SURVEY
RESEARCH
INSTITUTE FOR SOCIAL
THE
CENTER
RESEARCH
UNIVERJ
private pensions and
individual saving
by George
Katona
private pensions and
individual saving
by George Katona
MONOGRAPH NO. 4 0
SURVEY RESEARCH CENTER
I N S T I T U T E FOR SOCIAL R E S E A R C H
T H E U N I V E R S I T Y OF MICHIGAN
This investigation was supported in part by
Research Grant No. 058 from the Social Security Administration, Department of Health,
Education, and Welfare, Washington, D. C.
Copyright © 1965 by the University of Michigan
Library of Congress Catalog Card No. 65-64300
Lithographed by Cushing-Malloy, Inc., Ann Arbor, Michigan
Manufactured in the United States of America
PREFACE
THIS monograph contains a report on research carried
out by the Survey Research Center between 1962 and 1965. One way
to indicate what this research is about is to point to an institutional
change that has occurred since the end of World War II: Private
pension plans, relatively unimportant in 1945, have spread greatly
and in 1965 covered close to one-half of all privately employed people in the United States. These pension plans may influence the
economy not only by improving the living standard of the retired but
also by changing the behavior of those participating in pension plans
prior to their retirement. In this monograph, one aspect of the second possible impact is studied. The major question raised here is:
Do working people expecting retirement income from pension plans
spend more or save more than people not covered by such plans ?
Only some of the problems studied in this monograph are reflected in the statement just given. Moreover, the study did not
originate from interest in private pension plans alone. The Economic Behavior Program of the Survey Research Center, which was
set up toward the end of World War H and has conducted continuous
programmatic research over the past twenty years, is concerned
primarily with basic questions of economic behavior rather than
with applied economics. The origins of the research reported here
are theoretical, and the studies are intended to shed light on a
rather general problem, namely, the incentives of affluent people.
If one accepts the proposition that consumers and consumer
psychology play a significant role in an affluent society — or in a
mass consumption society, as the author prefers to call the current
new phase in economic history —the question of motives and incentives becomes one of paramount importance. Frequently, our
affluence has been deplored and even thought to provide a shaky
1
S e e the author's book, The Mass Consumption
Society
(McGraw-Hill,
1964) on the role of consumers and of consumer psychology in today's economy.
l
iii
iv
Private
Pensions and Individual Saving
foundation for future well-being. The notion is widely held that
wealth blunts incentives and that our current relatively prosperous
situation can be maintained only through artificial stimulation.
Therefore, basic studies of incentives for economic behavior in an
affluent society are called for. They require quantitative research
concerning specific instances of consumer behavior.
A'unique opportunity for such studies is offered by the improvement of retirement prospects that has resulted from the recent
large increases in coverage by and benefits from social security as
well as private pension plans. Assurance of retirement income represents a newly acquired form of wealth. Conceivably it might reduce concern with the future, weaken reliance on individual initiative, and thus induce people to save less than before and promote
carefree and wasteful spending. Whether or not this is the case
represents a practical problem of the day and at the same time a
legitimate objective for basic research.
The major problem raised in this monograph may be viewed
in yet another context. The study of expectations, both of their origin and their influence on action, constitutes one of the requirements
for economic analysis at a time when a very substantial proportion
of people have great latitude of action. Such study, on the part of the
Survey Research Center, has been concentrated for many years on
short-range expectations: whether people expect an income increase or decrease, whether they expect good or bad business conditions, or whether they expect prices to go up or down. These and
similar questions have been asked about developments during the
next twelve months. Studies of longer range expectations are confronted with great difficulties because of the finding that most people do not hold expectations relating to developments several years
ahead with any degree of confidence. This finding does not apply,
however, to retirement expectations. It was found several years ago
that many people, even in their thirties, are greatly concerned with
their living standard and income during retirement and have expectations about their retirement income. Therefore, the spread of
pension plans opened the door to studies of long-range expectations
and their influence.
2
*
*
*
Construction of hypotheses and theorizing in the light of empirical studies constitute individual endeavors even though they, too,
T h i s point has been discussed extensively in Part Two of the book, The
Mass Consumption
Society.
a
Preface
v
profit greatly from close contact of the researcher with a group of
collaborators. Collection of data, especially by means of sample
interview surveys, and their analysis are group activities in which
many people participate and several of them take leading roles.
Staff members of the Survey Research Center —its director, scholars working in it, as well as interviewers and coders — contributed
to the research reported in this monograph to a substantial extent.
Two of the author's colleagues, Professors J . N. Morgan and
Eva Mueller, were of great assistance through an interchange of
ideas. The author is particularly indebted to Jay Schmiedeskamp,
who served as major assistant during the last year of the study and
contributed to writing this monograph. Sincere thanks are also due
to Margaret Wood, who served as major assistant during the period
of data collection. The sampling work was directed by Irene Hess
and the interviewing -by Charles F . Cannell, Directors of the Center's Sampling and Field Sections, respectively.
Survey research is expensive. When the testing of hypotheses
requires data collection through interviews with extensive representative samples from the Atlantic to the Pacific, and computers
must be used in order to analyze the data, the researcher must have
ample financial means at his disposal at a time when he cannot show
that his work will yield worthwhile results. A grant made by the
Social Security Administration of the U. S. Department of Health,
Education, and Welfare supplied the funds needed, and leading personnel in the Administration provided encouragement as well as
valuable substantive assistance. The author is particularly indebted
to Mrs. Ida C. Merriam and Miss Lenore A. Epstein in the Social
Security Administration for their support.
T A B L E OF CONTENTS
Page
Preface
iii
List of Tables
ix
1.
Saving for Retirement
1
2.
The Universe Studied
7
3.
Attitudes Toward Retirement
13
Appendix: Level of Information about
Social Security Benefits
19
4.
Income Expected During Retirement
24
5.
Coverage by Private Pension Plans
32
6.
The Independent Variables
39
7.
The Dependent Variables
43
8.
Relationship Between Independent and
Dependent Variables
51
The Influence of Available Savings
62
10.
Other Variables
66
11.
Direction of Causation
73
12.
Individual Differences
76
13.
Coverage by Private Pension as a
Determinant of Saving
Appendix: Explanatory Variables for
Coverage by Private Pensions
9.
vii
81
88
viii
14.
Private Pensions and Individual Saving
Saving Too Much or Too Little ?
Appendix A
Questionnaire
Appendix B
Sampling Methods and Sampling Errors
90
95
110
LIST OF TABLES AND CHARTS
Table
Page
1
Private Pension Plans
2
2
Comparison of Crucial Group with Labor Force
9
3
Some Relevant Characteristics of the Crucial Group . .
11
4
Time of Expected Retirement
14
5
Attitudes Toward Retirement
15
6
Expected Financial Situation During Retirement
16
7
Amount Needed Each Year after Retirement by Current
Income
18
8
Level of Information about Social Security B e n e f i t s . . .
20
9
Level of Information about Social Security Benefits by
Social Security Coverage
21
Level of Information about Survivorship Provisions
under the Social Security Law
22
Level of Information about Survivorship Provisions by
Social Security Coverage
23
Expected Retirement Income Related to Current
Income
25
Distribution of Current, Expected, and Needed
Income
27
Expected Income During Retirement in Relation to
Current Income
28
Participation in and Income Expected from Private
Pension Plans
29
Expectations Regarding Income to be Earned During
Retirement
30
17
Expected Retirement Income and Current Income . . . .
33
18
Relation of Expected Retirement Income to Current
Income, Within Income Groups
34
Comparison of Family Units with and Without
Private Pensions
35
10
11
12
13
14
15
16
19
ix
x
Private
Pensions and Individual Saving
20
Possibility of Losing Pension Rights
38
21
Relation of Expected Retirement Income to Needed
Retirement Income
40
22
Independent Variables: Simple Correlation
Coefficients
42
23
Proportion of Income Saved During the Previous
Year
45
24
Saving Behavior During Past 24 Months
47
25
Reports on Use of Extra Money
48
26
Relation of Amount of Savings Expected at Retirement
to Current Liquid Wealth
Saving by People with Favorable and with Unfavorable
Retirement Prospects
27
28
49
52
Joint Effect of Participation in Private Pension Plans
and of Relation of Expected Retirement Income to
Current Income
55
29
Expected Savings by Participation in Private Pensions.
56
30
Regression Equations
31
Significance of Influence of Independent Variables. . . .
60
32
Distribution of Liquid Wealth
63
33
Significance of Influence of Independent Variables
Together with Liquid Wealth
65
Relation of Net Outlay on Durables to Income and
Liquid Wealth
67
35
Saving Performance by Homeowners and Renters . . . .
69
36
Proportion of Income Saved for Families with Average
Income and Average Expenditures, by Private Pension
Coverage
71
37
Ratio of Savers to Dissavers
76
38
Characterization of High and Medium Savers
Participating and Not Participating in Pension Plans. .
78
Relation of Liquid Wealth to Proportion of Income
Saved
86
34
39
57-59
Contents
40
Relation of Pension Plans and Liquid Wealth
to Saving More than 2% of Income
xi
87
41
Sampling Errors
112
42
Number of Cases in Various Subgroups
113
Charts
1
2
3
Major Determinants of Saving 5% or More of
Income in 12 Months
83
Major Determinants of Saving 2% or More of
Income in 12 Months
84
Major Determinants of Participation in Private
Pension Plans
89
CHAPTER 1
SAVING
FOR
RETIREMENT
THE extension of collective.security plans providing retirement income represents one of the important economic developments of the post-war years. One aspect of this change was the
broadening of federal Old Age Survivors and Disability Insurance.
By the early 1960's, together with other public retirement plans,
coverage had been extended to practically the entire labor force.
The other aspect of change was the establishment of many new private pension plans. A relatively small proportion of American
breadwinners participated in such plans when World War n ended,
but substantially more than one-third of the people in the labor force
did so in 1963. The President's Committee on Corporate Pension
Funds has recently summarized the increase in coverage by private
pension plans as shown in Table 1.
These new developments could have been studied from the
point of view of the improvement they will bring forth in the financial situation of retired people. This question has not been the concern of the studies reported in this monograph, and it may suffice to
say here that it will be several years before a sufficient number of
people covered by private plans will have retired so that there will
be a pronounced improvement in the standard of living of the average retired person. Since at present private pension plans disburse
relatively small amounts in retirement benefits, they accumulate
large amounts of reserves and will continue to do so for the next ten
years. (The federal old age insurance program, on the other hand,
pays out substantially the same amounts as it receives from social
security taxes.)
Therefore, the problem of investment of pension plan reserves
has been the subject of frequent discussion. In evaluating the impact
of accumulation of capital by the pension funds, the question about
the saving behavior of people covered by pension plans is of great
importance. Should covered people reduce the amounts they save to
the extent they and their employers contribute to pension plans,
1
2
Private
Pensions and Individual Saving
Table 1
PRIVATE PENSION PLANS
1945
1955
1964
(In
Number c o v e r e d
Number o f b e n e f i c i a r i e s
1975
(Est.)
1980
(Est.;
millions)
6.4
15.4
25.0
38.7
42.7
.3
1.0
2.4
5.2
6.6
(In b i l l i o n s of d o l l a r s )
C o n t r i b u t i o n s by
and employees
employers
B e n e f i t payments
Accumulated r e s e r v e s
1.0
3.3
6.9
9.9
10.9
.2
.9
2.7
6.5
9.0
5.4
27.5
76.5
175.0
225.0
(From T a b l e 1 o f " P u b l i c P o l i c y and P r i v a t e P e n s i o n Programs."
Report
to t h e P r e s i d e n t by t h e P r e s i d e n t ' s Committee on C o r p o r a t e P e n s i o n
Funds, U. S. Government P r i n t i n g O f f i c e , 1965; some o f t h e s e d a t a had
been p u b L i s h e d e a r l i e r by R. F . Murray i n t h e 43rd Annual R e p o r t o f
the N a t i o n a l Bureau o f Economic R e s e a r c h , 1963, pp. 20 E f . )
there would be a transfer in the distribution of assets—with less
money put by households into savings accounts and securities and
more capital dispensed by trustees of pension plans — but there
would be no increase in aggregate amounts saved. Very different
conclusions would emerge, however, if households were not to alter
their saving practices under the influence of coverage by pension
plans, or if coverage were even to induce people to increase the
amounts they individually and directly save.
Decision making by individuals about the amounts they save
and the motives responsible for saving are susceptible to studies by
the survey method. The b a B i c technique used in the present study
consists of segregating from representative samples of households
people covered and people not covered by pension plans. It should
be noted that similar studies concerning the impact of federal old
age insurance are not feasible since the small group not covered by
social security consists mainly of people in special situations. It is
relatively easy to apply statistical methods suitable to keep those
covered and those not - covered by pension plans comparable by
Saving for Re tirement
3
income, age, etc. This is hardly possible with respect to groups
with and without social security coverage.
The impact of pension plans on individual saving has received
very little attention in the past and is not mentioned at all in the
extensive discussion of pensions by the President's Committee.
Some economists and business leaders have mentioned the question
briefly. Without recourse to empirical data, they have postulated
that the spread of collective security arrangements must adversely
influence individual initiative and retard individual saving. For instance, Milton Friedman wrote with reference to the retirement
provisions under social security:
The availability of assistance from the state would clearly
tend to reduce the need for private reserves and so to reduce planned saving.
1
More recently, L . J . Kalmbach, Chairman of the Board of
Massachusetts Mutual Life Insurance Company, argued about the
effects of spreading private pension plans as follows:
It is very difficult to assess fully the long-range impact of this giant welfare program on savings habits and
individual initiative. But I think we can assume, first, that,
as the level of benefits has increased, more and more individuals have taken the attitude that it is not necessary for
them to carry on savings programs, and, second, that this
attitude would become more widespread with further increases in the general level of benefits. Anything of this
nature which reduces the incentives for people to acquire a
competence of their own, that spreads the feeling that the
future is secure without any unusual efforts on their part,
is something which can have adverse effects on our economic growth.
-
2
Mr. Kalmbach focuses attention on the central problem, the
incentives for saving and their effects on economic growth. From
his arguments a specific hypothesis may be derived concerning the
impact of collective security arrangements on people's spending and
saving motives and practices. We formulate what we may call Hypothesis 1 as follows:
' M i l t o n F r i e d m a n , The Theory of the Consumption
Function,
NaUonal B u r e a u of E c o n o m i c R e s e a r c h . P r i n c e t o n , N. J . : P r i n c e t o n U n i v e r s i t y P r e s s ,
1957, p. 123.
