53 we I H H a e H e o v oH Aesop m I H I A n I n N I N sure one ooo.oHe o I I H I H I H H a a ooooa Iooooe o I I I H I H H u H n oooo» Ioooo» Iooov» o I I I I H I a a H a moon» Iooom» o I I I I I I I H I o mooH» Io» Hesoe nope oooo» coon» ooovw coon» ooomm, oonHw ooon, eon» ones osoocH can Hooo» IHoona IHooo» IHoom» IHoome IHonH» IHooHe IHon» noon: eouaIHaou enema ovIov one .ooHnowovso osoocu oeusaqumm up neousom heave dosh vouoonxfi eaoocn .mH Hangs 54 H.vH o.o o v.v nH av o.o capo one ooo.oHe v.nH o. o o Hm ow o.o ooooe Iooooa «.uH H.v H.v o.HH o.nm o.Hv «.oH noon» Ioooo» o o o o on oo o some» Iooov» on o o o ov a v.v« oooo» ICQON» so o o o no o oH oooH» seousom eaceusm csuqcodl euubuom Newsroom undo, cod-con escosu nosuo uoHoHuaoe no cause HHpHo HuHooe IHHHe suHunooHno oceanHu-u some» ovIov cum .aoseuaoonon an oaooaH Hue-ouHuec coco-Hans euaueusse no asoeIssogs .oH semen 55 that only about three percent of all retirees could look for- ward to private pensions as a type of retirement income.(15) The 26 persons expecting retirement income from TILL-C33! are in an especially favorable position since CREE is a variable dollar pension providing an automatic hedge against inflation. These persons can also expect substantial retirement income from investments. Tables 18-20 show each of the three types of investments that make up sources of potential retire- ment income. They indicate the number of persons in each estimated retirement income category by the amount invested in each particular asset. The tables show a trend toward more types of investments and larger investments as the estimated retirement income increases. A larger number of this age category had invested in life insurance than in the other two types of investments. This is similar to earlier studies as this form of saving seems a popular one for all spending units and an especially important form of saving for those units under retirement age.(34) Investments in stocks and bonds and in savings show a striking similarity in both the number of persons and the amounts involved. The general investment pattern is consis- tent with previous research findings in that the lower expected income categories have few assets(9, p.248) In the two lowest expected income categories only two persons had savings of over $5000, three persons owned stocks and bonds worth $5000 or more, and six persons owned life insurance policies with a cash value of over $5000. 56 no I A n I A A m 0 NA 0A 44908 ooo.oHo o I I H I I I I H u m ooooe Ieoooe o I H I I I H m I v H some» Iooooe N I I .I .I I I. A A I. I mamas.“ Iooove o I I I I I I I I m a moon» Iooom» o I I H I I I I n H « oooHe eases com on» owe}, new one new on» nHw oHe no oaooomr Iowa Iowa Iona Ion» Ion» InH» IoHe Io» Io» eons-Hone annoy ovIov «we .eoHuoooouo asooaH eouusHumm an H-onaunona «Ho ooanuoeuH oHeH no oaHno sane .oH memes 57 mv I I I I N A N N b @N 44808 ooo.oH» o I I I I I .I H I n n noon» Iooon» o I I I I I H H I H o noon» Iooooo n I I I I I I I I I n noon» Ioooo» o I I I I n I I I I o noon» Iooonn o I I I I I I I H I n nooH» Io» meson one on» ova one one on» one an oHn no osoooH Iov» Inn» Ion» Inn» Ion» InHe IoH» In» Io» eouananm ammo» ovIovlmmo .aoHnouoouo oaoosH ooaaaHuom an Heoaaaeon» aHo ceaom one esoooe no ooHn> none .oH names 58 av I I I I N A I v 0 PN 44809 ooo.oHn o I I I I I I I H n n noon» Iooonn o I I I I H I I H n n noon» Ioooo» n I I I I I I I I H H noon» Iooovn o I I I I I H I H I n noon» Iooonn o I I I I I I I I I n onoHn Anson one: on» own nnn on» nnn one an oHn n» oaooaH lav» Inna Ian» InN» ION» InAn IOAw In» I60 vcasldanfl anew» ovIoe om< .eeHhomeeeo esoocn ooessdeou he Amocsasoma adv sandman no esAm> memo .oN namdfi 59 Sixty-three percent of all subjects in the 40-49 age group had invested in life insurance. Nearly 33 percent own stocks and bonds and over 37 percent have savings. It is important to note that many investments (stocks and bonds, real estate, etc.) for this age group, which has an average of twenty years left before retirement, have a great potential for growth. Investment planning at this age provides more flexibility in building an estate than is the case for the older groups. The real estate holdings show a trend much like that of the investments. The percentage of persons owning homes and the value of these homes show an increase as the expected income increases. Eighty-one percent of the persons in this age group reported real estate holdings of over $5000. This is much higher than the 65 percent national average found by the 1960 Survey of Consumer Finances for persons of this age. (5, p.72) The real estate holdings are shown in Table 21. The number of persons in each expected income category is indicated by the value of the real estate owned. Four persons in this group reported having investments in trusts of over $5000, the mean value of which was $16,900. The value of the personal property reported by the 43 subjects in this age group averaged 86162 per person. 60 at N A A m w v m n v w . AdHDH ooo.oHn @ I I A A $ I A I A A fimomfi IOOOQ» m I A I N A N I A A A mambfi Ieeoon IOOOfi“ a A I I I I I A m N N Gammw Iooone D I I I I I N A A I N NGGAW Ion A1809 on» omw Ofifi nmw Omw mmfi ON” “AW 0A9 0w TEOOQA Ion» Inn» Ion» Inn» Ion» InHe IoHe In» Ion eouusHoom canon ovIov mm< .eoHnouoaao esooaH conesnunm an Hausa-sane eHo eaeumm Haon no oan> none .Hn mamas 61 50-64 Age Group There were 304 respondents in the 50—64 age category with subjects in each of the six estimated income categories. Tables 22-28 show the sources of income by estimated income category and the expected amount from each of the seven sources for the persons in this age group. Table 29 shows the percent of aggregate income coming from each of the seven sources for each estimated income category. The findings for this age group are similar to those of the 40-49 age group in that social Security makes up a decreasing proportion of the estimated income as the expected income level rises and that the percent expected from the private pensions increases and makes up the major portion of retirement income., However, for this age group, with the exception of the lowest estimated income category, the sources of income are more widely represented. Except for the lowest category, all seven types of income are represented in all income levels. Here too, most of the respondents were expecting income from private pensions. Income from university pensions was expected by 143 persons of the 204 total, and 113 expected to receive benefits from TIAA-CRE! at retirement providing the added security of a hedge against inflation. There was duplication here, but it seems likely that the vast majority of the persons in this age group would receive retirement income in the form of private pensions, placing them in a 62 VON «h mm vfi ea 6H am 44909 av on a u m n e hope on. .oco.o~a no on H n a v a memo» neocm» «v «a n o n a on mama» .oooo» mm «a n n n s u mean» noose» mm o o a v m an moan» soocu» on u u s a a «a moon» no» cases coon» cocoa conaw coon» can» onoz enough sheen» lacuna naooflo anon» neon: econ-noun anew» vegan eu< .eoanoueaeo osoonu peas-«ea ma anode—3a meanness: scum pedal—KM eloonn .u« a 83 van on «a o nu, on mg m on an on genes uv «n e a e a a a n a u .mowo can coo.o~» mu n v n m n v I s a o «one» season vv I a a m an e H v a an aama» nooce» on n n n u u m a a v on. mean» nocoe» on :w a a a u u a a u «a coma» noose» m" u u a n a u u a a on ammo» so» canoe uo>o coco» econ» ooovw coon» coon» ocean cacao can» one: vacuum one nooo» cacon» sfioovm cacao» snoom» anonaa unooH» taco» neon: concede-u ease» 3100 and .sofuoueaoo Cancun panda—«mm NA encunnefi ”glam. 39E couccflwMHWH-Bonu .nN Manda. 