Opening a door: Peering inside retirement

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1 Opening a door: Peering inside retirement For Americans of all ages, retirement is a primary long-term savings goal. And measuring up to our peers can be a powerful motivator to save and hopefully to retire more comfortably.

2 Which of the following are most important to you when you compare yourself to other people? Retirement as a Status Symbol Peer comparison is a powerful motivator. Understanding how our own circumstances and behaviors compare to those of others helps us define who we are. For better or worse, it can play a role in how we evaluate our own status, success and position. As humans, we like to compare ourselves. What s more, we like to come out ahead. Some comparisons are more important than others. Voya recently partnered with ORC International* to explore the connections between peer comparison and retirement / location issues. This work is an extension of our Voya State of Savings comparisons, in which we report on retirement preparedness and savings relative to income on a state-by-state basis. Using ORC s CARAVAN Landline / Cell methodology, the survey was conducted in September of 2012, 1,011 adults aged 18 and older were surveyed. Results are weighted to be representative of the U.S. population overall. When listed among several other common comparisons, retirement savings is an important attribute for comparing to others even more significant than material possessions and salary, but less important than physical appearance or where someone lives. Which of the following are important to you when comparing Most Important Attributes yourself When to other people? Comparing to Others Physical appearance Where you live How much you have saved for retirement 27% 32% 38% Material possessions 17% Salary 16% Retirement savings as a way to compare one s self is equally important to both men and women. It s not surprising that retirement is more important for older Americans than for younger. Still retirement savings is a primary comparison factor for just over one-fifth of people age Retirement rises significantly in comparison for people living in the West, and for Hispanics. Retirement Savings is an Important Comparison Factor (based on age, Retirement region is an important and comparison ethnicity) factor 31% 31% 31% 26% 21% 38% Northeast Mid-west South West White African American Hispanic Age Region Ethnicity 01 I * An independent research company, not a member of the Voya family of companies.

3 Wealthier individuals place stronger emphasis on retirement savings as a measure of peer comparison. Individuals with children (at home) are slightly more likely to be interested in comparing retirement savings. Retirement Savings is an Important Comparison Factor Retirement is an important comparison factor (based on household income, children at home and education) 35% 20% 35% 31% 32% 23% <$35K $35K - < $50K $50 - < $75K $75K - < $100K $100K+ None Under High School or Less Some College Household income Children at home Education College Graduate Younger Americans are more likely to focus on material possessions and, interestingly, the oldest adults surveyed were second most likely. Material possessions also resonate significantly more strongly with Hispanic respondents. Material Possessions are an Important Comparison Factor Material possessions are an important comparison factor (based on age, region and ethnicity) 10% 13% 20% 17% 15% 15% Northeast Mid-west South West White African American Age Region Ethnicity Hispanic I 02

4 If you knew a colleague, acquaintance or friend is saving more for retirement than you are, how motivated would you be to put more toward your own retirement savings? Keeping Up with the Joneses We asked how motivated people would be to increase their own retirement savings if they found out that their peers were saving more than they were. More than half (52%) agree to some degree, while 30% would resist the impulse to react to peer pressure, reporting that they would not be motivated to save more at all, and would be very motivated. The effects of peer behavior on retirement savings can vary widely by demographic: It drops as people age. 65% Would increase savings if peers saved more Would You Increase Savings if Peers Saved More (by age)? 48% It is more powerful for African Americans and Hispanics. 47% % Whites 65% African Americans 72% Hispanics 39% 32% Would be motivated increase retirement savings if they found out their peers were saving more than they were. Age 03 I The effects of gender and region are slight but present: 54% of women 50% of men 54% living in the South 52% living in the West 51% living in the Northeast 48% living in the Mid-west Would be motivated to save more if they found out their peers were outsaving them. Lower income individuals are also much more likely to say that they are motivated by peer comparison; 61% earning less than $35,000 per year say they d likely increase their savings if they found out that their savings lagged that of peers 43% earning $100,000 or more would do the same. 61% Would increase saving if peers saved more Would You Increase Savings if Peers Saved More (by income)? 40% <$35K $35K - <$50K $50K - <$75K $75K - <$100K $100K+ Those making less than $35,000 per year are much more motivated by the actions of their peers. On the other hand, those least motivated by their peers, from an income perspective, are people eaning $75,000 - $100,000 annually. 33% 43% Income