L . J . K a l m b a c h , ' F r e e E n t e r p r i s e in a Changing World," Michigan
Busi2
ness
Review,
July, 1962 p. 5.
4
Private
Pensions and Individual Saving
Being assured of some resources after retirement, people
will spend more freely on the good things of life and concern themselves to a lesser extent with saving for retirement.
This is not the only possible hypothesis on the impact of improved old age benefits. Psychological considerations and their use
in theories developed in experimental psychology make it possible
to formulate an alternate hypothesis which postulates that individual
saving would increase, rather than decrease, under the influence of
collective retirement plans.
Well known among psychologists is the level of aspiration theory, originated by Kurt Lewin and successfully applied to various
aspects of economic behavior. In simplest terms it says that people
raise their sights with success and lower them with failure. Therefore, even if the retirement income provided by a pension plan
seems to suffice for one's needs prior to participating in a plan, it
may not appear so after the pension has been assured. Aspirations
may grow with achievement.
Furthermore, we may recall the goal gradient hypothesis, for
which there is extensive support from experiments with animals and
humans. It states that effort is intensified the closer one is to one's
goal. Concrete and attainable rewards have frequently been shown
to provide much greater incentives than punishment or the threat of
deprivation.
In earlier times, when there was no social security and private pensions were quite rare, most older people, unable to work,
lived with their children and depended on their help (or were destitute and had to be supported by welfare payments). Possibly, in the
absence of collective security arrangements, making adequate provisions for one's retirement through individual saving appeared an
insurmountably difficult task which relatively few people were able
to undertake. Even the motivation to try to provide for retirement
may have been weaker at earlier times than today when many people, thanks to pension rights, do not start from scratch but feel close
to their goal and are stimulated by attainable rewards to exert great
effort.
Whether or not collective security arrangements have a positive influence, raising people's levels of aspiration and stimulating
them to save, would of course depend on the retirement benefits expected from pensions. Before discussing in detail the new data collected on this issue, it may be mentioned that in the early 1960s
most people with private pensions expected to receive after retirement, from social security, private pensions, and other sources,
less than one-half of their current income. This finding makes it
Saving for Retirement
5
possible for us to formulate what may be called Hypothesis 2, as
follows:
Being assured of some, for many people insufficient, funds
after retirement, the provision of adequate funds during old
age no longer appears an insurmountably difficult problem;
being closer to the goal stimulates people to work harder
to achieve the goal, and therefore collective retirement
plans promote individual saving.
Obviously the two hypotheses do not represent the only possible ones about the relation of collective retirement plans to individual saving. It is also conceivable, and is no doubt the case with
some people, that retirement prospects have no impact whatsoever
on spending and saving behavior, at least over short periods of time.
Short-term considerations may be so powerful that they alone determine decisions about spending and saving.
ft is probable that substantial differences prevail among different individuals and perhaps also among different groups of the
population. Some individuals may be influenced by considerations
subsumed under Hypothesis 1, while with others the motivational
factors expressed in Hypothesis 2 may be more influential. Such
complexities of human behavior make for difficulties in testing the
hypotheses.
Certain findings, available for some time, seem more in accord with Hypothesis 2 than with Hypothesis 1. One finding, for
which there is extensive support, is the frequent reference made by
survey respondents to providing for old age and retirement as a
purpose of saving. Just as many people mentioned retirement as an
important reason for saving in the early 1960s as in the early 1950s,
despite the spread of private pension plans in the intervening decade. Secondly, it has been found that all classes of the American
people are concerned with how they will make out during retirement.
This becomes true at an early age: Many people In their thirties
speak of this as one of their worries or speak of making adequate
provisions for retirement as one of their goals. The expression of
this kind of concern becomes fairly general by the time the age of
fifty is reached.
Until recently, very little evidence has been available concerning the impact of retirement expectations on people's saving
behavior. Some data on the proportion of income put into life insurance by those people participating versus those not participating in
private pension plans, as well as insured versus uninsured under
social security, were collected by the Survey Research Center in
1957. The findings tended to contradict the notion that improved
6
Private
Pensions and Individual Saving
retirement prospects are seen as substitutes for individual life insurance, and thus to be more in line with the second than with the
first hypothesis.
Philip Cagan, of the National Bureau of Economic Research,
utilized data collected in 1958 for other purposes to compare the
savings of people participating in private pension plans with those of
people not participating. His sample was composed of those subscribers to Consumer Reports, published by Consumers Union, Inc.,
who voluntarily returned supplementary mail questionnaires. At the
time of this writing Cagan's report has not yet been published —a
preliminary and confidential draft was circulated in 1962 —and
therefore the following brief references are taken from the annual
reports issued by the National Bureau of Economic Research. Comparison between the average saving ratios of people covered and
people not covered under a private pension plan — paired so as to
make them similar in many characteristics — indicated that the former saved more than the latter:. On the average, saving in the form
of an increase in cash, savings accounts, and securities amounted to
2.8 percent of income in the group with pension plans as against 2.1
percent in the group without such plans. Saving through payments
for life insurance, annuities, and equity in a house or other real estate amounted to 5.9 as against 5.7 percent. It appeared probable
that the higher saving ratio was associated with coverage by a pension plan rather than with other characteristics of the savers. Thus
no support was found for a substitution effect, and Cagan spoke of a
recognition effect: "Realization of retirement needs and of the opportunities for financial independence opened up by a pension stimulate the motivation to save."
3
4
See the publication, The Life Insurance Public, issued in 1957 by the I n stitute of L i f e Insurance on the basis of Survey Research Center data. The
findings were discussed by Katona In The Powerful Consumer,
pp. 98 fl. This
book contains the first formulation of what has been presented here as the second hypothesis.
* 43rd Annual Report, National Bureau of Economic Research, 1963, p. 23.
3
CHAPTER 2
THE
UNIVERSE
STUDIED
THE present study is based on personal interviews with
representative samples of American consumers. All family units
living in private dwellings in the continental United States were included in the universe, from which the samples were selected by
means of probability sampling techniques. A family unit consists of
all related persons living in the same dwelling unit and may consist
of a single person.
Three independent surveys were conducted in June 1962, and
in January - February and August 1963. The same questionnaire was
used in the 1963 surveys, while the questionnaire used in the. 1962
survey differed from the later questionnaires in some respects because experience in 1962 led the investigators to make what they
considered improvements. The samples cf the several separate
surveys have been combined in the analysis, but some data .not
available from the 1962 survey are derived from the 1963 surveys
alone. Substantially the same findings were obtained in all samples,
which adds to the reliability of the findings.
Interviews were obtained from a total of approximately 5000
family units. Yet the relevant questions on expectations about retirement were not asked of all units that fell into the samples.
Family units where the head was not in the labor force at the time
of the interview were excluded. In other words, the questions about
retirement were not asked when the family head was retired, a
housewife, or a student, since these people would not be able to retire from their job or occupation and therefore the questions would
have been meaningless.
The analysis was not carried out for all remaining families in
the sample. It was assumed that certain groups of families would
be much less relevant for the purposes of the study than other
groups. It was thought, first, that young people would have less
specific retirement expectations than middle-aged or older people
and would be less influenced by those expectations in their spending
7
<
8
Private
Pensions and Individual Saving
and saving behavior. Similarly, it appeared advisable to exclude
low-income people from the analysis, since their discretion in
changing their spending-saving patterns is limited; in addition, relatively few of them save any money. Finally, single people were excluded from the analysis since it was thought that the behavior of
unmarried people (including widows or widowers) would be atypical.
The findings to be presented in this report relate, therefore,
to what will be called the "Crucial Group," defined as follows:
Complete families (husband and wife living together), with
the head in the labor force and aged 35 to 64, with a family
income of $3000 or more.
Altogether 1,853 interviews were obtained with members of
the Crucial Group. Family units In the Crucial Group represent approximately 50 percent of all family units the head of which is in the
labor force. Certain data, especially those that refer to amounts
saved during the preceding year (and to the proportion of income
saved), are taken from the 1963 surveys alone. In these surveys the
Crucial Group contains 1,311 respondents. Income-wise the Crucial
Group is divided as follows:
Family Income
$3000 to 5999
530 cases
$6000 to 9999
762 cases
$10,000 and over . . . .561 cases
Total
1,853 cases
Data are presented here on the composition of the entire labor
force and the Crucial Group, so as to indicate the differences between the universe studied and the universe excluded.
Table 2 shows the differences between the Crucial Group and
the entire labor force regarding major demographic classifications
and income. It is shown, for instance, that 22 percent of the Crucial
Group fell in the age group 55 to 64 as against 18 percent of the entire labor force. Since the Crucial Group consists of about half of
the labor force, it follows that among those excluded from it only
approximately 14 percent were 55 to 64 years of age.
The differences in income between the groups included and
excluded in the analysis are substantial. More than half of the Crucial Group had incomes of $7500 or over and were therefore in a
position to change spending or saving patterns under the influence of
relevant considerations.
The differences in occupation are much less pronounced and
The Universe Studied
9
Table 2
COMPARISON OF CRUCIAL GROUP WITH LABOR FORCE
Age o f Head
Crucial
Group
18 - 24
Entire
Labor F o r c e
Labor F o r c e
Aged 35-64
8%
25 - 34
18
35-44
45 - 54
55-64
411
28
38*
37
26
35
22
18
27
65 and o v e r
Total
2
100%
100%
1007.
Labor Force
Income
Over $3000
1963 Income
Under $2000
6%
$2000 - 2999
6
$3000 - 3999
6%
8
10%
$4000 - 4 9 9 9
9
10
12
$5000 - 5999
13
13
15
$6000 - 7499
19
16
19
$7500 - 9999
22
19
21
$10,000 - 14,999
20
14
15
$15,000 a n d o v e r
11
7
8
Not
ascertained
Total
1
100%
100%
Location
321
34%
Suburban a r e a
37
32
Adjacent
area
16
17
Outlying
are*
15
17
100%
100%
Central
Total
city
1001
10
Private
Pensions and Individual Saving
Table 2 (continued)
Crucial
Group
Entire
Labor F o r c e
Occupation
Professional,
technical
Managers, o f f i c i a l s
13%
13%
9
7
10
9
11
13
Craftsmen; o p e r a t i v e s
38
36
L a b o r e r s , s e r v i c e workers
11
14
Self-employed
Clerical;
Farmers,
businessmen
s a l e s workers
and farm managers
4
4
Other
4
4
Total
100%
100%
24%
24%
24
26
21
28
Some c o l l e g e
11
12
Have c o l l e g e d e g r e e
14
14
I
1
100%
100%
Education
Grade School
( 1 - 8 ) ; none
Some h i g h s c h o o l ; some h i g h
s c h o o l p l u s nonacademic
Completed h i g h s c h o o l ; completed high school plus
nonacademic
Not
ascertained
Total
the differences in education are quite small. Even though lowincome people usually have little education, young people are on the
average better educated than older ones. Both low-income and
young people are excluded from the Crucial Group, and the resultant
effects on education appear to have canceled out.
Perhaps of still greater importance is the information shown
in Table 3. The proportion participating in private pension plans is
much larger among families in the Crucial Group than among others
The Universe Studied
11
Table 3
SOME RELEVANT CHARACTERISTICS OP THE CRUCIAL GROUP
Participation in
P r i v a t e Pension Plans
Yea
No
Not
s u r e , not a s c e r t a i n e d
Total
Crucial
Group
Others i n
Labor F o r c e
Entire
Labor F o r c e
42%
27%
34%
52
62
58
6
11
8
100%
100%
100%
R a t i o o f E x p e c t e d Income
During Retirement to
C u r r e n t Income
L e a s than 30%
18%
8%
13%
30 - 391
14
7
11
40
- 49%
18
11
14
50 - 5 9 %
18
15
16
60 - 6 9 %
8
7
7
70% and o v e r
Not a s c e r t a i n e d
Total
9
16
14
15
36
25
100%
100%
100%
See C h a p t e r 4 f o r the q u e s t i o n s asked.
in the labor force. Moreover, uncertainty about being or not being
covered by a private pension plan is twice as frequent in the latter
group as in the Crucial Group. Similarly, inability to estimate income to be received during retirement is more than twice as frequent among others in the labor force than in the Crucial Group.
This is hardly surprising since all family heads under 35 years of
age belong in the "Others* category.
Unexpected, perhaps, is the finding that among the "Others*
relatively many expect a retirement income that represents a high
proportion of current income (over 70 percent) and relatively few a
retirement income that represents a low proportion of current income (lees than 40 percent). It appears that a fair number of young
12
Private
Pensions and Individual Saving
people with low incomes, when asked directly, say that they anticipate making almost as much during retirement as they do currently.
These expectations may be realistic since most young people will
make considerable income gains in the years before they retire.
But the data appear to justify the exclusions from the universe studied, especially since the analysis had to be based in part on a comparison of expected retirement income with current income.
It may be added that there is a large difference between the
Crucial Group and others in the labor force with respect to available liquid wealth (deposits, stocks, and bonds), since most young
people have little liquid assets. Thirty-six percent among those in
the Crucial Group and only 18 percent among "Others" have liquid
wealth exceeding $2000.
CHAPTER 3
ATTITUDES
TOWARD
RETIREMENT
B E F O R E studying people's attitudes toward and expectations about retirement, one may ask whether all Americans in the
labor force expect to retire. No direct question was asked about
this, but the following question gave fairly clear indications about
the expectations of the Crucial Group: "When do you think you (head
of family) will retire from the work you do now; I mean at what
age?" It is shown in Table 4 that 77 percent of those in the Crucial
Group gave a definite age in answer to this question. Only 7 percent
flatly refused to contemplate any retirement, while 16 percent were
uncertain about whether or when they would retire. Most of those
who gave a date for their retirement mentioned an age between 65
'and 70. A few people expect to retire at age 70 or later and a sizable group, one-fourth of all, at an age under 65. The answers to
this question did not differ greatly among income or age groups.
However, among older people the opinion *I shall work as long as
possible" was slightly more frequent than among younger people.