64 «an on on an on n we neaoa av an n a a I b Meao one coo.ca» me an o o n I e memo» Iooow» we m on m I I a” «map» Ioooo» mm a a we a a n «can» Iocov» on v n on a I a «mom» Income a” I I o m a m amen» Io» wagon coonw, oocuwll ocnmw I, coca» some one: cocoa” Income Incaan Incona Inca» neon: eeauanaam ease» wwlam 0&4 .gdhouovao 032: floasaamm ha maduoaa hawk—50m nsdgm loan 6000033“ 039: .VN a5. 85 eon a I u p p I n a I «on Jason we a I I N a I H I I a» none was occ.o~» on a I a a I I a I I on come» Ieoow» vv a I a n m I u I I on «can» Icooo» on I I I a n I I I I no mean» Ioooeo on I I I I I I I a I on ammo» Iooom» on I I I I I I I I I an goon» Io» nesoa nope coco» oooomx eoovw coon» coon» ,conno ocean can» eeoz oaooau one nooow Income Iueova Income Iaeomw Iuooaa Iueoaa Inca» have: voueanunn manor voIom 0&4 .oouuououao cocoon counsaumm hmleouauom udado scum voaoomwu oaoucu .nw nqm<fi 63 vow « u I v v a n n e aaH Aesop Hv « H I H n H I H I «a noun caeI: eoo.oHo on I I I H I a I I I. no amen» Ieoom» we I H I H H a a H H on mama» Ioeoe» an I I I H I I I I u on name» Ioocv» on I I I I I I H H H no «can» Ioeom» nH I I I I I I I I I oH meaH» Io» Anson nope coco» coon» coco» coon» coon» oeoH» oooH» cone anon eaanawi one Hose» IHcom» IHoov» IHeom» IHeeu» IHonH» IHoeH» IHen» ocean coauaHuau anew» veIcn one .uoHuouooao oaaoaH eouunHanm an amumnoH: no cacao Iona eouommxm oaoonH .en woman 67 vow I I I H u H o e. vH naH Adana Hv I I I H H H a n a no hope on. ooo.eH» on I I I I H I a H a «a memo» Ieoom» vv I I I I I I H a n am noon» Icoomw on I I I I I I I H n v» amen» Ieeev» an I I I I I I I I u on mean» Ieoon» nH I I I I I I I I I eH emmH» Io» Aesop nope cocoa cocoa eeov» econ» coon» eonH» oooH» can» one: oaaeuH one Hooe» IHoon» IHoov» IHooma IHoona IHeeH» IHooH» IHom» ocean vaunaHHnu none» veIeo ou< .eoHuoueueo esoocn veussdasm ha avocado one sequuehom loam ceaoennm enooon .hN Hausa 68 mom «H a v m on mH no on me me omega Hv e m m m m m e e v o neao one oom.mH» mm m I m I v w m I m m mmmm» Iooom» we a I I m m m e v a «H mmmm» Ieoema mm I I I m v H m o o oH momma Imcomm mm I I I I H m m m o mH mmmmo Income mH I I I I I H I H m mH mmmH» Io» Aesop nope momma momma come» comm» momma omnHw mooHo coma oaoz oaoouH can Home» IHoomw IHoov» IHoom» IHmoma IHomHa IHmmH» IHom» nova: oeuaaHamm muse» voIom coo .moduouoano osoocn vowed—emu an soogw nonuo soak 2903mm 230cm .mm Human. 69 o.mH m m.e v.m m.vH e.nm «H case one omo.oH» m.mH n.m m.« m.m m.mH m.vm mH mmmm» Ioomm» mm H.» p oH mm mm m.nH mmmm» Ioome» mm m. H.H m.v «.mm m on mmmm» Immov» mH a. m.« m.H an n.e m.mm mmmm» Ioomm» «.vn o m o v.nm o v.mH mmmH» Io» seouaom suceuem nmuwmon ecusaom haausoeu undo noanon eaooawu guano aoHuHaaom Ho canon HHpHo HeHoom IHdHa aoHaaeaHao eeueaHoam canon vamm coo .seusuaoouon ha osoocn aceaeuaveu veassdunn eunuehumd «o u-eeIuaonm .mm names 70 superior retirement position when compared with the persons of retirement age in the general population. The 1963 Survey found only three percent of the aged receiving any income from private pensions. The average percent of income expected from Social Security was 29.4, very close to the 30 percent reported by the 1963 Survey for all persons 65 or over.(15) Nearly 14 percent of this age group were expecting retirement income from Civil Service and another 14 percent were expecting retirement income from the State of nichigan. Fifteen percent of this group of persons were expecting income from royalties and patents at the time of retirement, although for most the amounts expected were small. The expected income from other sources became increasingly important in this 50-64 age group, with more than 67 percent listing this as a source of retirement income, many in substan- tial amounts. This category would no doubt contain income from the investment sources used in the study, but also may contain other types of income such as rents, interest from money loaned, or from investments other than bonds or savings. The three types of investments that make up the sources of potential retirement income are shown in Tables 30-32. They indicate the number of persons in each estimated income category by the amount invented in each asset. It is evident from these tables that the trend toward more and higher investment by those in the higher income categories is con- tinuing. 71 vom e n A m n Nd v~ an on mm 44599 av m a a a u e a em mg m nope peel coo.om» mm a u a a a a n v e p eeem» noeoe» we u u m m u v a e am am meme» ueeoe» an t u a n m H a a em mm amen» noooe» an a u u m a u e n e an mean» nooom» mm a a a u u u m s : em mean» no» gases on» an» owe mm» on» one on» use am» we enouum new» tam» com» new» new» sum» you» um» no» cone-«uum enemy venom ewe .ssauowoumu esoocn vanesdamm ha Aeomsemoma adv eosshsnmu cued no enumb memo .om Manda 72 eon cm H a n v e a om an «em means av m u s a m u e e a me nope can oce.om» mu m m a n m m n m a a“ mmeme locome vv v u a m m a a e e he mean» noooe» mm H s a a u H a m m on mean» nooove mm s u u u m e n n e he mean» neoome me u a s a s u a n « mm mead» no» neaoa one one own man one new one! age can a» cocoa” toe» new» new» :mne new» name acme see so» oouaamuam muse» onion fine .Iwuaououso Olaoau vousflduum ha Auvnsmaonv adv lumen vss locum no o=Hs> dado .fin Hdfldfi 73 vom N n m m n mu m «N mm mm 4(808 me m m a m m a n a «a a have can oce.ome me u a a s n e a n e «m mama» locum» we I m m m e a a s em pm cease cocoon an a m u m m e m e a em amen» _ neeov» an n u u u m a m n e we amen» noooe» am a c n a n m m a m p mama» tee meaoa on» ewe, ova an» an» new on» em» emu an uneven new» name new» :eme some tom» lee» an» no» eeueamaam enemy in om< , .eemuomoueo canoe” eeeuaeunm up Accusesonu use neuepem no same» menu .um mamas 74 In this age group, as in the previous age group, life insurance was the most common investment; however, the number of subjects with savings accounts was very close to the number with life insurance. 0f the 119 persons with life insurance with cash values in the over $5000 category, less than 25 percent had policies valued at over $20,000. One hundred fifteen persons reported savings above the $0 to $5000 category. Twenty-nine percent reported having over $15,000 invested in a savings account. Sixty percent of the subjects reported owning stocks and bonds valued at over $5000. In this age group there was a slight increase in the number in the lover estimated income categories having investments compared with the previous age groups. Forty-six percent of the subjects in the two lowest estimated income groups reported having savings and the amounts were fairly widely distributed. Although these groups had far less than those with higher estimated income, this increase may well be due to the decreasing fsmily expenses at this age so there is more discretionary income that can be used for investment purposes. It is obvious that most respondents in this study expected retirement incomes which are higher than those of the average retired person. In discussing a retirement planning schedule, Joseph Buckley says that at age 55 the investor can afford to take more risk in his investment program since family responsi- bilities are normally less.(l, pp.73-78) A comparison of the 75 investments in stocks and bonds between the 40-40 age group and the 50-64 age group shows an increase of nearly five per- cent in the number of investors, but another interesting factor in this comparison is the increased amounts invested by the older group. Sixteen persons in the 50-64 group had over $50,000 invested in stocks and bonds. Table 33 shows the real estate holding for the 50-64 age group. Home ownership was widely distributed throughout all . estimated income categories. Eighty-five percent of the subjects reported real estate holdings of over $5000. The 1960 Survey of Consumer Finances reports home ownership for about 64 percent of this age group among the whole United States population.