Parents Putting Retirement Savings Ahead of College Savings; Allstate survey shows most seek a balance

When parents have to choose between saving for their kids’ college educations and saving for their own retirement, retirement wins, according to the fourth annual Allstate « Retirement Reality Check » survey.

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While most people with children younger than 18 say they can save for retirement and college expenses, when forced to prioritize, fully one-third (33 percent) admit they are saving mostly for retirement and putting only a little money toward college, the survey showed.

Allstate’s annual « Retirement Reality Check » survey examines Americans’ attitudes toward, and saving habits for, retirement. The 2004 survey shows that, regardless of age, gender, education or income, Americans are placing a higher priority on retirement.

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Overall, almost half (46 percent) of parents in the survey said they are saving equally for retirement and college. Another 14 percent said they are saving mostly for college while putting aside only a little money for retirement.

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Only 5 percent said they have put off saving for retirement until they have paid for their child’s college–compared with the 33 percent who said they’re doing the opposite.

« When weighing the importance of saving for a child’s education versus your own retirement, it is impossible to say which is more crucial. And though a child’s education may be closer, the cost is small compared to 20 or more years of living expenses in retirement, » said Casey Sylla, president, Allstate Financial. « Though it sounds daunting, with time on your side, it is possible to save for both. The key is to start sooner rather than later and save a sufficient amount toward both goals. »

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Parents Without College Degrees Push College For Kids

Interestingly, respondents with the least amount of college education are most likely to put their children’s education and paying for it above their own retirement savings goals.

Among respondents with a high school degree or less, 9 percent said they have put off saving for retirement until they have paid for their child’s education. That compares with just 2 percent of respondents with some college, trade or business school; 3 percent of college graduates; and 2 percent of people with post-graduate education.

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The contrast is even greater when income is considered, the survey showed. Among respondents from households with income of less than $45,000 a year, 19 percent said they have delayed retirement savings in favor of paying for college costs.

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Respondents from the West (10 percent) and Northeast (9 percent) also were more likely to tackle college first, compared with people in the Midwest (4 percent) or South (2 percent).

In another indication that Americans are focusing on retirement savings, 50 percent of respondents said they have beefed up savings in recent years to catch up to where they believe they should be. Among Baby Boomers, born between 1946 and 1964 and nearing retirement, 53 percent said that the same.

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Low Confidence in Government Safety Nets

One impetus for the emphasis on retirement savings over saving for college (for which financial assistance exists) may be the lack of confidence Americans have in government « safety net » programs like Social Security and Medicare, which are intended to provide income and cover some health care costs after retirement.

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A majority of respondents made it clear they don’t believe the federal government will make the changes necessary to keep those two programs strong, the Allstate survey showed.

Specifically, 42 percent of survey respondents overall « strongly » disagreed that the government will change Social Security adequately, and another 25 percent « somewhat » disagreed.

And 38 percent of respondents « strongly » disagreed that the government will make necessary changes to keep Medicare strong, and 25 percent « somewhat » disagreed.

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« It seems clear that people are paying attention to federal policy, and making savings decisions based on their concerns about Social Security and Medicare, » said Mathew Greenwald, Ph.D., president of Mathew Greenwald & Associates, the firm that conducted the « Retirement Reality Check » survey. While Americans are focusing on their retirements, many also are preparing to support family members, even after retirement, the survey showed.

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Overall, 25 percent of respondents who still are working said they believe that, after retirement, they’ll still have to provide financial support for family members other than their spouse.

Southern respondents were most likely to say that (29 percent), and people living in the Midwest and Northeast were least likely (22 percent).

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Americans are adamant about not turning to relatives for help even though they concede they are falling short in saving for retirement. Only 20 percent of total survey respondents described themselves as « very prepared » for retirement in terms of savings and investments, and 56 percent said they are « somewhat prepared. »

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Confidence in retirement savings generally rose with education and income level.

Allstate created the fourth annual Allstate « Retirement Reality Check » survey in conjunction with Mathew Greenwald & Associates. Using a random digit dialing methodology, Greenwald & Associates polled 1,604 people born between 1946 and 1978, with household incomes of $35,000 and more. Retirees were accepted with incomes of at least $20,000. The margin of error (at the 95 percent confidence level) for the total number of respondents in this study is +/-2.5 percent, +/-3.8 percent for information specific to Gen Xers, +/-4.5 percent for Baby Boomers, and +/-5.0 for Silent Generation.

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The Allstate Corporation (NYSE:ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the « You’re In Good Hands With Allstate(R) » slogan, Allstate helps individuals in more than 16 million households protect what they have today and better prepare for tomorrow through more than 12,900 exclusive agencies and financial specialists in the U.S. and Canada.

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Customers can access Allstate products and services through Allstate agencies, or in select states at allstate.com and 1-800 Allstate(R). Encompass(SM) and Deerbrook(R) Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group provides life insurance, annuity, retirement, banking and investment products through distribution channels that include Allstate agencies, independent agencies, financial institutions and broker-dealers.

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source: Business Wire