An inquiry, about the respondents' expected domicile after r e tirement likewise showed no differences by income level or age. In
the entire Crucial Group 58 percent said that they expected to live
after retirement in the same town in which they lived at the time of
the interview, 25 percent expected to live somewhere else, and 17
percent were not certain, or answered that they had not given any
thought to this question.
Right at the beginning of the interview respondents were asked
a general question about their attitudes toward retirement. In reply
to the question, "Is retirement something to be looked forward to,
or is it to be dreaded, or what?" the majority answered unequivocally that they looked forward to retirement and considered it something desirable and pleasant (Table 5). One-fifth of the Crucial
Group said they "dreaded" retirement; among lower income people
and older people the proportion was slightly larger.
Respondents were also asked whether they would "get along all
13
14
Private
Pensions and Individual Saving
Table 4
TIME OF EXPECTED RETIREMENT
( P e r c e n t a g e d i s t r i b u t i o n o f C r u c i a l Group)
When W i l l
You R e t i r e ?
All
Income $10,000
and Over
Age
55-64
W i l l work, as long a s p o s s i b l e
7
7
10
Don't know whether w i l l
4
4
4
12
12
11
Don't know when w i l l
Expect
retire
retire
ta r e t i r e a t age o f :
Under 60
4
5
*
60 - 64
20
23
22
65 - 69
50
45
48
3
4
5
100
100
100
70 o r over
Total
* L e s s than 0.5 p e r c e n t
The
q u e s t i o n waa:
"When do you t h i n k you (head o f f a m i l y ) w i l l r e t i r e
from t h e work you do now; I mean a t what a g e ? "
right financially" when they retire, or whether retirement would
"cause financial problems" for them. Again, the large majority of
those .in the Crucial Group gave favorable answers, with 66 percent
saying flatly that they would have no financial problems when they
retire (upper part of Table 6).
Following this inquiry, detailed questions were asked about
income and expenses expected during retirement, and at the end of
the interview the general question about the financial position during
retirement was repeated in a slightly changed form. Respondents
were asked, "Would you say that what you can look forward to will
be enough or not enough for retirement?" The proportion indicating
that they expected to have enough was 59 percent (lower part of
Table 6). Expressions of uncertainty, inability to answer the question, and conditional answers (for instance, "It depends on inflation")
were not very common. Only 19 percent said that they would not
have enough for retirement
Table 6 also shows that expressions of favorable attitudes
Table 5
ATTITUDES TOWARD RETIREMENT
( P e r c e n t a g e d i s t r i b u t i o n o f C r u c i a l Group)
A t t i t u d e Toward R e t i r e m e n t
Look forward to r e t i r e m e n t ; e n t h u s i a s t i c
Mostly look forward .
Pro-con; mixed
Dread r e t i r e m e n t
Not g o i n g to r e t i r e
Not a s c e r t a i n e d ; don't know
Total
All
$3000-5999
Total
The q u e s t i o n was:
$10,000 and o v e r
52
6
9
19
7
7
48
6
7
23
8
8
53
7
8
18
6
8
53
6
11
18
7
5
100
100
100
100
35-44
Look forward to r e t i r e m e n t ; e n t h u s i a s t i c
M o s t l y look forward
Pro-con; mixed
Dread r e t i r e m e n t
Not going to r e t i r e
Not a s c e r t a i n e d ; don't know
Income
$6000-9999
Age o f Head
45-54
55-64
51
5
10
17
8
9
54
7
8
39
4
48
7
8
23
6
8
100
100
100
"How do you f e e l about ( h e a d ' s ) r e t i r e m e n t , i s i t something
to be dreaded, o r w h a t ? "
8
.
to be looked forward t o , o r I s i t
S3
as
ft
3
16
Private
Pensions and Individual
Saving
Table 6
EXPECTED FINANCIAL SITUATION DURING RETIREMENT
(Percentage d i s t r i b u t i o n
How w i l l
o f C r u c i a l Group)
vou g e t a l o n g a f t e r r e t i r e m e n t ?
F o r e s e e no f i n a n c i a l problems
All
Income $10,000
and o v e r
Age
55-64
66
80
60
9
4
10
Don't know; n o t a s c e r t a i n e d
12
5
10
F o r e s e e f i n a n c i a l problems
13
11
20
100
100
100
59
77
59
7
7
7
Depends, p r o - c o n
Total
W i l l you h a v e enough f o r r e t i r e m e n t ?
W i l l h a v e enough
Might h a v e enough
Depends, don't know, n o t a s c e r t a i n e d
15
4
9
W i l l n o t h a v e enough
19
12
25
100
100
100
Total
The
q u e s t i o n s were:
"Do you t h i n k you w i l l g e t a l o n g a l l r i g h t
f i n a n c i a l l y when ( h e a d ) r e t i r e s , o r do you
think that retirement w i l l cause f i n a n c i a l
problems f o r you p e o p l e ? "
"Would you s a y t h a t what you can look forward
to w i l l be enough, o r n o t enough f o r r e t i r e m e n t ?
toward the financial position expected during retirement were more
frequent among high-income people than among all people (and
therefore less frequent among low-income people than among, all
people). Families with a good current financial position were overwhelmingly optimistic about their financial situation during retirement. There were also differences among age groups. Pessimistic
answers were more frequent among those 55 to 64 years of age than
among younger people. Being close to retirement appears to increase awareness of financial problems during retirement.
Attitudes
Toward Retirement
17
We may conclude that American people (in the Crucial Group)
are overwhelmingly optimistic about retirement. When asked to explain their confident evaluations of their retirement prospects, respondents most frequently referred to social security or private
pensions. Twenty-eight percent of the Crucial Group specifically
mentioned these sources of retirement income. (Expectations about
retirement income are the subject of the next chapter.) There were
two additional reasons for-respondents' optimism about their retirement which should be mentioned here. About 13 percent of the
Crucial Group referred to available savings or assets and over 7
percent to reduced expenses in explaining why they did not expect
any financial problems during retirement.
The latter reason was also studied by means of a direct.question, to which 82 percent of the Crucial Group answered that their
expenses after retirement would be "less than now.* (In addition,
11 percent said that they did not know, 6 percent thought that their
expenses would remain unchanged, and 1 percent that their expenses
would increase.)
In explaining their answers many respondents mentioned two
or more factors that would reduce their expenses. More than onehalf of the Crucial Group pointed out that by the time they retired,
their children would have left home or completed their education. A
second frequent mention, made by one-fifth, was reference to reduced housing expenses. The house will be paid for, so said most of
these people. Mention of reduced expenses in connection with work,
or on clothes, entertainment, and travel, and such general remarks
as "older people need less to live on* were also quite frequent.
The American people, then, overwhelmingly believe that they
will need less money after they retire than before retirement. How
much less ? This question was studied by asking, "What would you
say, how much will you need each year after retirement?*" Close
to two-thirds of the Crucial Group gave a numerical answer to this
question. This indicates that the question did not tap an area about
which people lack information or to which they have not given
thought. Even among those not answering this first question, an additional sizable group gave a reply to the following supplementary
question: "Could you give me a rough estimate of what your needs
will be?" Altogether, as shown in Table 7, only 15 percent professed not to be able to give an answer to these questions about
their needs after retirement.
It appears from Table 7 that families with a current income
between $3000 and $6000 most commonly estimate their retirement
needs slightly lower than their current income. But in the income
groups over $6000, needs are often estimated much lower than
18
Private
Pensions
and Individual
Saving
Table 7
AMOUNT NEEDED EACH YEAR AFTER RETIREMENT BY CURRENT INCOME
(Percentage d i s t r i b u t i o n
Amount Needed
(per year)
Under $1000
All
1
of Crucial
$3000
-5999
1
Group)
C u r r e n t Income
$6000
$10,000
-9999
and o v e r
1
1
$1000 - 1999
7
17
4
1
$2000 - 2999
19
29
19
8
$3000 - 3999
26
27
32
19
$4000 - 4999
13
8
14
16
$5000 - 5999
7
2
7
11
$6000 - 7499
7
1
4
16
$7500 and o v e r
5
1
15
Don't know
Total
15
15
18
13
100
100
100
100
* L e s s than 0.5 p e r c e n t .
The .question was:
"What would you s a y , how much w i l l you p e o p l e need
each y e a r a f t e r r e t i r e m e n t ?
( I f d o n t know) Could
you g i v e me a rough e s t i m a t e of what your needs
w i l l be?"
1
current income. In the over $10,000 income group, about one-half of
those who gave an estimate believed that they would need less than
$5000 after they retire. Probably the question about amounts needed
was understood to refer to minimum needs. Many people answered
in terms of how much would make it possible to live, rather than in
terms of how much they expected to spend after retirement.
Attitudes
Toward Retirement
19
Appendix to Chapter 3
LEVEL OF INFORMATION ABOUT SOCIAL SECURITY BENEFITS
IN supplementing the studies regarding the level of i n formation about retirement, it may be useful to say a few words concerning the level of information about the social security program.
In order to study the extent to which people know about social security and the specific types of benefits paid by it, two approaches
were used.
The f i r B t was nonsuggestive and asked respondents to name
the specific benefits which they could recall. The question was:
"We are interested in finding out what people know of the social security program; as far as you know,' to what types of benefits does
social security entitle a worker or employee and his f a m i l y ? " Table 8 shows that more people know about retirement than other benefits; 63 percent of a l l Americans mentioned retirement benefits
spontaneously, compared with 30 percent who mentioned survivorship benefits and 17 percent who mentioned disability benefits.
There is a greater awareness of benefits paid through social security among high- than among low-income respondents. Since income
is highly correlated with education, this implies that people with
higher education are the best informed.
Table 9 shows that respondents who are covered by social security know more than respondents without coverage about the benef i t s which people are entitled to receive under the current laws.
The second approach used was more direct. A l l respondents
who did not spontaneously mention survivorship provisions were
asked, "Suppose a person eligible for social security dies - in that
case, are any payments due to his dependents? (If Yes) What type
of payments ? When so prompted, as many as three out of four respondents indicated awareness of the survivorship provisions (Table 10). Table 11 shows respondents covered by social security to
be better informed in this respect than those without coverage; 76
1
B
The data presented in Table 8 and the following three tables relate to all
family units, rather than to the Crucial Group, the behavior of which Is analyzed
in all other tables. Retabulation of the data for the Crucial Group indicates
rather small differences. F o r Instance, the summary data in Table 8 show that
63 per cent of all family units referred spontaneously to retirement benefits; in
the Crucial Group the preporUon was 69 per cent. Awareness of survivorship
benefits was indicated by 30 per cent of all family units and 36 per cent of the
Crucial Group. The corresponding Figures for disability benefits were 17 per
cent and 19 per cent.
1
20
Private
Pensions
and Individual
Saving
Table 8
LEVEL OF INFORMATION ABOUT SOCIAL SECURITY BENEFITS^'
(Percentage distribution" of a l l family u n i t s )
Know of -
All
Under
$3000
$3000
-4999
Income
$5000 $7500
-7499 -9999
$10,000
and up
Survivorship benefits alone
5.
4
5
5
5
D i s a b i l i t y benefits alone
1
2
1
3
1
*
Retirement benefits alone
33
34
28
34
31
34
Survivorship and d i s a b i l i t y
benefits
2
1
2
2
3
1
Survivorship and retirement
benefits
26
24
•
4
16
9
13
18
D i s a b i l i t y and retirement
benefits
7
5
10
8
7
7
A l l three benefits
7
5
4
7
9
10
29
40
36
23
18
20
100
100
100
100
100
100
Don't know; not ascertained
Total
Summary
Know of Retirement benefits
. 63
53
55
67
73
• 75
Survivorship benefits
30
19
24 .
32
43
39
D i s a b i l i t y benefits
17
13
17
20
20
18
* Less than 0.5 percent.
The questions were:
"We are interested In finding out what people
know of the Social Security program; as f a r as
you know, to what types of benefits does Social
Security e n t i t l e a worker or employee and h i s
family?"
"Anything else?"
1/ This table, as well as Tables 9, 10 and 11, are based on a representative sample of a l l American family u n i t s . The four tables are
not r e s t r i c t e d to the C r u c i a l Group.
Attitudes
Toward Retirement
21
Table 9
LEVEL OF INFORMATION ABOUT SOCIAL SECURITY BENEFITS
BY SOCIAL SECURITY COVERAGE
(Percentage d i s t r i b u t i o n of a l l family u n i t s )
Head Covered by Social Security
Know of -
All
Yes
5
No
Survivorship benefits alone
5
D i s a b i l i t y b e n e f i t s alone
1
4
Retirement b e n e f i t s alone
33
34
26
2
2
1
16
18
10
1
1
Survivorship and d i s a b i l i t y
benefits
Survivorship and retirement
benefits
D i s a b i l i t y and retirement
benefits
7
7
7
A l l three b e n e f i t s
7
7
2
29
26
49
100
100
100
Don't know; not ascertained
Total
Summary
Know of Retirement b e n e f i t s
63
66
45
Survivorship benefits
30
32
17
Disability benefits
17
17
11
See Table 8 for the questions.
percent of covered people knew of survivorship benefits as compared to 57 percent of those with no coverage.
The studies on the awareness of survivorship provisions permit certain conclusions regarding awareness of retirement provisions as w e l l . No doubt direct questions about retirement benefits
addressed to the 37 percent of the sample who did not mention them
spontaneously (see Table 8) would have likewise greatly increased
ro
to
Table 10
LEVEL OF INFORMATION ABOUT SURVIVORSHIP PROVISIONS
UNDER THE SOCIAL SECURITY LAW
TO
(Percentage d i s t r i b u t i o n of a l l family u n i t s )
All
Under
$3000
$3000
-4999
Income
$5000
-7499
$7500
-9999
$10,000
and over
Second question not asked, survivorship
benefits mentioned spontaneously
30
19
24
32
43
39
Yes, payments are due to dependents
43
44
48
45
41
41
Depends
3
3
2
3
1
2
No payments are due to dependents
3
5
3
3
4
3
21
29
23
17
11
15
100
100
100
100
100
100
Don't know, not ascertained
Total
The question was:
( I f survivorship provision not mentioned in answer to quesion noted on Table 8) "Suppose
a person e l i g i b l e for S o c i a l Security d i e s - - i n that case, are any payments due h i s
dependents?"
l
2.