(5, p.72) Twelve of the subjects in this age group had invested in trust accounts. All were valued at between $5000 and . 1510.000. The personal property reported by the 50-6i age group averaged $8762 per person. 65 and Over Age Group The 65 and over age group was made up of 140 subjects. There were respondents in each of the six estimated income categories. Tables 34-40 show the sources of income by estimated income category and the amounts expected from each source for the subjects in this age group. The break-down of the aggregate income is shown in Table 41. This indicates the percent of the aggregate coming from each of the seven sources for each estimated income category. 76 ecu em «a «m he em as an as e an Asses me u v e m e e m a m m no.0.meu eoo.omm we a a n a e e e m a m came» seoom» we 1 m n a s e s u a s emcee Ioccee mm m u e a n v as n a e mean» neeove an e a a a v e n a e m «can» access as n u m n n a v e m n cams» no» seeps one saw eve am» one new onew as» can mail eaooam low” Inn» lam» lam» lam» im~0 tau» In“ low vousldunm manor venom owe .n0«hou0umu slouch voasldamm ha Asvfldlaonv adv Ousunfl deem no onus» ammo .mm flflfldfl 77 ow” mm bu NH 5 I HN Adfioa '[r it em on n u . a u m seen can eoo.eme an me n m c u u some» :eoow» mm on m a m u m sees» neoeee as ea n e m a a some» noose» an v m a m u as seen» noose» m n u m a u a seems you is? Some Some can; :83» so...» 2...: account :mooee laces» umeem» emcee seen: consumeem .525 one no 04mm .eeusomceso esoosu 330nm he essence.— mudsmssnsn seam seasons” slouch .em H.848 78 ovm u a m e e s as em as as 44909 vs I n m n m m m m u «a nose on. coo.ome me n a m e n n v e m a meme» cocoa» an n I n a a u m n a we mean» uocoo» an a a n I c H u m a be mean» soccv» an n u a u u m m u m we seem» noose» e u n a n u a n u m 5 meme» no» 44909 nose oooew econ» oooee seem» coca» cease ooomw some seem access can moose nmoon» umoov» nmoom» amooe» amonme tacos» Imam» soon: coveseuem more one mm ouno can coo.cme an cm s n I I c mama» Iooom» an es s m a I s emcee Ioooee an e e s I u a memo» Ieooea mu m e m n m n mmmmw Ioooue m I I n a m a mess» Ice hence coon» coca» comm» coon» some one: access Imcomw Income Imcome Imam» soon: successes hobo use we own .ecqmoweueo osoomu oousadeem ms suamosem humusocm fisuuom loam venuemmm eaoosn .em mamefi 80 com a e as e e I s s I can means on e a n m I I I I I am hobo can oce.eme em I I s I m I I I I as «mean Ieoewe an I I e n I I m m I as some» Ieoco» an I I I I a I I I I «a some» Ieooe» me I I I I m I m I I as mean» Ioocm» Io» Asses nope coco» scone ecoe» aces» coon» ocean ocean can» seem eases" can mace» Income Imeove Imeom» Income Ideas» Imooma Imam» sense cameraman some one as one .ssuaonfleueo cannon veussdemm Ha somehow ardo lash veauswwnm esoomn .bm Manda 81 a: I I I I a n n u a 22 A439 vn I I I I I g I I a «N hove and ooo.oH» an I I I I a I I I I an «mam» Iocow» an I I I I I u n I a an moan» Ioocm» Iocov» «a I I I I I I n a I on magma Iooou» m I I I I I I I I I a ammaa A‘soa nope coca» ooona. 83ww coon» oooua.11oon~w coca» can“ one: cabana can accm» Iaoon» IuooI» Incom» Iuoomo IucmH» IaocH» Idem» nave: nouanuuum have and nomm¢ .mwdhou0uao eaooan vmuaaavmm an unmwno«a no ovuam loam vouoomwu 0:60am .wn Hand? 82 eta u I I I N n A a _ a @NH 44808 vn H I I I n I H I m an no>o vac oco.o~a an I I I I ~ .~ I I n «a macaw Icoom» Iooom» an I I I I I I I I I ma ammo» Iooov» an I I I I I I I a I «N «can» Iocoua A¢aoa nope aoamw coon» coovwl ooomw. econ» oonmm, cocdw can» one: oauouu can doom» Iuocn» Iaoow» IHoonw Incomu Iuonuw Iaoofin Iaon» nova: vow-auumm umbo was no 0N¢ .nouuououao 08005 23...:qu ha nanoaam can nouananom lob— vaaooaNH 08°03 .mn Mama. 83 cv~ a 6 G «A «a b bu an «a an A‘HOH vs a n n u n ~ ~ I I a nope an: ooo.oH» an a I u u a a cu m a « mama» Icoaw» an I u a u m a m v a a camp» Ioooc» an I I a a a g a a v a mama» Icocv» an I I I a a u I v a nu «mama Iocem» Io» Ao van once» mm «at .aouaaaooucm an cicada auoaihaaam vouaaavum eunuchau< no anovluuoum .nv HAM¢H 85 For there pereone, an with the other age group, Social Security nakea up a smaller percentage of expected retirement income an the eetiaated income increaeee. The average amount expected from Social Security in 26 percent. Thin in lower than for the general population aa round in the 1963 survey of the Aged. The pattern does change for thin group, with the univereity pension and other eourcee making up major nourcee of income for all estimated incoae categories. TIAA- CHEF nakee up a relatively small ehare of eatinated incoae tor this group. Thin age group was not in a favorable poeition with reapect to inflation aince the anor portion or expected income would he a fixed income. Out of 140 total, 119 peraone reported income tron univereity peneiona and TIAA-CRII. while 83 or the univereity peneion recipienta reported anonnta of $2001 to $3000. acre than two—thirde of thoec expecting returne tron TILL-cull were expecting $1500 or lees. 80 not only wan there a eaaller percentage of theee perecne involved in Tran-car! than wae the cane with younger groupe, but the amount tron thia type of private pension wan also considerably leea for thin age group. Nearly 23 percent or theee older peraona expected retire- nent incone tron Civil Service peneiona, with all but four reporting a aininun return or $2000. Seven percent reported expected retire-cut income from State or lichigan peneione. but all except one of theae were $2000 or lees. Ten percent expected retireaent incoee from royaltiea and patente with 88 more than half of this number expecting under $500. The "other sources" category makes up one at the impor- tant sources for this age group with an average of 24.5 per- cent of the retirement income in each or the six estimated income categories. Here again the gains enjoyed by invest- ment planning are obvious. Seventy-six percent of all per- sons in this age group were expecting this type or retirement income and more than half of these persons were expecting more than $2000. The importance of this planning for retirement is self evident. In 1980, 30 percent or all families headed by a person 65 or over had a yearly income of under $2000 and about 60 percent had incomes of less than $3000.(4, p.87) The three types of investments that made up the sources 01 potential retirement income are shown in Tables 42-44. They show the number of persons in each estimated income caiegory by the amount invested in each type of asset. lith the exception of the trend or increasing investaents with increasing estimated retirement incomes. this group shows a different pattern in investments than the other age groups. In both the 40-49 and 60-64 age groups more persona invested in life insurance then either or the other tvo types of assets. In this age group only 37 percent owned life insurance with a cash value of over $5000 and only eleven persons owned policies with cash values of over $15,000. Sixty-two percent of the persons in the 40-49 age group and 59 percent of the 50-64 87 OVA I H I I I H a a an me 4189—. we I I I I I a e a e «a cape one]: coo.o~» me I H I I I I e e m we mmmme Income an I I I I I I m n m mu mmmhe Income as I I I I I I I m c an mmmne Icooe» an I I I I I I I a n ma mmmm» Iceman Io» 44909 cm» on» ova new owe mm» on» new, one a» canoe" Ice» Inn» Ion» Iowa Ice» Ice» Ion» In» In» coueaeemn hope one no out .nownomeeco oEOOcn ooaeadumm an Anoneanonu new oonennnnn owed no case» coco .Nv Hammfi 88 oflm an «M d n n v m ad «a db 4480B vn ca N I I u N n a I V hero and.1 oco.o~» an a u I I a I u a v nu «mam» Iooowa an a o I u u a n n n «a gags» Ieooc» an a n I n I I I u a nu aamn» Icoov» an a I a I I I I u a mu mama» Iooom» m a I I I I u I I a n aam~a Io» ao can ooo.oHa an I v I I a v n n a a «mom» I33» an n n I H H a m a p «H camp» Iooou» an H I I I I I a n a HH «mam» Ioocv» an I H I H H m H I a HH aman» Icocn» m I I I H I I H I a v ammH» Io» HHBDF cm» can cw» mm» omw an» own nH» on ow oaooaH Iowa Inn» Iowa Iowa Ion» InH» IaH» In» Io» nonanHumm uo>o and mm ou¢ .moHuowoeau oaooan uauuflauum ha auvauusoaa nHv nuaabnm no 05Hn> ammo .vv Han4fi 90 age group had investments in life insurance of over $5000. This pattern is consistent with the findings of the Federal Reserve Board Survey of Consumer Finances conducted in early 1959.