5 Imagining Retirement: Physical and Financial Independence Physical and the financial independence remain at the top of comparison dimensions even when individuals were asked to view themselves in retirement. Most Important Measure to Compare Myself with Peers in Retirement Most important measure to compare myself with my peers -- in retirement Physical health and independence Lifestyle and financial independence 23% 55% Imagine you are retired. Which one of the following attributes would you be most likely to compare yourself to others? Ability to travel Material possessions 1% Again, age strongly impacts this perception of relative comparisons trending upward or more important for the physical as individuals age, and downward, or less important, with respect to financial and lifestyle independence for older individuals. (It s important to note, that respondents were asked to choose which single aspect was most important to them.) Most Important Retirement Comparison Physical independence Financial Independence 29% 16% 46% 51% 66% 64% 67% Age I 04

6 West 60% Midwest 55% Imagining Retirement: Physical and Financial Midwest West Independence (continued) There is also a slight shift in how the different regions of the country view the relative importance of physical and financial independence. Those living in the West are more likely to value physical independence, while those living in South are more likely to value financial independence. South Most Important Retirement Comparison (based on physical or financial independence) West 60% South 52% Midwest 55% Physical Independence Financial Independence Northeast West Midwest Northeast Northeast 56% South South 52% Physical Independence Financial Independence Again, culture plays a role in determining how people will weight financial and physical independence in retirement, with whites and African Americans more likely to value physical over financial independence. Most Important Comparison Measure in Retirement (based on ethnicity and income) Physical independence Financial Independence Physical Independence Financial Independence Ability to Travel 49% 15% 21% 56% 59% 33% 54% 46% 71% 13% 20% 11% 18% White Physical African Independence American Financial Independence Hispanic Ethnicity <$35K $35K - <$50K $50K - <$75K $75K - <$100K $100K+ Physical Independence Financial Independence Ability to Travel 71% 05 I 49% 49% 15% 56% 59% 71% 56% 13% 59% 11% <$35K $35K - <$50K $50K - <$75K $75K - <$100K $100K+ 18% Income <$35K $35K - <$50K $50K - <$75K $75K - <$100K $100K+

7 People without children are more likely to place a higher value on physical health and independence, while parents are more likely to value lifestyle and financial independence, however physical independence appears to be more important (as a source of peer comparison) to all survey respondents. Most important comparison measure Most Important -- in retirement Most important Retirement comparison Comparison measure (based on presence Physical Independence Financial Independence -- and in age retirement of children in the home) Physical Independence Financial Independence 58% 30% 29% 58% 48% 48% 30% 51% 51% 29% None Under Presence and age of children None Under Comparing one s self on the ability to travel is important to almost a fifth (17%) of younger people, but decreases significantly with age. Travel is most important retirement comparison Travel is Most Important Retirement Comparison (by age) 6% 11% 11% 17% 17% Age Retirees and Peer Pressure Like people not yet retired, retirees are more likely to value their own experience relative to their peers based on physical rather than financial independence with travel and material possessions receiving significantly less emphasis. On the main comparisons, retirees report very similar emphasis to those not yet retired. Interestingly, people who are currently retired are slightly less likely to measure their own experience relative to their peers on lifestyle and financial dimensions, and also on their ability to travel. As a retiree, which one of the following attributes would you be most likely to compare yourself to others? I 06

8 Most meaningful peer comparisons Most Important Comparison Measure in Retirement Retired Not Retired Physical health and independence 58% 55% Lifestyle and financial independence Ability to travel Material possessions 23% 10% 3% 1% There is a slight gender gap when it comes to self comparisons in retirement 61% of women and 55% of men >>> find physical health and independence the most meaningful comparison 16% of women and of men >>> find lifestyle and financial independence the most meaningful comparison Travel (at 10%) is equally meaningful to both men and women As The Voya Retirement Research Institute has found in various peer comparison studies, experiments and tools, being able to compare one s own savings and investment behavior to those of our peers can encourage improved savings behavior. The power of peer comparison has the potential to help individuals save more to hopefully retire comfortably. That s a case where peer pressure can be a good thing! For more information about peer comparison, geography and retirement savings, visit VoyaRetirementResearchInstitute.com, VoyaCompareMe.com and VoyaStateofSavings.com. Additional copies of this report can be downloaded at the Voya Retirement Research Institute Not FDIC/NCUA/NCUSIF Insured I Not a Deposit of a Bank/Credit Union I May Lose Value I Not Bank/Credit Union Guaranteed I Not Insured by Any Federal Government Agency This paper has been prepared by the Voya Retirement Research Institute for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary are subject to change without notice based on market conditions and other factors. The information provided is not a recommendation to buy or sell any security. Products and services offered through the Voya Financial family of companies X.G Voya Services Company. All rights reserved. CN For broker/dealer use only. Not to be used with the public. Voya.com