<5
Attitudes
Toward Retirement
23
Table 11
LEVEL OF INFORMATION ABOUT SURVIVORSHIP PROVISIONS
BY SOCIAL SECURITY COVERAGE
(Percentage d i s t r i b u t i o n or a l l family units)
Head Covered by S o c i a l Security
All
Yes
No
30
32
17
43
44
40
3
3
2
3
3
5
21
18
36
100
100
100
Second question not asked,
survivorship benefits
mentioned spontaneously
Yes,
payments are due
to dependents
Depends
No payments are due to
dependents
Don't know, not ascertained
Total
See Table 10 for question.
the proportion indicating awareness of these provisions of the social
security program. I t appears therefore that the existence of r e t i r e ment benefits under social security is well known to the American
people.
CHAPTER 4
INCOME
EXPECTED
DURING
RETIREMENT
THE procedure for determining what income respondents expected to receive during retirement began by asking the f o l lowing question, after it had been ascertained whether respondents
carry social security or participate in a private pension plan:
"Considering what you now have or is assured for you now,
what retirement income do you expect altogether?"
Approximately half of a l l respondents in the Crucial Group gave an
estimate in dollars in reply to this question, although sometimes in
brackets. Those who said that they could not make such an estimate
were asked:
"Nobody can be sure, but many people can give us an estimate of how their income after retirement w i l l compare
with their current income - w i l l it be half as much, onequarter, three-quarters, or what?"
FoHowing this question, four specific questions were asked
about the income expected f r o m specific sources. First, questions
were asked about income expected f r o m social security and, secondly, about income from other kinds of pensions. Then respondents
were asked whether the husband or wife expected to earn money by
working after retirement and how much they expected to earn by
working. FinaUy, respondents were requested to give an estimate
of other expected income, such as income f r o m life insurance or
annuities.
The replies received were scrutinized with respect to the
consistency of the f i r s t global answer with the later partial answers.
A sufficient degree of correspondence among the different replies
was obtained so that it was possible to set a figure of expected r e tirement income f o r 85 percent of the sample. (In many instances
midpoints of brackets were used.)
The relation between the amounts of current and expected
24
Table 12
EXPECTED RETIREMENT INCOME RELATED TO CURRENT INCOME
(In percent of Crucial Group)
Expected Retirement
Income
$3000
-3999
$4000
-4999
$5000
-5999
Current Income
$6000
$7500
-9999
-7499
$10,000
-14,999
*
*
Under 51000
U
$1000 - 1999
$15,000
and over
2
Total
1
3
TO
*
22
$3000 - 3999
1
21
$4000 - 4999
1
12
$2000 - 2999
O
10
I
Pi
$5000 - 5999
6
$6000 - 7499
7
$7500 and over
6
#
15
*
Not ascertained
Total
6
12
20
23
19
12
5r
a.
100
* Less than 0.5 percent
See the text for the questions asked.
to
26
Private
Pensions
and Individual
Saving
income is shown in Table 12. Expected retirement income is very
much smaller than current income. As the two marginal columns of
Table 12 show, 33 percent of the Crucial Group expected retirement
income of less than $3000 and 6 percent of more than $7500. The
respective percentages f o r current income are 0 and 54 percent.
The median figure f o r expected retirement income is $3450 a year
and f o r current income $7900.
When the various brackets of expected retirement income are
compared with the brackets of current income, a fairly consistent
pattern is found. Among those with $4000 to $5000 current income,
f o r instance, i t is most common to estimate retirement income at
$2000 to $3000. Among those with $7500 to $10,000 current income,
it is most common to estimate retirement income at $3000 to $5000,
etc. The middle segment outlined in Table 12 contains close to 40
percent of the Crucial Group, or 45 percent of all those who gave an
estimate of their retirement income. In addition, there are two
fairly equal groups, one with relatively low and one with relatively
high estimates of retirement income.
The consistency of estimates of retirement income is also
shown in Table 13, in which the 25th, 50th, and 75th percentile points
of the estimates are calculated separately for each of the three major income groups into which the Crucial Group is divided. In the
two lower income groups, the f i r s t quartile and the median of expected retirement income are slightly smaller than one-half of s i m i l a r measures of current income. The third quartile point of expected retirement income is higher than one-half of current income. In
the $10,000 and over income group all estimates are substantially
lower than half of current income. Somewhat similar relations are
found when expected and current income are compared within three
age groups.
Table 13 also contains data on estimates of income needed
during retirement. These figures, supplementing those given in the
previous chapter, indicate a close correspondence between the two
estimates: the income expected and the income needed during r e tirement.
The ratio of expected retirement income to current income
was calculated f o r each family in the sample. Table 14 indicates a
fairly normal curve f o r a l l respondents. There are 18 percent who
estimated their retirement income at 29 percent or less of their
current income, and 17 percent who estimated i t at over 60 percent.
Fifty percent of respondents, or close to 60 percent of those who
made an estimate, f a l l in between.
When, however, the income groups are studied separately, the
normal curve disappears. The lower the income, the more frequent
Income Expected During Retirement
27
are high estimates, and the higher the income the more frequent are
low estimates. This may. be related to the provisions of the social
security system: social security provides a higher proportion of
earned income at lower than at higher income levels. A typical
family with a current income of $5000 a year expects to have an i n come of $2500 during retirement. A typical family with a current
Table 13
DISTRIBUTION OF CURRENT, EXPECTED AND NEEDED INCOME
Current Income
$3000 - 5999
$6000 - 9999
$10,000 and over
C r u c i a l Group
Current
Income
Expected
Retirement
Income
Needed
Retirement
Income
$4,110
$1,680
$2,100
median
4,850
2,370
2,840
3rd quartile
5,460
2,990
3,630
1st quartile
$6,810
$2,610
$3,140
1st q u a r t i l e
median
7,690
3,530
3,570
3rd quartile
8,830
4,720
,4,440
1st q u a r t i l e
$11,940
$3,820
$3,190
median
13,840
5,620
4,540
3rd quartile
16,480
7,480
6; 150
1st q u a r t i l e
$5,890
$2,600
$2,820
median
6,850
3,590
3,650
3rd quartile
9,600
5,000
4,790
1st quartile
$5,560
$2,370
$2,600
8,830
3,320
3,520
Age of Head
35 - 44
45 - 54
median
55 - 64
3rd quartile
9,970
4,720
4,700
1st q u a r t i l e
$4,630
$2,910
$2,490
median
6,230
3,050
3,380
3rd q u a r t i l e
8,800
4,300
4,340
28
Private
Pensions
and Individual
Saving
TabLe 14
EXPECTED INCOME DURING RETIREMENT IN RELATION TO CURRENT INCOME
(Percentage d i s t r i b u t i o n of C r u c i a l Group)
Ratio of Expected Retirement
Income to Current Income
All
$3000
-5999
Current Income
$6000
$10,000
and over
. -9999
29% or l e s s
18
11
15
28
30 - 39%
14
9
16
16
40 - 49%
18
19
19
16
50 - 59%
18
16
20
17
60 - 69%
8
15
6
7
70% or more
9
13
9
4
15
17
15
12
100
100
100
100
Not ascertained
Total
income of $15,000 a year expects to have an income of $6300 during
retirement. In the f i r s t case the proportion is 50 percent and in the
second case 42 percent.
The presentation of data on total retirement income can be
supplemented by information on the income expected during r e t i r e ment f r o m various specific sources. Practically a l l respondents in
the Crucial Group acknowledged that they have some form of social security. (Railroad retirement, government pensions, and the
like were included in the question asked.) When respondents were
queried about the monthly income they expected f r o m social security, only about one-third gave answers in terms of dollar amounts.
One out of ten respondents said, I shall receive the maximum they
pay" and very many others replied, "Whatever they are paying when
I retire. * Still, it appears that there is a fairly widespread awareness of the approximate size of retirement benefits f r o m social security. Those who replied in-terms of dollar amounts estimated the
payments most commonly at slightly over $150 a month.
Participation in private pension plans, though it has greatly
increased during the last few years, is still restricted to less than
half of the members of the Crucial Group. Fifty-two percent answered with a definite "No" to the respective question, while regarding 6 percent it was not certain whether the type of retirement
arrangement referred to represented a private pension plan. ThereH
Income Expected During Retirement
29
fore, all tabulations on private pensions relate to 42 percent of the
Crucial Group (Table 15).
It appears that participation in private pension plans is much
less frequent in the $3000 to $6000 income group than in the higher
income groups. Yet the rate of participation does not appear to i n crease beyond an income level of $12,000 or $15,000.
Most participants had some knowledge about the size of r e tirement income provided by their private pension plans, and the
majority were in a position to give rather precise figures to the i n terviewer. The amounts of retirement income expected are fairly
low among respondents with less than $10,000 income and rarely
Table 15
PARTICIPATION IN AND INCOHE EXPECTED FROM PRIVATE PENSION PLANS
(Percentage d i s t r i b u t i o n of Crucial Group)
Private Pension
All
$3000
-5999
Current Income
$6000
$10,000
and over
-9999
Have
42
26
47
52
Don't have
52
68
48
43
6
6
5
5
100
100
100
100
12
12
16
10
7
3
9
9
Not sure
Total
Retirement Income Expected
from P r i v a t e Pension Plans
Less than $150 a raontii
$150 - 3O0 a month
$300 or more a month
Amount not
ascertained
Total
6
*
3
16
17
11
19
17
42
26
47
52
* Less than 0.5 percent.
The questions were:
(After asking about social security, r a i l r o a d
retirement, or other government pensions) "What
about other kinds of private pensions - w i l l you
and your wife (husband) have anything l i k e that?
What Income do you expect from this?"
30
Private
Pensions
and Individual
Saving
exceed the retirement benefits expected f r o m social security. At
higher income levels, however, participation in private pensions is
frequently expected to result in a retirement income twice as high
and sometimes even three times as high as the social security benefits that the same people expect to receive.
About two-thirds of a l l respondents in the Crucial Group do
not expect any income f r o m life insurance, annuities, or similar
sources during their retirement.
About one-half of those in the Crucial Group said that they or
their wives anticipated earning some money after they retired f r o m
their regular jobs. Most commonly, part-time jobs or small r e ceipts f r o m self-employment were expected to provide the additional income. I t was said not infrequently, especially by older people, that they planned and expected to earn as much as possible and
still receive social security benefits. Table 16 shows that most
Table 16
EXPECTATIONS REGARDING INCOME TO BE EARNED DURING RETIREMENT
(Percentage
W i l l Earn Income?
d i s t r i b u t i o n of C r u c i a l Group)
All
Yes
No
Don't know
Total
$3000
-5999
Current Income
$6000
$10,000
-9999
and over
52
53
51
49
41
42
41
42
7
5
8
9
100
100
100
100
23
29
22
17
Amount To Be Earned
Less than $2000 a year
Over $2000 a year
Don't know
Total
The questions were:
9
4
8
13
'20
20
21
19
52
53
51
49
"Do you or your wife (husband) expect to earn
money by working a f t e r your (Head's) retirement?
About how much do you people expect to earn?
Income Expected During Retirement
31
people in the Crucial Group with less than $10,000 income estimated
their earnings f r o m work after retirement at less than $2000 a
year. Among upper income people, and especially among college
graduates, expectations of sizable earned income are more common. Age-wise there are no differences in these expectations:
Those close to retirement gave estimates quite similar to those
given by much younger people. Uncertainty about the size of i n come to be earned during retirement is very pronounced in a l l population groups.
Earned income represents a sizable portion of total expected
retirement income only among those who expect relatively low retirement income. Life insurance and annuities account in some
cases f o r a substantial share of total retirement income, but the
proportion of families expecting such income is relatively small.
(In explaining why they anticipated few financial problems during
retirement, only 4 percent of the Crucial Group referred spontaneously to earnings after retirement and less than 3 percent to insurance or annuities.) Income from social security and private pensions represents a sizable share of the total f o r most people.
Especially among upper income people with pensions, these pensions
often account for a large proportion of the total expected retirement
income.
CHAPTER 5
COVERAGE
BY PRIVATE
PENSION
PLANS
SOME pertinent information on coverage by private pension plans has already been presented in Table 15. It was shown
there that less than half of the Crucial Group is covered by a pension plan, and that the proportion having such coverage is much
lower in the $3000 to $6000 income group than in the higher income
groups.
In Table 17 the distribution of current income is presented
separately f o r those with and without a pension plan, and the sizable
difference in the median income of the two groups —$9000 as
against $7000 — is indicated. The table also presents data on the
retirement income expected by those having and those not having
pension plans. Again, the expected retirement income of those with
pensions is higher than those without. Yet it is not clear f r o m these
distributions whether the excess is more pronounced in expected
than in current income; the difference in expected retirement i n come might reflect nothing but the difference in current income.
The ratio of expected retirement income to current income is
presented in Table 18. Those covered by pensions are found to have
high ratios somewhat more often and low ratios somewhat less often
than those not covered. Participation in a private pension plan appears to make the largest difference among those in the lowest of
the three income groups ($3000 to $6000). For people with current
income levels over $10,000, ratios of less than 40 percent were calculated f o r 47 percent of those with pensions and f o r 55 percent of
those without pensions: the comparable figures f o r the $3000 to
$6000 income group show a much greater spread: 9 percent and 32
percent, respectively.
In a l l three income groups shown in Table 18, having a private
1
It should be mentioned again that railroad retirement plans have been
included among government pension plans and excluded from private pension
coverage.
1
32
Coverage by Private Pension Plans
33
Table 17
EXPECTED RETIREMENT INCOME AND CURRENT INCOME
(Percentage d i s t r i b u t i o n of Crucial Group)
Amount of Income
With Private Pensions
Expected
Current
Retirement
Income
Income
Without Private Pensions
Expected
Current
Retirement
Income
Income
Under $1000
$1000 - 1999
1
2
4
18
$2000 - 2999
17
22
$3000 - 3999
1
25
9
16
$4000 - 4999
4
17
12
8
$5000 - 5999
10
10
14
6.
$6000 - 7499
19
11
22
4
$7500 - 9999
27
19
$10,000 - 14,999
26
13
$15,000 and over
11
Not ascertained
Total
Median-^
\l
11
18
8
100
100
100
100
$9000
$4000
$7000
$2950
Not ascertained cases are excluded in c a l c u l a t i n g median values.