(34) Forty-nine percent of the subjects in the 65-and-over age group owned stocks and bonds or nore than $5000. Eighteen percent of the subjects had more than $25,000 invested in this type oi asset. Sixty-seven percent oi the subjects reported savings accounts of over $5000 and 38 per- cent reported having more than $15,000 invested in savings. These findings reflect the large amount of estimated retire- nent income expected iron the "other sources" category. The tvo lovest incone categories in this age group sup- port other research tindings, and are sisilar to the lover incone categories or the other age groups in this study in that the number of these subjects reported assets was substantially lover than among those expecting a higher estimated retire- aent income. Only four persons in these tvo loeeet incone groups reported lite insurance with a cash value of more than $5000, slightly ncre than halt reported savings over $5000, and about one-tourth reported stocks and bonds valued over $5000. Table 45 shoes the real estate holdings tor the 05 and over age group. It indicates the nusber of persons in each estimated income category by the value of the real estate investment. 91 own a nu h a an MN on QM a an 44893 em a n v m e m H H I I note ecu eeo.eH» an a e I n n e v a n I came» Ieoom» an I e e I e e a e I a mean» Ioooe» an H I I I H e eH n m n emcee Ieoove an I I H I H v e n a a mean» Iceeu» e I I I I H I I H e v emeH» genes one one owe new on» new ewe eHw eHw we oaooaH Ieee Inn» Ian» Ion» Ice» IeH» IeH» In» Io» eoounHonm hobo one am um¢ .nodhomoaco eaoonu veacadunm ha Aucnsnaozv any eveunm «sou «0 on~c> coco .mv qudfi 92 here of the subjects in the two lowest estimated income categories reported owning homes than reported other types of investments. Eight percent or all respondents in this age group reported real estate holdings 01 more than $5000, with the majority of the holdings in the $10,000 to $30,000 range. Seven persons in this age group reported holdings in trusts of over $5000, with a mean value or $21,430. The personal property reported averaged $7625 per person. Potential Estimated Income for all Age Groups Tables 46-48 show the relationship or the mean moditied estimated incone and the mean potential estimated income for the three oldest groups by the six estimated income categories. The mean estimated income was determined by sunning the aid- points of the expected income tron university pension, TILL- CREF, Social Security, Civil Service, State or lichigan and royalties and patents for the subjects in each at the six income categories and dividing by the number of subjects in that category. The mean potential estimated income was made up of the lean estimated income plus the mean investment computed from the mid-points of investments in life insurance, stocks aId bonds. and savings made by each estimated income category projected at a tour percent annual return. 93 TABLE 46. Kean Increase in Annual Retirement Income Derived Prom Financial Retirement Planning by Estimated Income Category. Age: 40-49 Years. $0— 92000- $4000— $6000- $8000- $10,000 ~__ $1999 $3999 $5999 $7999 $9999 a over Benn Estimated Income $333 $2317 $5252 $5975 $7650 $9600 Hean I , Potential Incogg 8880 $2945 $6000 $1555 $8267 $11,100 _ TABLE 47. lean Increase in Annual Retirement Income Derived From Financial Retirement Planning by Estimated Income Category. Age: 50-64 Years. $0- $2000- $4000- $6000- $8000— $10,000 $1999 $3999 $5999 $7999 $9999 & ovsgg lean , Estimated ‘ Income $417 $2480 $3900 A56100 $7100 $9200 Mean Potential - Income $871 $3030 $4620 $7093 ‘_$8400 $10,910 IAELI 48. Mean Increase in Annual Retirement Income Derived Iron Financial Retirement Planning by Estimated _!pcome Category. Ag : 65 Years and over. $0- $2000- $4000- $6000~ $8000— $10,000 $1999 $3999 $5999 $7999 $9999 a over lean Estimated Income $870 $2955 $3555 $5400 $8800 $8525 "H’lean Potential Income $1595 $3592 $4348 $6765 {7925 $11,200 These tables demonstrate the increases in retirement income that Iinancial retirement planning achieved for the persons in this study. The yearly income that could be expected from this type or planning for the persons in the 94 40-49 age group ranged from $547 to $1500 annually for the six estimated income categories. The average increase in retirement income espected tron retirement planning for this age group was $920 per year. For the persons in the 50-64 age group, the annual increase in retirement income ranged from $454 for the $0 to $1999 estimated income category to $1710 for the $10,000 and over estimated income category. The average annual income from financial retirement planning was $955. The 65-and-over age group had the widest range or change in retirement income resulting from retirement planning. This ranged from $637 annually tor the $2000-33999 estimated income category to $2675 per year for the $10,000 and over estimated income category. For this age group there was a smaller annual dollar increase tor the $2000-33999 category than for the 50-81999 estimated income category. The average yearly increase in retirement income tor the persons in this age group was $1250. These findings show, with only two exceptions, an upward trend is the amount of increase in expected retirement income that resulted from financial retirement planning tree the lower to the higher estimated income categories. There is also an upward trend in this expected income from the younger to the older age groups. CHAPTER V SUMHARY.AND IMPLICATIONS The purpose of this study was to analyze the expected retirement incomes and the financial plans tor retirement of a group of Michigan residents with emphasis on the extent ct planning for retirement income. the hedging against inflation built into these plans, and the timing of the accumulation of investments as related to the age of the respondents. Data concerning the retirement plans or a selected group of individuals became available making this study possible. These data were originally collected for another purpose. The respondents were comprised at 403 persons on university payroll. The anticipated income at retirement for this group, as a whole. was higher than the income received by persons of retirement age in the general population. The United States Senate Special Committee on Aging round 31 percent of all iamilies headed by a person of retirement age had an income of under $2000 per year in 1960. Nearly 60 percent of all aged couples in 19.. had incomes below taooo.(4. p.87) Slightly less than ten percent oi the persons in this study were expecting retirement incomes of under $2000. Fifty-six percent oi the persons in this study were anticipating retirement incomes of $6000 or more. This pro- portion is much higher than that new received by the retired population. The 1950 report of the United States Bureau of Census found nine and four~tenths percent of the two member families with the head 05 and over in the $5000-$6999 money income class, five and nine-tenths percent in the $7000-$9999 class, and five and six-tenths percent had incomes of $10,000 and cver.