Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, July 25, 1995 TAG: 9507250074
SECTION: BUSINESS PAGE: B6 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
Associated Press WASHINGTON - A new study warns that many Americans, particularly blacks and Hispanics, will not have sufficient resources for a comfortable retirement.
Although the top 5 percent of white American families over 70 have assets of $655,000, the bottom 10 percent of white households have less than $800, says the analysis by senior economist James P. Smith of Rand, an independent, nonprofit think tank in Santa Monica, Calif.
The median white household wealth is $90,000, meaning that half of the families have more $90,000 in assets and half have less.
But Smith says the typical older black and Hispanic household has less than $20,000 in wealth and more than a fourth of older back households and a third of Hispanics have no assets at all.
Smith's study was based on national surveys for the National Institute on Aging and released today at a news conference in Washington.
Many analysts liken retirement needs to a three-legged stool - pensions, Social Security and savings. Without one leg, they say, the stool will fall over.
Smith contends American participation in pension plans is declining and notes the Social Security system is threatened financially.
And, he adds, ``Savings rates for all age groups have fallen sharply during the last decade.''
Given the gloomy findings about the third leg of private wealth and savings, he says the message is unmistakable: ``Loud alarm bells are ringing for the future.''
Government and business leaders have long decried the low U.S. savings rate, saying it must be increased to retain living standards in retirement and to advance the nation's economic growth.
Secretaries Robert Reich of Labor and Robert Rubin of the Treasury launched a campaign last week designed to educate Americans about the need to save more and participate in pension plans.
As baby-boomers near retirement, Reich worries that they won't have enough money to live on when they reach old age.
``Huge numbers of baby-boomers are moving toward retirement. People are living longer, the national savings rate has declined, and the cost of living is steadily rising,'' Reich said. ``All these factors, taken together, will have a major impact on the way people live in retirement.''
Reich's concern reflects a rapidly changing world of pension benefits that in the last five years has seen a 50 percent increase in the number of retired workers receiving a lump-sum pension payment based on their savings contributions rather than the traditional monthly pension benefits, which told workers that when they retired they were guaranteed a level of benefits.
These programs are rapidly being replaced by what are known as defined-contribution plans where employers contribute a set amount of money each year, and there is no guarantee of benefits when the employee retires.
by CNB