See Chapter 4 for the questions asked.
pension makes a substantial contribution to raising the ratio of expected retirement income to current income. The fmding that the
contribution is much greater in the case of lower income people is
explained by another finding already illustrated by Table 15, namely,
that the absolute amount of expected private pensions is f a i r l y small
in most instances.
As to the differences in current income among those with and
those without pension plans, Table 19 shows education and occupation to be relevant factors. Those who went to college or have a
college degree are much more likely to have a pension plan. The
occupational data reflect what is well known, namely, that employees
of large f i r m s participate in private pension plans more frequently
34
Private
Pensions
and Individual
Saving
TabLe L8
RELATION OF EXPECTED RETIREMENT INCOME TO CURRENT INCOME,
WITHIN INCOME GROUPS
(Percentage d i s t r i b u t i o n of C r u c i a l Group)
Ratio of Expected Retirement
Income to Current Income
Less than 30%
All
17
With Private Pensions—'
$3000
$6000
$10,000
-5999
-9999
and over
4
13
26
30 - 397.
17
5
18
21
40 - 49%
24
25
25
21
50 - 59%
20
19
24
17
60 - 69%
12
29
10
10
70% and over
L0
18
10
5
100
100
100
-100
Total
Without Private Pensions ^
$3000
$6000
$10,000
-5999
and over
-99.99
-
All
Less than 30%
25
18
23
40
30 - 397.
17
14
19
15
40 - 49%
20
21
22
16
50 - 59%
20
19
21
21
60 - 69%
8
14
3
4
10
14
12
4
LOO
100
LOO
100
70% and over
Tocal
j . / Respondents for whom i t was not ascertained whether they have
private pensions, what t h e i r current income i s , and what r e t i r e ment income they expect have been omitted from t h i s tabulation.
than do employees of small f i r m s or self-employed people. The two
groups which are much more frequent among people without pension
plans are self-employed businessmen and farmers. The three
groups in which private pension plans are more frequent are: professional people, managers of business f i r m s , and skilled workers.
Coverage by Private Pension Plans
35
Table 19
COMPARISON OF FAMILY UNITS WITH AND WITHOUT PRIVATE PENSIONS
C r u c i a l Group
Private No Private
Pension
Pension
E n t i r e Labor Force
Private No Private
Pension
Pension
Education of Head
Grade school; none
197.
30%
15%
29%
Some high school
23
26
21
22
Completed high school
26
26
29
29
Some college
16
8
14
9
College degree
16
9
20
10
Not ascertained
*
I
1
1
100%
100%
100%
100%
P r o f e s s i o n a l , technical
15%
9%
19%
10%
Managers, o f f i c i a l s
13
7
10
Total
Occupation of Head
Self-employed businessmen
5
3
17
3
11
C l e r i c a l ; s a l e s workers
12
10
15
13
Craftsmen, operatives
44
35
41
33
11
8
18
*
7
Laborers; service workers
8
Fanners, and farm managers
1
Other
4
3
4
3
Total
100%
100%
100%
100X
8
Age of Head
28%
Less than 35
29%
35 - 44
41%
40%
28
24
45 - 54
38
37
27
•24
55 - 64
21
23
16
19
1
4
100%
100%
65 and over
Total
100%
100%
36
Private
Pensions
and Individual
Saving
Table 19 (continued)
C r u c i a l Group
Private No Private
Pension
Pension
E n t i r e Labor Force
Private No P r i v a t e
Pension
Pension
Family Income
Less than $3000
-
-
$3000 - 5999
15%
35%
23
35
$6000 - 9999
46
40
45
29
$10,000 and over
39
25
29
15
-
-
1
2
100%
L00%
100%
100%
Under $100
14*
18%
16%
35%
$100 - 999
33
29
33
27
$1000 - 4999
26
24
26
20
$5000 and over
22
21
20
13
Not ascertained
5
8
5
5
100%
100%
100%
100%
Not ascertained
Total
2%
19%
Liquid Wealth-^
Total
* Less than 0.5 percent.
_1/
Family funds in banks, bonds, and stock.
No large difference appears among clerical or sales personnel or
(in the Crucial Group) among semi-skilled or unskilled workers.
One of the two groups usually without pension plans is characterized by relatively high income (and high savings as well), namely,
the self-employed. However, the other group, the farmers, is characterized by low income.
In many other respects, the differences between people with
and without pension plans are relatively small. This is true of age
and residential location, as well as of the number of people in the
family. Most relevant, the liquid wealth available to the members
of the Crucial Group at the time of the interview (the sum of various
bank deposits, bonds, and stock) does not appear to differ greatly by
Coverage by Private Pension Plans
37
pension coverage (lowest part of Table 19). In spite of the sizable
income differences in the Crucial Group, the proportion of those
with practically no liquid wealth (less than $100) is only slightly
smaller and the proportion of those with large liquid wealth only
slightly larger among those who have pensions than among those
who do not.
Table 19 also presents data on the differences between those
with and without pensions in the entire labor force. These differences are not relevant f o r this study of the impact of pension plans,
since it is restricted to the Crucial Group, but are.of interest as a
description of the prevailing situation. Again, differences in occupation, education, and income are substantial: The differences between the two groups with respect to liquid wealth are much larger
in the labor force than in the Crucial Group.
The respondents' information about private pension plans was
studied by asking the following question: "Suppose you wanted to
change jobs; would you lose your pension rights, or some of them,
by quitting your present job ?* Almost half of those participating in
pension plans replied that they would lose their pensions, and close
to a f u r t h e r one-fourth said that they would lose some of their pension rights. Approximately 25 percent replied, however, in the negative. I n this respect the difference among income groups was
small (Table 20).
A relatively small proportion of upper income people participate i n private pension plans which offer them some kind of choice
about the kind of retirement income they may receive (e.g. between
fixed and variable yield, or annuities which cover the wife as well).
Choice between pension and lump-sum payments appears to be
somewhat more frequent. Some, likewise relatively few participants, also have latitude regarding the amounts paid into pension
plans. These differences are neglected in this study. This appears
justified because the proportion of high-income people, for whom
such considerations may be important, is fairly small in the Crucial Group.
Respondents were given ah opportunity to express an opinion
regarding the crucial question raised in this investigation. Those
2
3
- It is surprising how little Information is available on the kind of people
who participate in pension plans. The Report by the President's Committee
(cited i n Chapter 1) does not contain any such information, although data on the
relaUon of plans to the size of the employer's business (e.g. the number of his
employees) could have been obtained without survey research.
I n the Crucial Group 4.5 percent had a family income of $20,000 or over
in 1963.
2
3
38
Private Pensions and Individual
Saving
Table 20
POSSIBILITY OF LOSING PENSION RIGHTS
(Percentage d i s t r i b u t i o n of C r u c i a l Group with private pensions)
Whether Would Lose Pension
Rights Upon Changing Job
All
$3000
-5999
Income
$6000
$10,000
-9999
and over
Yes, would lose rights
48
50
50
44
Yes, q u a l i f i e d
14
12
12
17
8
11
6
10
Would lose rights but would
receive part of amount at severance
No, q u a l i f i e d
No, would not lose r i g h t s
Don't know, not ascertained
Total
3
*
4
3
22
21
22
23
5
6
6
3
100
100
100
100
* Less than 0.5 percent.
The question was:
"Suppose you wanted to change Jobs, would you lose
your pension r i g h t s or some part of them by
quitting your present job?"
with private pensions were asked whether "the prospect of receiving
a check regularly after retirement (makes) any difference in the way
you spend or save money now." The question was intentionally f o r mulated in a somewhat- suggestive way and 24 percent of those with
pension plans did answer in the affirmative, usually by saying that
"It may make some difference." However, when these respondents
were asked about the kind of difference they had in mind, only 10
percent of those with a pension plan gave definite answers: About 7
percent said that they were spending more, and about 2 percent that
they.were saving more than they would have otherwise done.
It appears, then, that relatively few people are clearly aware
of an Impact of participation Ln private pension plans on their
spending and saving behavior. In order to study this complex question, a direct question does not suffice and the data must be analyzed
in a different way.
CHAPTER 6
THE
INDEPENDENT
VARIABLES
THE indirect method of investigation, to which the study
was geared f r o m the beginning, consists of determining the relation
between certain explanatory or independent variables and certain
dependent variables. One of the independent variables — called Independent Variable A —is participation in private pension plans. I t
consists, as previously shown, of 42 percent of the Crucial Group
participating and 52 percent not participating (6 percent being
omitted).
Retirement income expectations comprise another crucial i n dependent variable. Problems of measurement arose, however, with
respect to the identification of families with favorable expectations.
A number of different solutions suggested themselves. From them,
three were selected f o r study.
Independent Variable Bl (Retirement Income Relatively High)
concerns the ratio of expected retirement income to current income.
Because this ratio varies with income, the variable was "standardized'' with respect to income. That is, members of the Crucial
•Group were f i r s t divided into six income brackets (under $5000,
$5000-5999, $6000-7499, $7500-9999, $10,000-14,999, and more than
$15,000 current income). The ratio of expected retirement income
to current income was calculated for each respondent. Then, within
each of the six income brackets, respondents were ranked according
to these ratios and divided into three equal groups. The "Retirement income high" group consists of the one-third of respondents
with the highest ratios in each income bracket, and the "Retirement
income low" group of the one-third of the respondents with the lowest ratios. Since high-income families more often expect a retirement income that is low relative to current income, they f e l l into the
"High" group with lower ratios than did low-income people. Data
illustrating this finding were presented in Chapter 4.
As stated before, a figure f o r expected retirement income
could not be calculated f o r 15 percent of the respondents in the
39
40
Private
Pensions and Individual
Saving
Crucial Group, The division into three groups was carried out f o r
the remaining 85 percent. Each of the three groups consists, then,
of 28 1/3 percent of the Crucial Group,
Independent Variable B2 (Expected > needed) is constructed
from the ratio of expected retirement Income to the amount respondents believe they w i l l need after retirement. For 30 percent of r e spondents, either the expected or the needed retirement income
could not be determined with any degree of precision. Distributions
of the data obtained f r o m the other 70 percent of the Crucial Group
are shown in Table 21.
It turns out that there is a fair correspondence between the
distributions of the two sets of income figures. Nevertheless, a
Table 21
RELATION OF EXPECTED RETIREMENT INCOME TO NEEDED RETIREMENT INCOME
(In percent of C r u c i a l Group)
Expected
Retirement Income
Income
Needed
Retirement Income
9
6
$2000 - 3000
18
15
$3000 - 4000
17
22
$4000 - 5000
9
11
Less than $2000
$5000 - 6000
5
7
$6000 - 7500
6
6
$7500 and over
6
3
70
70
Total
Expected income larger than needed income...
18
Expected income i n same thousand d o l l a r
bracket as needed income
31
Expected income smaller than needed income..
21
E i t h e r expected or needed income not
precisely a v a i l a b l e
30
Total
100
The Independent
Variables
41
study of the respective figures f o r individual respondents reveals
sizable differences. Only 31 percent of the Crucial Group gave
estimates of expected and needed retirement income which f e l l i n
the same thousand dollar bracket. The two extreme groups, those
who expected more and those who expected less than they thought
they needed, consist of 18 and 21 percent of the Crucial Group, r e spectively.
Independent Variable B3 (Enough) depends upon the respondents' subjective estimates of their financial situation during r e t i r e ment Two questions (cited in Table 6, Chapter 3) were used jointly:
whether the respondent expects to encounter financial problems
during retirement and whether he w i l l have enough f o r retirement.
One group was formed of those giving unconditionally optimistic a n
swers to both questions. Such people answered the f i r s t question by
saying that they would get along all right and the second question by
saying that what they can look forward to would be enough. This
group consisted of 51 percent of the members of the Crucial Group.
Another group consists of those who gave definite pessimistic
answers i n reply to both questions; 14 percent of the Crucial Group
did so. An intermediate group of 22 percent includes the remaining
respondents, most of whom expressed uncertainty in reply to one or
the other question (not ascertained cases being omitted).
Some of the independent variables are also used in combination. Of particular importance is the joint analysis of Independent
variables A and B l , since current income is held constant in the
construction of B l . Those with high retirement income expectations
and private pension plans constitute 13 1/2 percent of the Crucial
Group; those with middle retirement income expectations and pension plans, 14 1/2 percent; those with low retirement income expectations and pension plans, 10 1/2 percent.
Correlation coefficients were calculated among the independent variables with the results shown in Table 22. It appears that
the correlation between having private pension plans and the other
three .independent variables, though positive in all cases, is quite
small. On the other hand, expectation of high retirement income
correlates strongly with expecting larger retirement income than
needed. The relation of these two variables to having enough is in
the middle range.
The high correlation between variables B l and B2 is of interest. Both variables derive from ratios having the same numerator,
i.e. expected retirement income. On the other hand, i t should be
noted that B l is, in a certain sense, a socio-psychological variable:
Respondents were ranked high when their retirement expectations in
relation to their current income exceeded those of two-thirds of
r
42
Private
Pensions and Individual
Saving
Table 22
INDEPENDENT VARIABLES:
SIMPLE CORRELATION COEFFICIENTS
Expected
income high
(Bl)
Private pension (A)
Expected income
larger than needed
(B2)
.13
Expected income high ( B l )
Expected income
larger than needed (B2)
W i l l have
enough
(B3)
.16
.08
. 70
.21
.39
respondents in their income group. In variable B2, however, the
relation to other people was not considered, and each respondent
was ranked according to his subjective assessment of his financial
prospects during retirement.
To illustrate the high correlation coefficient of .70, it may be
mentioned that among those classified as "Expected income high,"
42 percent expected a larger and 8 percent a smaller retirement i n come than they thought they would need. The respective proportions
among those classified as "Expected income low" were 7 and 45
percent.
The absence of any pronounced correlation between another
two of the variables may be illustrated by the following findings:
Among those with private pension plans, 58 percent, and among those
without private pension plans, 46 percent, said that they would have
enough f o r retirement
As to the correlation between the independent variables and
current income, it has already been stated that the higher the i n come, the more frequent is participation in pension plans. Variable
B l has been constructed so that each of its subgroups contains the
same proportion of lower, middle, and upper income people. V a r i ables B2 and B3 show a positive correlation with income in the order of magnitude of .2.
r
CHAPTER 7
THE DEPENDENT
VARIABLES
LN a study of the impact of certain new developments on
spending and saving behavior, the crucial variable to be explained is
the amount saved (or the proportion of income saved). Amounts
spent represent a much less satisfactory variable. They represent
over 90 percent of income and therefore always correlate highly
with income. Also, they consist to a large extent of regular expenditures on necessities, which fluctuate little. Expenditures on durable goods constitute a more valuable dependent variable, and to
some extent they are used in this analysis to supplement data on
saving (see Chapter 10).