(5, p.92) The sources of retirement income for the subjects in this study were largely made up of private pensions. The exceptions to this were the two lowest estimated income categories where Social Security benefits made up the major source of income. For these two categories, income from Social Security repre- sented 44.5 percent of the expected retirement income. However, Social Security as a percent of the aggregate income for all estimated income categories was similar to that of the retirement aged population as a whole. The 1902 Survey of the Aged found Social Security making up 30 percent of money income received by the SS-and-over aged group.(15) This study found it representing 29 percent of the estimated retirement income. Private pensions, as a source of retirement income accounted for only three percent of aggregate retirement income for those of retirement age in the general population.(l5) For the three oldest age groups in this study they accounted for 38 percent of expected retirement income. Iith the exception of 57 respondents all were covered by at least one type of private pension from their place of employment. One 97 hundred sixty respondents were expecting retirement income from both types of university private pension. Thble 49 shows the expected sources of retirement income for the respondents in this study as compared to the sources of retirement income for the SS and over age group in the general population as found by the 1903 Survey of the Aged. (1, pp.39-39) TAIL! 49. Comparison of Expected Sources of lstimated unetirement Income for 403 lichigan Residents and the Actual Source of Retirement Income for the 65 and Over Age Group for the General Pepulation as Found by the 1963 Survey of the Agpd. Sources 403 of Retirement Iichigan 1963 Income Residents ‘Surver Percent due to: Earnings - 32 Social Security 29 30 Private Pensions 38 3 Other Sources 18 19 (including interests dividends & rents) Other Public Benefits 13 6 Public Assistance - 5 Veterans Benefits - 4 Royalties and Patents 4 - 98 The asset position of the persons in this study showed the extent of retirement planning that had taken place. The amount of investments that had been made by these persons tended to be higher and more widely distributed with respect to type of investment than for the retirement aged population as a whole. The 1963 Survey of the Aged reports slightly more than one-sixth of the aged have no assets of any kind or have assets valued at less than $1000. If the real estate holdings are excluded, persons in these circumstances increase to one-fourth of the aged in the survey. Assets of $10,000 or more (excluding real estate) were reported by only one-third of the aged.(15) This study indicates that the assets held by this particular group of persons are far more extensive than those of retirement aged persons in the general population. Real estate was the principle form of investment with 81 percent of all respondents reporting home ownership. Nearly half of these homes were worth $20,000 or more. While only 25 percent of the under 40 age group had life insurance with a cash value of $5000 or over, 51 percent of the other age groups reported policies of this amount. Twenty-five percent of the under 40 age groups reported savings of $5000 or more. 58 percent of the other age groups reported savings of at least $5000 and 38 percent had $10,000 or more invested in savings. 99 Investing in stocks and bonds did not prove to be quite so popular, but nonetheless, 18 percent of the under 40 age group reported stocks and bonds valued at $10,000 or more. Nearly 41 percent of the other age groups had investments in stocks and bonds of $5000 or more and 29 percent reported holdingsuof over $10,000. Since there was, no doubt, considerable overlapping in holdings of life insurance, savings, and stocks and bonds, it would appear that many of these subjects had substantial assets. This was especially true of the two older age groups. These facts indicate that extensive retirement planning had been done by this group of Iichigan residents. A general upward trend was seen in the number of persons with assets and in the sine of these holdings as the estimated income increased. Generally, the most change seemed to take place after the $0000 to $8000 estimated income level was reached. This trend was seen for all three types of retire— ment preparation-1ife insurance, savings and stocks and bonds. Rlpgtheses The hypotheses werendesigned to look at more specific relationships within the general framework of the financial retirement plans. 100 The first hypothesis states that a significant relation- ship exists between the estimated retirement income and the distribution of sources that make up the income expected at retirement. The data support this hypothesis. Table 50 indicates the number of persons in the three lowest estimated income categories ($0-$5999) and the three highest estimated income categories ($0000-$10,000}and over) by the distribution of sources of retirement income. The distributions of sources were obtained by adding the sources of estimated income, minus the "other sources” category, to the number of investments sources for each respondent. The respondents were then sorted into two distribution classifications-opersons with less than five sources and persons with more than five sources of estimated retirement income. The "other sources" category was not included in order to avoid duplication. TABLE 50. Relationship between the Estimated Retirement Income and the Distribution of Sources of Retirement Income. w,“ iitimated Retirement ~Persons with Iess Persons with Income than 5 Sources 5 or more ‘ sources N . i’ N % $0-85999 149 87 22 13 _$§000-$10,000 a over 90 41 130 59 Degrees of freedom - l; ngorztable 80.1; Xiof 0.03 significant at the 1% level. X of 12.12 significant at the .05% level. .Rounded figures. 101 Only 13 percent of persons in the lower expected income classification as compared with 59 percent in the higher income classification expected to have income from five or more sources. The second hypothesis states that a significant relat- ionship exists between the estimated retirement income and the amount of that income that comes from variable dollar sources. Tables 51 and 52 demonstrate the relationship between the estimated retirement income and the amount from variable dollar sources. TABLI 51. Estimated Retirement Income and Observed Frequencies of Incomg_rrom TIAA-CRET. ‘iEtimated Retirement No finder ‘55000 or Income gléA-CRII 53000 more $0~$5999 138 32 5 $5000-$19,000 & over .03 88 77 Degrees of freedom - 2; infor table 111.2; I! of 9.21 significant at the 1% level. TABLI 52. lstimated Retirement Income and Observed Fre- quencies of Income From Stocks and Bonds. 'lstimated Retirement *NoIStocks ‘fihder -$257555" Income and Bond!» $25,000 or more $0-$5999 130 32 13 $0000-$10,000 a over 112 SS 51 Degrees of freedom - 2; ;! for table 28.0: X§10f 9.21 significant at the 1% level. 102 The results of the chi-square test support the hypotheses. However. the data did not distinguish between the anount of retirement income expected from 11a; and CREE only one of which is a variable dollar source. The sass is true of income expected free stocks and bonds. This is a limiting factor in the suitability of the data in the above tables as a basis for testing this hypothesis. but the high chi- square results suggest the existence of a significant relationship between these two variables. . The third hypothesgs states that: The higher the expected level of estisated retireaent income the earlier the retirement incose planning occurred with respect to the 'age of the recipients. . This hypothet-a can be neither supported nor negated by the data. The younger aged groups had fewer and less valuable investments than the older groups. The data do not give information on when these older groups started their financial retirement planning. However. the trend of the timing of the accusulation of assets in relation to the age groups emerges quite clearly. For the under 40 age group, the only investment: of naJor iaportance was real estate. fifty percent of this group held assets of this kind and only 25 percent or less had investments in life insurance, savings or stocks and bonds. The 40~49 age group showed an increase in all four types of assets over the previous age group. The largest increase was in life insurance with 38 percent more of this 103 group reporting policies than the previous group. The real estate showed an increase nearly as large 41th 31 percent sore reporting home ownership. There was a 12 percent increase in those reporting savings and 13 percent sore own stocks and bonds. The 50-04 age group showed only a slight increase in real estate holdings and a five percent drop in life insur- ance. Here the largest aaount of change was a 20 percent increase in savings. There was also a small increase in the investments in stocks and bonds. The 05 and over age group showed a different pattern of asset holdings compared with the previous group with a 21 percent drop in the percentage of persons with cash value in life insurance policies. There was a 12 percent increase in the percentage investing in stocks and bonds. a 10 percent increase in those with savings accounts and a drop in the nusber reporting hone ownership. Table 53 shows the percentage of persons in each age group who reported investments'in each n: the four types of assets. TABLE 53. Asset iceusulation by Age Groups Asset ”fl gnder 40 40-49 50-54 05 and over Percent owning Real Estate 50 81 85 80 Life Insurance 25 63 58 37 Savings Accounts 25 37 57 67 Stocks and Bonds 18 33 37 49 a rounded figures 104 The trend in asset accumulation seems to indicate that home ownership and life insurance are the nest important investments for the 40-49 age group. This is the age group with heavy family responsibilities and so the investments of this type are the ones normally expected. In the 50-64 age group, savings hecose a major investment and the 55-and- over group show the greatest tendency toward stocks and bonds; however, for this group too, savings are of major importance. The tendency toward stocks for the older group nay indicate that at this age they are less concerned with the increased risk involved with this type of invest- sent or are more concerned with inflation. Limitations The weaknesses of the study result, in part. from the limiting nature of the data. It would have been interesting to have included inforsation on the debts owed by these persons and the debt retirenent place, especially in the real estate investments, as these are significant factors in estate building progress. The extent of hedging against inflation that has been incorporated into the retirement plans would have been sore evident if the asount invested in stocks had been specifi- cally designated separately from the bond investsent. The inclusion of a "none" category in the questionnaire' for the amounts invested, as was done for the sources of expected income, would have given a clearer picture of the 105 investments. If this category had been included a response of 50 - $5000 could also have been conputed at a mid-point providing n more complete analysis of the investments, particularly for those Just beginning investment programs. since the respondents did not have the option of a "none" category a response in the $0 - $5000 category was considered a $0 investment on the assumption the majority indicating that response would have zero investnent. A response in the $5000 - $10,000 category was the least anount considered as an investment in this study. “Appendix 3 contains some questions designed to elisinate some of these weaknesses. Summary Iithin the limitations of the data, this study has attempted to analyze the sources of estimated retirement income for this group of Michigan residents. It has also looked at the financial retirement plans made by these persons and the potential such plans have for increasing incone after retirement. The results show that planning for retirement, in the years before this stage is reached. by investing in real estate, life insurance. stocks and bonds, and savings programs has a great potential for contributing to the income after retirement. The study shows that this parti- cular group of persons have made great strides in retiresent preparation. This is especially true of those in the older age groups. but many in the younger age group have also 106 begun programs of this type. While it is evident that those with larger anticipated retirement incomes have sade more investsents of the kind that will increase retiresent incomes, those with smaller estimated incomes have also been able to initiate this kind of planning and the results of the study indicate that these programs will put these persons in a stronger financial position after retirement. is has been nentioned enrlier in the study this is a selected group and no generalization to a larger pepulation can be made. ' A further purpose of this study was to draw implication from the findings for teaching fanily financial nanagement. One important implication for teaching is indicated not so much by what is in the data, but by what is not there: the fact that there were so few respondents in the under 40 and 40-49 age groups. There are two possible reasons for this: I) a lack of interest in the retirement period at these ages. and, 2) a lack of knowledge in how to estimate the retirement income. The important role education can play is pointed out by both of these reasons. Education, whether it is in the classroom or in family financial counseling, can help promote an active interest in preparing for the retirement period. Progress in this area could be achieved by individuals gaining a better understanding of this period of the life cycle through knowledge of the sonic-psychological adjustments that must 107 he faced with the exit from the labor force. Also. the effects that the sharp decrease in income has on the style of living of the retiree present a serious problem for many. Both of these are directly related to financial planning. It has been pointed out that the less change that must take place in the style of living the more successful and happier the adjustment to retirement. The analysis of the data in this study indicated that helpful areas to include in a family financial management educational program should relate to: l. the types of investment opportunities and the pur- pose for which each can best he used; 2. information on the value of providing a hedge against inflation and an understanding of has this protection can best be included in financial plans; 3. the relative costs and risks involved in different types of investments; 4. the sources of more detailed information on specific' types of investments; 5. methods of determining what financial returns can be expected from different types of investments; 6. methods of computing total worth; 7. the function of the Social Security program and how to estimate the income from this source at retirement age; All of these skills. necessary for making and carrying out realistic financial retirement plans. could be acquired or enhanced through education. 108 Education could also play a part in stressing the importance of not waiting until retirement is imminent before starting financial retirement planning. These plans can be made far more effective if started early in the period of employment. Buckley suggests that plane for financial retirement requirements should be underway by age 35.