Of primary interest f o r this study is "discretionary saving,"
that is, net changes in various forms of deposits with banks and
savings institutions as well as in bonds and stocks. We neglect i n currence of debt because i t is usually motivated by expenditure considerations (e.g. the desire to purchase a. house or durable goods)
rather than by saving considerations. Similarly, contractual saving,
consisting of repayment of debt and life insurance premiums, is
hardly indicative of spontaneous individual saving. It is the relation
of the latter to improved retirement prospects that we wish to study.
The t e r m "saving* tn this report stands f o r "discretionary saving,*'
as defined.
Ideally, amounts saved should be studied over a prolonged
time span. Clearly, over a period of a few months, or even over a
period of twelve months, saving behavior may be influenced by a
host of factors that are of no relevance to the present study. Unusual developments in income or in expenditures may cause a person who usually saves a high proportion of his income to save very
little or nothing at a l l over any given short period of time. In this
study, however, it was not possible to obtain data on amounts saved
for a period longer than twelve months.
In addition, even the twelve-month saving data were not obtained i n a fully satisfactory manner. Experience has shown that
43
44
Private
Pensions
and Individual
Saving
amounts saved can be most accurately obtained by combining information on "current* assets f r o m surveys with the same people at
two different points of time with some information on flows or.
changes over time. This method minimizes memory errors, but
could not be used in this study in which only one interview was available with each respondent.
Therefore, amounts saved have been determined through
memory questions. Assets at the time of the interview were determined f i r s t (separately f o r checking accounts, savings accounts,
government bonds, and stocks) and then questions were asked about
any change in each of the aforementioned assets over the previous
twelve months. Saving is defined as the net addition to the types of
liquid reserves just mentioned. There can be no doubt that the resultant data are f a r f r o m precise. Yet the biases in the data are
unlikely to be of a type which would differ between such subgroups
of the population as those with or without pension plans. Comparison between amounts saved by different subgroups represents one
feasible approach to the problem of measuring saving behavior.
Differences in the saving performance of different groups
must be analyzed cautiously. Survey data on aggregate amounts
saved are unreliable, not only because of reporting errors but also
because in small samples a few respondents who have saved or
dissaved very large amounts of money exert an undue influence on
the aggregates (and therefore also on the means).
Measuring
amounts saved by means of memory questions has the further drawback that reports of "no change* (in checking and savings accounts,
bonds or stocks) are sometimes elicited when there has in fact been
a change. It is primarily people with small additions to savings,
resulting, f o r instance, f r o m interest receipts, who neglect to mention them and report no change.
Under these circumstances, in comparing the saving performance of subgroups of the people (e.g. those covered and those not
covered by private pensions), chief reliance must be placed on median amounts saved and the frequency distribution of savings. In
this study, the proportion of savers, and especially the proportion of
large savers (defined as those who saved more than 5 percent of
their income) and medium to large savers (who saved more than 2
percent of their income), are compared in different subgroups.
1
Studies conducted by the Inter-University Committee for Research on
Consumer Behavior (under the dlrecUon of Robert Ferber) and the Survey R e search Center Indicate that very substantial errors occur when survey data on
liquid assets owned and amounts saved are used to calculate aggregate or mean
savings. The major reporting error consists of respondents failing to report on
certain assets.
1
The Dependent Variables
45
These proportions are, to be sure, not exact: because of the probability of understatements, the true proportions are likely to be
higher than shown by survey data. But the errors can be expected
to be randomly distributed between the subgroups compared.
Since the ideal dependent variable is not available, i t is replaced by three different variables, each of which attempts to approximate certain aspects of what is really needed. In addition to a
measure of the proportion of income saved during the preceding
twelve months (5 percent or more), a second variable is built f r o m
answers to questions about saving behavior during the past twentyfour months, and a third f r o m answers to a question revealing
saving-mindedness. A l l three are "dummy variables," taking the
value 1 when a respondent meets certain qualifications and the
value 0 otherwise.
Dependent Variable 1: Proportion of income saved in the past
twelve months exceeds 5 percent of current income.
2
Table 23
PROPORTION OF INCOME SAVED DURING THE PREVIOUS YEAR
(Percentage d i s t r i b u t i o n of C r u c i a l Group)
Proportion of Income Saved
All
$3000
-5999
Income
$6000
-9999
$10,000
and over
10X or more
9
5
7
16
5 - 97.
8
5
8
10
8
4
10
11
-4 through +1%
52
63
52
41
Dissaved 5% or more
15
15
15
13
8
8
8
9
100
100
100
100
2-4%
Not ascertained
Total
Note:
Saving i s defined as the net additions to deposits, bonds, and
s tocks.
"In a preliminary publication (Chapter 19 in the author's book, The Mass
Consumption Society), amounts saved rather than the proportion of Income saved
were used as the first dependent variable. The two correlate highly, but there
are people who save large amounts and still only a small percentage of their income, and vice versa. Amounts saved correlate with income much mbre highly
than does the proportion of Income saved.
46
Private
Pensions
and Individual
Saving
The chosen dependent variable is focused upon a relatively
small proportion of the sample who "may be characterized as large
savers. These are defined as people who saved more than 5 percent
of their income. They constitute 17 percent of the Crucial Group.
The frequency of these large savers increases with income, but
is f a i r l y constant in the age groups 35 to 64. The lower the i n come, the higher the proportion of those who have no assets or who
save nothing. The use of memory questions causes the proportion
saying that their savings have not changed to be particularly large
(Table 23).
Dependent Variable 2: Saving behavior.
Two separate questions were asked in order to find out
whether respondents thought that they had added to their savings
during the previous twelve months and during the previous twentyfour months. The questions read as follows:
"During the past twelve months or so, did you people save
any money, or did you decrease your savings, or did you
just break even?" and "Now taking a l l the financial reserves you have, stocks, bonds, bank deposits and the like,
how does the amount you now have compare to what you had
two years ago ? "
In reply to the f i r s t question, 39 percent of the Crucial Group said
that they had saved money in the past twelve months, and in reply to
the second question, 41 percent said that their financial reserves
(determined just before the question was asked) were higher than
two years ago. Altogether, 28 percent of the Crucial Group answered both questions by affirming increased savings. In addition,
there were 16 percent who had either saved during the past twentyfour months and broken even during the past twelve months, or
saved during the past twelve months and broken even during the past
twenty-four months. A total of 44 percent of the Crucial Group are
classified as "savers'* according to the second dependent variable,
as shown by the distribution of respondents presented in Table 24.
The proportion classified as having saved shows a sizable correlation with income, but practically none with age.
A comparison of the second with the f i r s t dependent variable
indicates that practically a l l the families who saved more than 5
percent of their income during the last twelve months are included
among those claiming to have saved sometime during the last
twenty-four months. But the latter group includes very many f a m i lies who saved a smaller proportion of their income during the last
twelve months and even some who saved nothing in that period. Dependent Variable 2 is thus characterized by the inclusion of many
small savers.
The Dependent Variables
47
Table 24
SAVING BEHAVIOR DURING PAST 24 MONTHS
(Percentage d i s t r i b u t i o n of C r u c i a l Group)
Saving Behavior
Say they saved sometime during past 24 months
44
Say they broke even
32
Say they reduced savings
19
Saving behavior not ascertained
5
Total
Say they saved
100
$3000
Income
$6000
$10,000
Age of Head
-5999
-9999
and up
35-44
45-54
55-64
25
44
65
46
42
44
See the t e x t for the questions asked.
Dependent Variable 3: Saving-mindedness.
The following question was asked: "Suppose you had some extra money — say an amount equal to one week's wages or salary (income) — what would you do with this money ? " The proportion of respondents who answered that they would save or invest the extra
money, and did not mention spending it, constitutes the third dependent variable. Such people make up 42 percent of the Crucial Group
according to the distribution shown in Table 25.
Saving-mindedness is related to income to only a limited extent. In contrast to the f i r s t two dependent variables, which represent respondents' reports on their past behavior, the third variable
is attitudinal (a report on inclinations).
The correlations between the three dependent variables are as
follows:
5% or more of income saved and saving behavior
5% or more of income saved and saving-mindedness
Saving behavior and saving-mindedness
.41
.16
.20
The correlation between the f i r s t two variables is f a i r l y high,
48
Private
Pensions
and Individual
Saving
Table 25
REPORTS ON USE OF EXTRA MONEY
(Percentage d i s t r i b u t i o n of C r u c i a l Group)
Uae of Extra Money
Would save or invest i t (saving-minded)
4-2
Would repay debt
16
Would spend i t
31
Two kinds of answers, don't know
11
Total
Saving-minded
100
$3000
Income
$6000
$10,000
-5999
-9999
and up
35
41
Age of Head
52
35-44
42
45-54
40
55-64
48
See the text for the question asked.
while saving-mindedness shows a rather small relationship with
saving performance during the past twelve or twenty-four months.
To illustrate: Among those who reported having saved (saving behavior), 52 percent were classified as saving minded, in contrast to
30 percent of other respondents. Evidently saving-mindedness reflects a desire which is frequently not realized.
It should be added that a l l three dependent variables show
some correlation with income. The highest correlation coefficient
was obtained between income and saving behavior (.29). The three
variables also correlate with amounts of liquid wealth. For instance
the correlation coefficient between the f i r s t dependent variable and
liquid wealth is .23.
Data are available on a fourth variable which might also be
considered a candidate f o r a dependent variable to be used in the
study. The surveys included questions on the amount of savings expected at the time of retirement. Respondents were asked in detail
about their current liquid reserves — separately about various bank
accounts, bonds, and stock — but were asked only the following global
question about their expected reserves: 'Altogether, about how
much do you expect to have in savings, investments or reserve funds
when you retire (not including your house)?" After this information
The Dependent Variables
49
was received, respondents were asked: "How does that compare to
what you have now?"
Information about the amount of saving expected between the
time of the interview and retirement must be used with caution. It
is known f r o m previous studies that survey respondents greatly exaggerate their prospective savings. For instance, many more people say that "during the next year* they w i l l save some money than
are found to have actually saved when the same respondents are reinterviewed a year later. Saving is considered a virtuous thing
which one should do, and therefore many people who have no savings
whatsoever and have not saved i n past years reply that they w i l l
save in the future.
An analysis of the data obtained in the present series of surveys confirms the inferences drawn from previous studies. Table
26 shows that a f a i r proportion of people, who at the time of the i n terview had small amounts of reserve funds, said that by the time
they retired they would have more than $5000 or even more than
$10,000 in savings. The proportion of the Crucial Group with over
T a b l e 26
RELATION OF AMOUNT OF SAVINGS EXPECTED AT RETIREMENT
TO CURRENT LIQUID WEALTH
(In
p e r c e n t of C r u c i a l Group)
C u r r e n t L i q u i d Wealth
Amount o f S a v i n g s
Expected a t Retirement
Less
than
$500
$500
-4999
$5000
-9999
$10,000
and over
Don't
know;
N.A.
Tote'-
L e s s t h a n $500
10
2
*
*
*
12
$500 -
12
10
1
*
1
24
4999
$5000 -
9999
4
8
2
1
1
16
$10,000
and over
5
11
6
10
2
34
7
5
*
1
l'
14
38
36
9
12
5
100
D o n ' t know;
ascertained
not
Total
* Less
than 0.5
N.A.:
Not a s c e r t a i n e d
The
percent
q u e s t i o n was:
" A l t o g e t h e r , about how much do you expect to have
i n s a v i n g s , i n v e s t m e n t s , or r e s e r v e funds when you
r e t i r e (not I n c l u d i n g your h o u s e ) ? "
50
Private Pensions
and Individual
Saving
$10,000 in liquid savings stood at 12 percent at the time of the i n terview, but according to the respondents was supposed to rise to 34
percent by the time of their retirement. To the question of how the
two amounts of assets would relate to each other, 38 percent of the
Crucial Group said that their savings at the time of retirement
would be much larger and 15 percent that they would be somewhat
larger. Only 19 percent said that savings would be the same and 12
percent that they would be smaller, while 16 percent professed not
to be able to answer the question.
Most relevant, there were hardly any differences in the f r e quency with which different income groups expected to increase
their savings. This finding casts doubt on the reliability of saving
expectations because i t is well known that high-income families
save more than low-income families. Therefore, it can be predicted
that the greater the income, the more w i l l be added to savings in the
future. It may also be mentioned that the proportion among those
with small current assets (less than $500) who expected to increase
their reserve funds was about the same as the proportion among
those with large current assets (more than $10,000). Since current
assets reflect past saving performance, this fmding also casts doubt
on the reliability of saving expectations.
The only respect in which saving expectations appear realistic
is in their relation to age. Relatively few people over 55 years of
age (and not yet retired) said that they would have much larger savings at the time of retirement. This is understandable because
older people have fewer years left in which to accumulate additional
reserves, but i t makes i t difficult to use the data since many older
people are greatly interested in saving and their recent past saving
performance is often relatively high.
Under these circumstances, only limited use w i l l be made of
the expected saving variable.
CHAPTER 8
RELATIONSHIP
BETWEEN
INDEPENDENT
AND DEPENDENT
VARIABLES
THE relationship between the variables is sufficiently
complex so that ordinary tabulations do not fully suffice for testing
the hypotheses presented in Chapter 1. The dependent variables
may be influenced by a number of independent variables acting in
concert. Therefore, i t is essential to determine the contribution of
each independent variable, net of the influence of other variables, by
means of a multivariate analysis. However, before turning to such
an analysis, the independent variables are f i r s t studied individually
in relation to the three dependent variables. Such a presentation
serves to illustrate the prevailing relationships, although it may not
provide sufficient evidence in favor or against the hypotheses being
tested.
Cross - tabulations
The data are divided in Table 27 into three broad income
classes. In other words,. neglecting all other possible influences,
that of income is partialed out in a rough manner.
Turning f i r s t to independent variable A, participation in'private pension plans, the table presents nine sets of figures (three dependent variables in three income groups) f o r those covered and
those not covered by pensions. Among the nine, eight are higher in
the covered group and one is the same; six of the eight differences
are statistically significant. The differences appear less pronounced
among those with $3000-5999 income than among those with higher
income.
The f i r s t of the three measures of favorable retirement i n come expectations, B l , yields a mixed picture. In four cases the
measure of the dependent variable is higher in the "low" group and
in five cases it is higher in the "high** group, with most differences
not being significant.
51
52
Private
Pensions
and Individual
Saving
T a b l e 27
SAVING BY PEOPLE WITH FAVORABLE
,
AND WITH UNFAVORABLE RETIREMENT PROSPECTS-'
(In
p e r c e n t o f i n d i c a t e d subgroups
Dependent ,
Variable -
C u r r e n t Income
$3000
$6000 $10,000
-5999
-9999
and up
A.
1.
2.
3.
All
11
27
43
14
28
38
B2.
Covered
20
32
49
63
57
49
23
51
49
C u r r e n t Income
$3000 $6000
$10,000
-5999 -9999
and up
B3.
9
30
39
Not
11
41
36
11
24
32
covered
20
60
47
R e l a t i o n of E x p e c t e d R e t i r e m e n t Income
C u r r e n t Income
E x p e c t e d Income High
20
15
16
60
51
47
43
55
45
10
29
36
All
13
39
37
to
E x p e c t e d Income Lou
26
17
18
61
44
40
39
51
42
R e l a t i o n o f E x p e c t e d R e t i r e m e n t Income
Amounts Needed
E x p e c t e d Income L a r g e r
11
33
24
21
18
48
65
48
31
59
41
46
•1
2,
3,
the C r u c i a l Group)
P a r t i c i p a t i o n i n P r i v a t e Pension Plans
Bl.
1.
2.
3.
of
to
E x p e c t e d Income S m a l l e r
11
16
14
14
23
40
58
40
34
38
46
38
Estimate of S i t u a t i o n During Retirement
Say W i l l Have Enough
17
29
21
66
52
53
56
44
47
Say W i l l Not Have Enough
12
4
13
10
14
34
43
26
25
30
37
29
1/
The t a b l e r e a d s (upper l e f t c o r n e r ) :
11 p e r c e n t o f those c o v e r e d
by p r i v a t e p e n s i o n p l a n s and w i t h an Income o f $3000-5999 s a v e d 5
p e r c e n t or more of t h e i r income d u r i n g the p a s t 12 months; e t c .
2/
The dependent
1.
2.
3.
v a r i a b l e a are defined as
follows:
S a v e d 5 p e r c e n t or more o f income I n the p a s t 12 months ( S / Y ) .
Say they saved d u r i n g the p a s t two y e a r s ( s a v i n g b e h a v i o r ) .
Would use e x t r a money f o r s a v i n g o r i n v e s t i n g ( s a v i n g mindedness) .
Relationship
Between
Variables
53
The data obtained f o r variable B2 resemble to some extent the
pension data. Among those with more than $6000 income, measures
of the dependent variables are consistently higher f o r those who expect a larger retirement Income than they would need than f o r those
who expect a smaller retirement income.
The third independent variable provides clear indications in
all income groups: Higher measures of saving performance and
saving-mindedness are obtained for those who say they w i l l have
enough than for those who say they w i l l not have enough for their
retirement.
It should be noted that In tabulating the data for the three i n dependent variables B, only the two extreme groups were used in
each case, as indicated in the table. The intermediate group was
omitted (for instance, those whose expected retirement income was
about the same as their needed income, or those who were not sure
whether they would have enough at the time of their retirement).
Comparison of the three independent variables B suggests that
the f i r s t variable, based on a classification of families as to whether
in comparison with other families they expect a high or low r e t i r e ment income, probably does not represent a factor influencing people's behavior. But scrutiny of variables B2 and B3 suggests that,
at least in the middle and upper income groups, the subjective notion
of favorable retirement prospects is correlated with an increase in
the measures of saving. Similarly, coverage by pension plans is related to increased saving.
Regarding the relation of coverage by pension plans to the
proportion of income saved (dependent variable 1), it should be
added that the arbitrary selection of the dependent variable does not
affect the results. Among those covered by pensions there are more
high savers than among those not covered, even if high savers are
defined as those saving more than 2 percent or more than 10 percent rather than those saving more than 5 percent. This is shown
as follows:
Crucial Group
Proportion of Income Saved
Covered
Not covered
10% or more
14%
7%
5 to 9%
9
6
2 to 4%
12
6
Some caution regarding any conclusion from the data presented'in Table 27 is indicated because both the independent and the
dependent variables correlate with income and the income effect
54
Private
Pensions
and Individual
Saving
may not have been entirely eliminated by the procedure used. For
instance, it may be possible that, say, in the $6000 to $10,000 i n come group, relatively' many families with private pensions had
close to $10,000 income and relatively many without private pensions close to $6000 income. However, one of the independent v a r i ables was specifically constructed so as not to correlate with i n come. As stated before (Chapter 6), independent variable B l does
hold income constant within fairly narrow ranges, since the same
proportion in each narrow income group is classified "high* as is
classified "low."
It is possible to tabulate independent variables A and B l
jointly. In Table 28, those people with high retirement expectations
are divided into two groups: those covered and those not covered by
private pension plans. The same is done f o r those with medium and
low retirement expectations. We find that in a l l three groups the
measures of the dependent variables are higher f o r those with p r i vate pensions than for those without.
Thus, Table 28 suggests that saving performance and savingmindedness are related to participation in a private pension plan,
regardless of the relative level of expected retirement income. But,
as in Table 27, independent variable B l is not related to saving, except perhaps f o r those people not covered by private pension plans.
Data on saving expectations, even though f a r f r o m realistic,
also suggest that participation in private pension plans has a positive influence on saving. Table 29 indicates that in each income
group a significantly higher proportion of those covered than of
those not covered by private pensions expected larger savings at the
time of retirement than they had at the time of interview. No relationships were found, however, between saving expectations and the
independent variables B.
Multivariate
Analysis
The multivariate analysis here presented was carried out by
calculating regression equations, fitted by the method of least
squares on the IBM 7090 computer. The computer supplies (a) the
coefficients, (b) the standard errors of the coefficients, (c) the
t-values that represent the relation of (a) to (b) and thus indicate the
significance of the coefficients, as well as (d) the values of R , i.e.
the percentage of variance explained (adjusted f o r the number of degrees of freedom). The relevant regression equations are reproduced in Table 30 including, in parentheses, the standard errors.
Looking f i r s t at the influence of income and age alone on the
dependent variables, we find in equations 1, 2, and 3 that income is
2
Table
28
JOINT EFFECT OF PARTICIPATION I N PRIVATE PENSION PLANS AND.,
OF RELATION OF EXPECTED RETIREMENT INCOME TO CURRENT INCOME(Measures of
Retirement
Income
the dependent v a r i a b l e s
(Bl):
Pension P l a n ( A ) :
H i g h
Covered
are i n percent
of C r u c i a l Group)
M e d i u m
Not c o v e r e d
Covered
L o w
Not covered
Covered
Not
covered
^
Dependent v a r i a b l e
1
19
14
26
13
26
13
g-
Dependent v a r i a b l e
2
51
44
56
38
49
39
w
Dependent v a r i a b l e
3
48
41
48
40
52
35
to
1/ F o r d e f i n i t i o n
C h a p t e r 6.
of dependent v a r i a b l e s ,
see T a b l e 27;
for d e f i n i t i o n
of
independent v a r i a b l e B l , see
|r
TO
S"
Cr
«T
CA
tn
Ol
T a b l e 29
EXPECTED SAVINGS BY PARTICIPATION I N PRIVATE PENSIONS
( I n percent
Expected Savings at
R e t i r e m e n t Compared
to P r e s e n t S a v i n g s
$3000
-5999
E x p e c t much more
Expect a l i t t l e
About t h e
Expect
more
same
less
D o n ' t know; n o t
ascertained
Total
The
questions
were:
of C r u c i a l
Group w i t h f a m i l y head
Covered
$6000
$10,000
-9999
and up
All
aged 3 5 - 5 4 )
$3000
-5999
Not C o v e r e d
$6000
$10,000
and up
-9999
All
53
54
49
52
31
44
42
39
5
15
20
16
10
8
14
10
10
6
13
9
27
13
19
19
15
8
11
10
10
14
14
13
17
17
7
13
22
21
11
19
100
100
100
100
100
100
100
100
" A l t o g e t h e r a b o u t how much do you e x p e c t to h a v e i n s a v i n g s ,
r e s e r v e f u n d s when you r e t i r e ( n o t i n c l u d i n g y o u r h o u s e ) ? "
"How does t h a t compare to w h a t you h a v e now?"
investments,
or
Relationship
Table
Between
Variables
57
30
REGRESSION EQUATIONS
(The e x p l a n a t o r y power o f independent v a r i a b l e s t e s t e d
a g a i n s t t h r e e dependent v a r i a b l e s r e p r e s e n t i n g s a v i n g )
1.
S/Y
t
2.
SB
S/Y
t
5.
6.
N
R
=
- .033 + .086Y + .006A
(.007)
(.015)
12.7
.4
N
R
-
.052 + .043Y + .041A
(.007)
(.015)
6.1
2.7
-
SM
t
4.
N
R
-
t
3.
- . 1 1 7 + .043Y + .017A
(.007)
(.014)
6.4
1.2
-
"
SB
-
t
-
t
7.
S/Y
t
8.
SB
=
=
t
9.
10.
SM
t
-
S/Y
-
t
11.
SB
t
-
1202
.033
= 1792
- .083
2
-
Z
1795
.023
- . 1 1 5 + .037Y + .017A + .079PP
(.007)
(-015)
(.023)
5.2
1.1
3.3
N
R
- . 0 6 0 + .084Y + .010A + .048PP
(.024)
(.007)
(.015)
2.0
11.9
.6
N, = 1702
R ° .088
.056 + .034Y + .040A + .105PP
(.007)
(.015)
(.025)
4.7
2.6
4.3
SM
-
•= 1154
= .042
£
N
R
- . 2 1 3 + . 0 4 7 Y + .021A + .07 I E
(.035)
(.009)
(.018)
2.0
5.4
1.2
- 1705
= .032
,2
794
. .049
- . 1 7 5 + . 0 8 1 Y + .026A + .145E
(.032)
(.008)
(.018)
4.5
9.6
1.5
a
- . 0 3 0 + .041Y + .048A + .097E
(.033)
(.009)
(.018)
2.9
4.7
2.7
N o2
- . 1 4 8 + .O30Y + -038A + .084 E x p > Need
(-037)
(.012)
(.022)
2.3
2.6
1.7
- . 2 0 5 + .090Y + .029A + .103 E x p > Need
(.037)
(.012)
(.022)
2.8
7.8
1.3
R
z
= 1261
- .093
1258
.031
N
2
- 515
. .036
N
R
-
R
715
.110
58
Private
T a b l e 30
12.
SM
-
S/Y
t
14.
SB
=
<=
t
15.
-
S/Y
18.
19.
22.
24.
.033 + .025Y + .012A - .009 R - h i g h
(.009)
(.019)
(.030)
2.8
.6
-.3
N
R
»
694
.012
- . 0 5 0 + .080Y + .016A + .036 R - h i g h
(.010)
(.021)
(.032)
8.4
1.1
.8
N
R
-
953
.070
- . 1 6 5 + .045Y + .019A + . 0 0 2 E +
(.009)
(.030)
(.018)
.1
5.1
1. 1
N- -= 954
R - .022
N, R -
1136
.122
t
- . 2 2 6 + .079Y + .029A + . 1 7 6 E + .053PP
(.009)
(.036)
(.029)
(.018)
8.9
1.6
4.9
1.8
N
R
-
1220
.043
t
- . 0 3 6 + .032Y + -049A + . 0 9 8 E + .115PP
(.009)
(.018)
(.033)
(.029)
3.5
2.7
2.9
4.0
- 2 . 1 1 + .793Y + -525A + .031PP
(.040)
(.084)
(.133)
19.7
.2
6.3
N„ R -
1196
.267
- 2 . 0 1 + .705Y + .561A + .557 R - h i g h
(.051)
(•109)
(.166)
14.0
5.1
3.4
N
R
=
-
711
.238
- 2 . 3 0 + .621Y + . 802A + .347 E x p > N e e d
(.062)
(.118)
(-194)
10.0
6.8
1.8
N„ R -
530
.230
- 2 . 2 4 + -794Y + .508A + . 4 4 3 E
(.044)
(.091)
(-157)
18.3
5.6
2.8
N
R
-
921
.296
.012A + .064LW + .071PP
(.014)
(.005)
(.022)
-.9
13.2
3.2
N
R
-
1110
.172
.055 + .029Y - .032A + .081LW + .041PP
(.009)
(.017)
(.006)
(.027)
3.1
-1.8
13.6
1.5
N
R
-
1142
.224
•
SB
SM
-
LW
LW
LW
-
t
-
LW
-
t 23.
725
.027
868
.056
t
21.
N. =
R -
N, R -
t
20.
.044 + .045Y + .033A + .043 Exp >Need
(.012)
(.023)
(.038)
3.8
1.4
1.1
.096PP
(.028)
3.5
t
17.
Saving
.033 + .040Y + .046A + .051 R - h i g h
(.010)
(.021)
(.032)
4.1
2.1
1.6
SM
t
16.
and Individual
(cont.)
t
13.
Pensions
S/Y
-
t
-
SB
t
-
.002 -
.013Y (.008)
-1.6
Relationship
T a b l e 30
25.
27.
28.
.087 + . 0 0 5 Y + -017A + .048LW + . 107PP
(.006)
(.010)
(.019)
( .029)
.4
7.6
3.7
.9
SM
t
. 0 0 2 Y - .008A + .062LW + .033E
(-034)
(.010)
(.006)
(.018)
-.2
9.9
1.0
-.5
t
- . 0 2 4 + .020Y - .020A + .086LW + . 133E
(.011)
(.007)
(.033)
(•019)
12.4
4.0
1.8
-1.0
S/Y
-.066
SB
SM
S/Y
SB
t
N
R
-
888
.248
*
-
799
. Ul
m
-
499
.136
-
508
.269
- . 0 6 1 + .048Y - .043A + .088LW + .072 E x p > Need N
(-014)
(.009)
(.040)
(.025)
R
3.4
9.9
1.8
-1.7
SM
-
2
2
R
N
. 0 0 5 Y - -004A + .058LH + .066 E x p > N e e d N (.012)
(.022)
(.008)
(.035)
R
-.2
7.5
-.4
1.9
. 155 + .013Y (.015)
.8
-
767
. 157
m
_
_ 1158
.087
-
-.040
t
31.