(l. p.73) Still another implication for education is the contri- bution that could be made to employees in the plants, fas- tories and other establishments. This type of education should begin long before the retirement years. In this way realistic plans could be made and assistance would be available in carrying them through. The same general infor~ nation as described above would be useful in this setting along with more specific and personal planning. is impor- tant factor for employees is to have a clear picture of what the company retirement benefits are and how they might best be supplemented to fit individual retirement plans. The study reported by Reid indicated that education programs of this kind resulted in more favorable expectation for the future. The persons taking part in the programs were more actively involved in planning for their retirement years.(24) , The findings of this study point out the superior retirement position of the persons with the variable annuity pension. These persons have a built-in hedge against inflation as well as a higher expected retirement income. Unfortunately. 109 this type of pension is not available to many retirees. but through family financial education an individual could learn how to develop a similar program for himself. Implications for further Research The review of literature revealed a very limited amount of data concerning the retirement plans made by individuals. This area of study becomes increasingly impor- tant as this stage of the life cycle lengthens and as the retirees become a larger portion of the general population. If professional persons are to be prepared to assist individuals in making and carrying out retirement plans, further research in this area is needed. A study similar to this one which eliminated the weaknesses listed above would prove helpful. A longitudinal study investigating the plans made before retirement and the actual results of the plans on the retire- ment income of the individuals would be enlightening. A study using the current incomes and family size and structure as related to investment planning would also provide useful information. Perhaps the most important implication for research indicated by this study is the need for data from a random sample. In this way broader generalizations could be made and an important contribution to the information for under- standing and using financial retirement planning to supple- ment fixed retirement income could he made. BIBLIOGRAPHY Books Buckley, Joseph C., The Retirement Handbook, New Yerk, 1967. Goldstein, Sidney, Consumption Patterns of the A ed, Philadelphia, 1960. Kreps, Juanita, ed., Employment,_rncome and Retirement ‘groblems of the Aged, Durham, North Carolina, 1§3§. Miller, Herman P., Rich IanPoor_g;g, New York, 1964. Orbach Harold L. and Tibbitts Clark eds. Agigga the Econom , Ann Arbor, 1963. ’ ’ ' David, Alvin, "Trends and Probabilities in Sources of Retirement Income.“ Epstein, Lenore, "The Income Position of the Aged." Fisher, Janet, "leasuring the Adequacy of Retirement Incomes." Jaffe, A. J., "Population, Needs, Production, and Older Manpower Requirements." Lininger, Charles, "Some Aspects of the Economic Situation of the Aged: Recent Survey Findings.” Report of the Ihite House Conference on Aging, The Nation and Its Older People, United States Department of Health, Education and Welfare, Washington, D. C., 1961. Names, Irving, Social Integration of the Mg New York, 1967. Shadko, Jeannette Bond, Cha es in Activit of Older People: Bennie Count!I licgggan, Unpublished Masters 'Thesis, Iichigan State Un varsity, 1967. Tibbitts, Clark and Donahue, V. Eds.. Social and Aging Trauma the 10. 11. 12. 13. 14. 15. 10. 17. 18. 19. 111 Epstein, Lenore, "Some Problems in Measuring the Economic Status of the Aged in the United States." Jaffe, A. J. and Nilsvsky, J. R., "Unemployment, Retirement and Pensions." Articles "Assets of the Aged," Family Economic Review, Consumer and Food Economic Agriculture Research Service, Research Division United States Department of Agriculture, June, 1965, p.7. Butler, Robert N., "Crises and Contributions in Later Life," American Journal of Orthopsychiatrz, Vol. 37, David, Alvin, "Report on Problems of Retirement Age and Related Conditions for the Receipt of Olquge Benefits," International Social Securit! Association Bulletin, 0e p pppe - e _ Davidson, Iaria, "Social and Economic Characteristics oi Aged Persons (66 and over) in the United States in 1960," genics Quarterly, Vol. 14, 1967, pp. 27-44. Eppley, David, "Concurrent Receipt of Public Assistance and Old-Age Survivors and Disability Insurance by Persons 65 and Over in Early 1963," welfare in Review, Vol. 2, 3, 1964, pp. 18-23. 1' 1' Epstein, Lenore, "Income of the Aged in 1962: First Findings of the 1963 Survey of the Aged," Social Security Fisher, Jacob, "Postwar Changes in the Income Position of the Aged,” Social Security Bulletin, Vol. 17, 1964, ppe 7‘10e Kent, Donald P., "Social and Cultural factors Influencing the Mental Health of the Aged," American Journal of Orthogszchiatrl, Vol. as. 1966, 357m. Kirchner, Wayne, "The Attitudes of Special Groups Toward the Employment of Older Persons," Journal of Gerontology, V01. 12, 1957. ppe 216-20e Harmer, Judd, "The Crisis of Riddle Age," American Journal of Orthquzghigtgz, Vol. 31, 1961, pp. 336-37. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 112 Martin, John and Doran, Ann, "Evidence Concerning the Relationship Between Health and Retirement," Sociological Review, Vol. 14, 1966, pp. 329-43. "Haney Enough to Retire on," Chan in Times, Vol. 20, July, pp. 7~l2, August, pp. 27-32, Septem33r, pp. 24-30, 1966. Palmore, Erdman, "Retirement Patterns Among Aged Hen," Social Security Bulletin, Vol. 27, 1964, pp. 3-10. , "Work Experiences and Earning oi the Iged in 1932: 1963 Survey," Social Security Bulletin, v01. 21. 19“. ppe 3-14e Reid, Otto 3., "Aging Americans: A Review or Cooperative Research Projects," Welfare in Review, Vol. 4, 5, 1966, ppe 1-12e "Report on the Investment of Old-Age Invalidity and Survivors Insurance Funds," International Social Security_Aseociation Bulletin, V01. 18, 1933. Rosenblatt, Aaron, "The Functions of work and Employment' for Older Person," Journal of Jewish Communal Service, Vol. 42, 1966, pp. m8. “ Schorr, A. L. "The Family Cycle and Income Development," Social Security Bulletin, Vol. 29, 1966, pp. 14-25. Thomas, Hans, "Ageing and Problems of Adjustment," International Social Science_gournal, Vol. 15, 1963, PP- §33:§3~ laldman, Saul, "Oldage Benefits for workers Retireing Before Age 65," Social SecuritymBulletin, Vol. 29, 1966, pp. 38-42. ledderburn, Dorothy Cole,"Econonic Aspects of Aging," International Social Science Journal, Vol. 15, 1965, Ihite, Gladys O., "Resting Financial Needs Under Old Age Assistance," Welfare in Review, Vol. 1; 1963, pp. 1-6. ’ , "Income of Older People," Ieltare in BOVIO', VOIe I. 1963. ppe 7-110 Youmans, E. Grant, "Objective and Subjective Economic Disengagement Among Older Rural and Urban Hen," Journal of Gerontology, Vol. 21, 1966, pp. 439-41. 34. 35. 36. 37. 38. 39. 40. 113 Pamphlets "Basic Facts on the Health and Economic Status of Older Americans," Iashington Government Printing Office, 1961. "City Iorker's Family Budget for a Moderate Living Standard Autumn 1966,” Bureau of Labor Statistics, washington, D» C., 1967. Galloway, Lowell, "The Retirement Decision: An EXplor- atory Essay," Research Report No. 9, Iashington Social Security Administration, 1965. "Impact of Inflation on Retired Persons," Rational Advisary Committee, White Rouse Conference on Aging, lashington, D. C., 1960. Lamale, Helen, "New BLS Standard Budgets and Living Cost Indexes," United States Department of Labor, Bureau of Labor Statistics, Washington, D. C., 1967. Orshansky, Rollie, "Counting the Poor: Another Look at the Poverty Profile," Reprinted from the Social Security Bulletin, 1965. "Revised Equivalence Scale: For Estimating Income and Budget Costs by Family Type," United States Depart- ment of Labor, Bureau of Labor Statistics, Washington, De Ce . 1961s APPENDIX A Questions from the original questionnaire that were used in this study. 115 APPENDIX A 3. Your age to your nearest birthday: key 0: under 40 3: 60-64 6: 75-79 1: 40-49 4: 65-69 7: 80-84 2: 50-59 5: 70-74 8: 85-89 9: 90 and over Please indicate the amount of annual income you estimate you will receive after retirement from the sources listed below. 54. University pension annually key 0: none 3: 51001-81500 1: less than $500 4: 31501-52000 2: $501-$1000 5: $2001-$3000 55. TIAA and/or CREP annually key 0: none 5: 32001-53000 1: less than $500 6: 53001-34000 2: $501-$1000 7: $4001-$5000 3: 81001-$1500 b: 85001-36000 4: 61501-32000 - 9: 56001 and over 56. Social Security annually (Upon request the local Depart- ment of Social Security Administration will send you a form to request your status from the national office. For the form telephone 372-1910.) key 0: none 3: 61001-51500 1: less than $500 4: 51501-52000 2: 5501-81000 5: 52001-53000 57. United States Civil Service Retirement Program annually. key 0: none 3: 51001-31500 6: 53001-34000 1: 8501-51000 4: 51501-62000 7: $eOOl-55000 2: 51001-51500 5: 52001-53000 8: 55001-36000 9: $6001 and over 58. State of Michigan annually (as public school teachers,etc.). key 0: none 3: 51001-31500 6: 53001-34000 1: less than 4: 51501-62000 7: 64001-85000 5500 5: 52001-93000 8: 55001-36000 9: $6001 and over I"adjustments were made for the obvious errors in these questions 116 59. Royalties and Patents annually key 0: none 3: 51001-51500 6: 53001-54000 1: less than 4: 51501-52000 7: 54001-55000 5500 5: 52001-53000 : 55001-56000 2: 5501-51000 9: 56001 and over 60. Other sources annually key 0: none 3: 51001-51500 6: 53001-54000 1: less than 4: 51501-52000 7: 54001-55000 5500 5: 52001-53000 8: 55001-56000 2: 5501-51000 9: 56000 and over Please estimate your and your spouse's net earth at retire- ment for each of the sources below - 62. Real Estate at present market price key 0: less than 55000 5: 525,001-530,000 1: $5001-310,000 6: 330,001-335,000 2: 510,000-515,000 7: 535,001-540,000 3: 515,001-520,000 S: 540,001-550,000 4: 520,001-525,000 9: 550,000 and over 63. Cash value of life insurance policies key 0: under 55000 5: 525,001-530,000 l: 55001-510,000 6: 530,001-535,000 2: 510,001-515,000 7: 535,001-540,000 3: 515,001-520,000 8: 540,001-550,000 4: 320,001-325,000 9: $50,001 and over 64. Stocks and Bonds at present market value key 0: under 55000 5: 525,001-530,000 l: 55001-510,000 6: 530,001-535,000 2: 510,001-515,000 7: 535,001-540,000 3: 515,001-520,000 S: 540,001-550,000 4: 520,001-525,000 9: 550,001 and over 65. Savings accounts in banks, savings and loan, credit union, etc. key 0: under 55000 5: 525,001-530,000 l: 55001-510,000 6: 530,001-535,000 2: 510,001-515,000 7: 535,001-540,000 3: 515,001-520,000 8: 540,001-550,000 4: 520,001-525,000 9: 550,001 and over 66. Trust Accounts key 0: under $5000 5: 525,001-530,000 l: 55001-510,000 6: 530,001-535,000 2: 510,001-515,000 7: 535,001-540,000 3: 515,001-520,000 8: 540,001-550,000 4: 520,001-525,000 9: 550,001 and over 117 67. Personal preperty including household goods, automobiles, etc. key 0: 1: 2: 3: 4: under $5000 $5001-310,000 $10,001-315,000 315,001-320,000 320,001-325,000 525,001-530,000 530,001-535,000 535,001-540,000 $40,001-$50,000 550,000 and over ‘APPEHDIX B These questions were designed to show has some of the weaknesses in the study sight be elimi- nsted. They might prove usetul to snyone interested in conducting s sinilsr study. 119 APPENDIX B Please indicate the snount of snnusl income you estimate you sill receive siter retirement iron the sources listed below. (Questions 1-9) 1. University pension snnuslly key 0: none 3: 31001-31500 1: less than 3500 4: 31501-32000 2: 3501-31000 5: 32001-33000 2. TIAA snnuslly key 0: none 5: 32001-33000 1: less than 3500 6: 33001-$4000 2: 3501-31000 7: 34001-35000 3: 31001-31500 8: 35001-36000 : 31501-32000 9: 36001 snd over 3. CHEF annually key 0: none 5: 32001-33000 1: less thsn 3500 0: 33001-34000 2: 3501-31000 7: 34001-35000 3: 31001-31500 8: 35001-36000 4: 31501-32000 9: 30001 snd over 4. Social Security snnuslly key 0: none 3: 31001-31500 1: less than 3500 4: 31501-32000 2: 3501-31000 5: 32001-33000 5. United States Civil Service Retirement PrOgrsn snnuslly key 0: none 5: 32001-33000 1: less than 3500 6: 33001-34000 2: 3501-31000 7: 34001-35000 3: 31001-31500 8: 35001-36000 4: 31501-32000 9: 36001 snd over 6. State 01 Iichigsn snnuslly key 0: none 5: 32001-33000 1: less than 3500 6: 33001-34000 2: 3501-31000 7: 34001-35000 3: 31001-31500 8: 35001-36000 4: 31501-32000 9: 36001 snd over 7. Royslties snd Patents snnuslly key 0: none 5: 32001-33000 1: less than $500 6: 33001-34000 2: 3501-31000 7: 34001-35000 3: 31001-31500 : 35001-36000 4: 31501-32000 9: 36001 and over 8. 9. 120 Other fixed dollar sources annually resulting from veterans benefits, places of former esploysent, etc. (Not personally planned investments) key 0: none 5: 32001-33000 1: less than 3500 6: 33001-34000 2: 3501-31000 7: 34001-35000 3: 31001-31500 8: 35001-36000 4: 31501-32000 9: 36001 and over Other variable dollar sources snnuslly resulting iron places or tognerw wploynent, etc. (Not personally planned invest- sents key 0: none 5: 32001-33000 1: less than 3500 6: 33001-34000 2: 3501-31000 7: 34001—35000 3: 31001-31500 3: 35001-36000 4: 31501-32000 9: 36001 and over Please estimate net worth at retiresent for each of the sources below. 10. 11. 12. 13. 14.. Real Estate at present market price key 0: none 5: 320,001-325,000 1: less than 35000 6: 325,001-330,000 : 35001-3lo,000 7: 330,001-340,000 3: 310,001-315,000 8: 340,001-350,000 4: 315,001-320,000 9: 350,000 and over Your age when you started investing in Real Estate key 0: under 40 2: 50-64 1: 40-49 3: 65 and over Cash Value of Life Insurance policies key 0: none : 320,001-325,000 1: less than 3500 : 325,001-330,000 2: 35001-310,000 : 330,001-340,000 3: 310,001-315,000 3: 340,001-350,000 4: 315,001-320,000 9: 350,000 and over Your age when you started investing in lite insurance key 0: under 40 2: 50-64 1: 40-49 3: 65 and over Cssh value of Stock at present market value key 0: none 5: 320,001-325,000 1: less than 3500 6: 325,001-330,000 2: 35001-310,000 7: 330,001-340,000 3: 310,001-315,000 8: 340,001-350,000 4: 315,001-320,000 9: 350,000 and over 15. 16. 17. 18. 19. 20. 121 Your age when you started investing in Stocks key 0: under 40 2: 50-64 1: 40-49 3: 65 and over Cash value of Bonds at present market value key 0: none 5: 320,001-325,000 1: less than 3500 6: 325,001-330,000 2: 35001-310,000 7: 330,001-340,000 3: 310,001-315,000 8: 340,001-350,000 4: 315,001-320,000 9: 350,000 and over Your age when you started investing in Bonds key 0: under 40 2: 50-64 1: 40-49 3: 85 and over Savings accounts in banks, savings and loan, credit union, etc. key 0: none 5: 320,001-325,000 1: less than 3500 6: 325,001-330,000 2: 35001-310,000 7: 330,001-340,000 3: 310,001-315,000 8: 340,001-350,000 4: 315,001-320,000 9: 350,000 and over Your age when you started investing in Saving accounts as a regular investment key 0: under 40 2: 50-64 1: 40-49 3: 65 and over lncose from other sources annually resulting Iron personally planned investments other than those mentioned above (such as rents, interest from sortgages held or tron other types 0: investments, .tCe e ”'TIT/i‘I/MJM/[illfiaiifillfitflu’mwfyrm‘s