59
2
R
_
. 143E
(.043)
3.3
?
N
- . 0 5 9 + -005Y + . 029A + .055LW +
(.012)
(.022)
(.008)
6.9
.4
1.3
t
30.
_
N
R
„
t
29.
Variables
(cont.)
t
26.
Between
2
o 519
.015A + .055LW 4 .022 E x p > Need
2
.086
(.028)
(.010)
(.043)
R
-.6
5.7
.5
N
-
Notations:
S/Y
SB
SM
PP
R-high
Exp> Need
E
Y
A
LW
Dependent v a r i a b l e 1 (aaved 5% o f income or more)
Dependent v a r i a b l e 2 ( s a v i n g b e h a v i o r )
Dependent v a r i a b l e 3 ( s a v i n g - m i n d e d n e s s )
I n d e p e n d e n t v a r i a b l e A (have p r i v a t e p e n s i o n s )
I n d e p e n d e n t v a r i a b l e B l ( e x p e c t e d r e t i r e m e n t income
r e l a t i v e l y high)
Independent v a r i a b l e B2 ( e x p e c t e d r e t i r e m e n t income
e x c e e d s needed r e t i r e m e n t income)
Independent v a r i a b l e B3 ( s a y w i l l have enough f o r
retirement)
C u r r e n t Income
Age of f a m i l y head
C u r r e n t l i q u i d w e a l t h (sura o f d e p o s i t s , bonds, and
stocks)
E x c e p t f o r income, age, and l i q u i d w e a l t h , a l l of the above a r e
"dummy v a r i a b l e s , " i . e . , they take the v a l u e 1 i f the r e s p o n d e n t
meets c e r t a i n q u a l i f i c a t i o n s and the v a l u e 0 o t h e r w i s e .
60
Private
Pensions and Individual
Saving
highly significant, especially in the case of saving behavior, while
age is not. The percentage of variance explained by these two v a r i ables is quite small.
In the next set of twelve equations (4 to 15), in addition to i n come and age, the "influence" of the four independent variables on
each of the three dependent variables is studied. The t-values obtained f o r the coefficients of the various independent variables are
grouped in Table 31 so as to facilitate comparison of the significance of their explanatory value. Several independent variables
exert a significant influence on the dependent variables after the i n come and age effects are elininated, but the R values remain low.
Considering the three dependent variables jointly as representing
various approaches to measuring saving, we find that participation
in private pension plans has the greatest explanatory value. Its coefficients are positive in a l l three cases and are highly significant
in the case of S/Y and Saving-mindedness. The coefficient is least
significant when the dependent variable, saving behavior, includes
the small savers.
As can be seen from Table 31, "Enough* is by f a r the "best"
2
Table
31
SIGNIFICANCE OF INFLUENCE OF INDEPENDENT VARIABLES
(Summary o f d a t a from e q u a t i o n s
Average t - v a l u e s
of:
S/Y
(1)
4 to
15, T a b l e 3 0 )
Dependent V a r i a b l e s
Saving
Saving
Behavior
Mindedness
(2)
(3)
Income
4.0
9.4
4.3
Age
1.1
1.0
2.2
3.3
2.0
4.3
-0.3
l.l
L.6
2.3
2.8
1.1
2.0
4.5
2.9
t-values
of:
Private pensions
Relatively
retirement
income ( B l )
E x p e c t e d < needed
Enough ( B 3 )
For
(A)
high
(B2)
e x p l a n a t i o n o f v a r i a b l e s , s e e C h a p t e r s 6 and 7.
Relationship
Between
Variables
61
of the three independent variables reflecting favorable retirement
prospects. It shows a pronounced positive correlation with saving
behavior. The variable "Expected > needed* appears to be related
to saving performance, although to a less pronounced extent. Relatively high retirement income does not appear to be significant in
relation to any of-the saving measures.
In a l l these respects the multivariate analysis is in accord
with the tabulations presented in Table 27. The new data indicate
that the doubts expressed regarding the efficiency of the methods
used in Table 27 to hold income constant were, to a large extent, not
justified. This statement applies most clearly to the influence of
private pensions on saving. The regression equations show that the
differences between participating and not participating in pension
plans are significant regarding dependent variables 1 and 3, and
positive but much less significant regarding variable 2. Similar results were obtained i n Table 27. The correspondence of the two
methods of calculation is also complete regarding independent v a r i able B l , which may be disregarded as not indicating any influence,
either positive or negative, on saving.
The possibility of interaction between pension plans and measures of favorable retirement prospects is of interest. Specifically,
the question should be raised about the joint influence of private
pensions and the most effective of the B variables, "Enough. * Equations 16, 17, and 18 are relevant in this respect The t-values obtained in these three equations are 3.5, 1.8, and 4.0 f o r private pensions, and . 1 , 4.9, and 2.9 for "Enough." Five of these values are
practically unchanged from those presented in Table 31 (the relation
of "Enough" to S/Y represents an exception), where they were calculated by considering the influence of private pensions and "Enough"
separately. The R values are somewhat higher in the new equations. These findings suggest that the two variables contribute i n dependently to explaining the dependent variables. This conclusion
is confirmed when the contribution of "Enough* is studied separately f o r those with and those without private pensions.
Regression equations were also calculated with "expected
savings at retirement much higher than currently" as the dependent
variable. In Chapter 7 it was concluded that this variable does not
provide a valid indication of prospective saving performance. Nevertheless, it is of interest that favorable retirement prospects (the
B variables) turn out without any explanatory value, while a significant influence of private pensions is found (coefficient of .173, standard e r r o r of .037, t-value of 4.7).
2
CHAPTER 9
THE
INFLUENCE
OF AVAILABLE
SAVINGS
THE financial reserves already available to various
groups of the population represent an important variable in any
study of saving behavior and of inclinations to save. According to
findings made in a number of previous studies, a substantial majority of Americans believe that they have accumulated their financial
assets by saving out of income. Only a relatively small proportion
report that inheritance or gifts were the source of aU or most of
their assets. Capital appreciation is seen as a s t i l l less important
source of the current value of assets.
Therefore, for the majority of people current asset holdings
may serve as an indication of the extent of past saving performance.
Those with relatively large assets are people with thrifty predispositions, or people who live under circumstances that permit substantial saving, or who habitually save. What has been done repeatedly in the past, and especially in the recent past, is likely to be
done in the future. There is a strong presumption that, in each i n come group, holders of large assets wiU save more in the future
than w i l l holders of small assets.
A counterargument has been frequently advanced by economic
theorists, who have postulated that the larger the wealth, or the
larger the liquid assets, the more people w i l l be stimulated to i n crease their spending and the more they w i l l be deprived of incentives to add to their savings. The problem of how asset holdings
1
\n e a r l y 1964, 63 p e r c e n t of f a m i l i e s with s a v i n g s or investments e x c e e d ing $2500 s a i d that m o s t of their a s s e t s have been s a v e d out of Income r a t h e r
than r e s u l t i n g f r o m i n h e r i t a n c e , gifts, o r the a p p r e c i a t i o n of a s s e t s . I n h e r i t a n c e
or gifts, u s u a l l y together with s a v i n g out of income, w e r e s a i d to be r e s p o n s i b l e
f o r the a s s e t a c c u m u l a t i o n of another 21 p e r c e n t of these f a m i l i e s . A m o n g f a m i l i e s with l a r g e a s s e t s and among older f a m i l i e s , the proportion having r e c e i v e d
an i n h e r i t a n c e w a s somewhat l a r g e r . See G . Katona, C . L i n i n g e r , a n d E .
M u e l l e r , 1964 Survey
of Consumer
Finances,
S u r v e y R e s e a r c h C e n t e r , Ann
A r b o r , M i c h i g a n , 1965, pp. 107-108.
L
62
Influence of Available
Savings
63
influence subsequent saving is discussed in the last chapter of this
monograph. At this point we are concerned with the size of assets
at a given point in time as an indication of saving performance in
the previous period. Regarding the latter question, there is no controversy: The greater the current assets at any given time, the
greater the saving performance prior to that time.
In this study a variable, liquid wealth (LW), was constructed
from answers to questions about the size of holdings in various
kinds of checking and savings accounts, as well as in bonds and
stocks. When the amounts reported are added up for each family in
the Crucial Group, 13 percent are found to have no liquid wealth at
all and an additional 11 percent very small liquid wealth (less than
$200). These families are primarily in the lowest of the three i n come groups presented in Table 32. At the other extreme, 12 percent of the entire Crucial Group and 30 percent of those with more
than $10,000 income reported liquid wealth exceeding $10,000.
When liquid wealth (in 8 brackets) is taken as a dependent
variable in regression equations, the strong influence of income
alone is indicated by a t-value of over 20 for the income coefficient.
The simple equation, liquid wealth as a function of income, yields an
T a b l e 32
DISTRIBUTION OF LIQUID WEALTH
(Percentage
Liquid
Wealth-^
d i s t r i b u t i o n of C r u c i a l Group)
All
None
13
$3000
-5999
C u r r e n t Income
$6000
$10,000
and over
-9999
32
10
I
L e s s t h a n $200
11
16
13
5
$200 - 999
24
22
30
16
$1000 - 1999
11
8
14
11
$2000 - 4999
15
13
18
12
9
4
7
17
12
3
4
30
5
2
4
8
100
100
100
100
$5000 -
9999
$ 1 0 , 0 0 0 and over
Amount not a s c e r t a i n e d
Total
1/
F a m i l y funds
and s t o c k s .
i n c h e c k i n g and s a v i n g s
accounts,
government
bonds,
64
Private
Pensions and Individual
Saving
R value of .25. Knowing income, and nothing but income, a substantial part of the variance in liquid wealth is explained. Age also
proves influential after income is partialed out (t-value of over 6),
and so is education after both income and age are partialed out
(t-value of over 7). Of particular interest are the regression equations testing the influence on liquid wealth of the four major independent variables, in addition to income and age. These are equations 19 to 22 (Table 30). Relatively high retirement income ( B l ) ,
the variable which was discarded on the basis of findings in Chapter
8, shows the closest relation to liquid wealth. The other variables
that indicate favorable retirement prospects are also related to l i q uid wealth, though to a lesser extent, while participation in private
pensions appears to be independent of liquid wealth. The t-values of
the independent variables other than income and age, in the four
equations in which liquid wealth is the dependent variable, areas
follows:
2
Retirement income high
Expected > needed
Enough
Private pensions
3.4
1.8
2.8
0.2
In a liquid wealth equation in which income, age, education,
and participation in pension plans are the independent variables,
private pensions enter with a t-value of -0.2. Clearly, the extent of
available financial reserves is not closely related to participation in
pension plans.
We must use liquid wealth as an independent rather than a dependent variable, and study its influence, together with other independent variables, on recent past saving performance and savingmindedness, that is, on the major dependent variables in this study.
This is done Ln equations 23 to 31. The relevant t-values are summarized in Table 33.
As stated earlier in this chapter, there is every reason to expect a sizable influence of liquid wealth on each of the three dependent variables. This is confirmed by the data, which also show that
the influence of income on the dependent variables is sharply r e duced when liquid wealth is introduced into the equation. The R
values are much higher when both income and liquid wealth serve as
explanatory variables than when income is used alone. The crucial
findings emerge from a comparison of Table 33 with Table 31. In
every instance the significance of the influence of private pensions
is lower in Table 33 than in Table 31, but the differences are rather
small. (For example, with S/Y the dependent variable and with l i q uid wealth i n the equation, a t-value of 3.2 is obtained f o r the private
2
Influence of Available
Table
Savings
65
33
S I G N I F I C A N C E OF INFLUENCE OF INDEPENDENT VARIABLES
TOGETHER WITH LIQUID WEALTH
(Summary o f
t-values
from e q u a t i o n s
23 to
25)
T a b l e 30)
13.2
13.6
7.6
3.2
1.5
3.7
Liquid wealth
9.9
12.4
6-9
Enough
1.0
4.0
3.3
Liquid wealth
7.5
9.9
5.7
Expected >
1.9
1.8
0.5
Private
wealth
23 to 3 1 ,
Dependent V a r i a b l e s
Saving
Saving
Behavior
Mindedness
(3)
(3)
of:
(Equations
Liquid
data
pensions
(Equations
(Equations
26 to
29
28)
Co 31)
needed
For explanation
of v a r i a b l e s ,
Bee C h a p t e r s 6 and
7.
pensions coefficient, compared to 3.3 without liquid wealth in the
equation.) Similarly, insignificant differences are obtained when the
influence of "Enough" is studied with and without liquid wealth.
Somewhat larger declines in t-values result for the Expected >
needed variable when liquid wealth is introduced.
We conclude: The relationship found between two important
variables, Private pensions and Enough, on the one hand, and three
measures of saving on the other hand, remains significant and substantially unchanged when current liquid wealth is taken into consideration. This is true even though liquid wealth correlates highly
with past saving performance and saving-mindedness.
C H A P T E R 10
OTHER
VARIABLES
DATA are available on a few variables not yet mentioned in this report, and a brief summary of findings concerning
these variables is indicated.
Net Outlay on Consumer
Investment
Expenditures
It may be of interest to relate major espenditures on durable
goods, which fluctuate over time to a much greater extent than expenditures on food and other necessities, to retirement prospects.
Questions about the amounts spent on the purchase of cars and
household appliances, as well as on additions and repairs to homes,
were included in the retirement surveys. Trade-in values were
likewise ascertained. By deducting them f r o m total purchase prices,
a figure f o r net outlay on consumer investment expenditures was
calculated for each family unit. Amounts of net outlay tend to be
higher, the larger the income and also the larger the liquid wealth
(Table 34). The relationship with income is somewhat more pronounced than that with liquid wealth.
By definition, total expenditures and total amounts saved are
inversely related, but nothing can be said a p r i o r i about the relation
of net outlays on consumer investment expenditures to net additions
to financial reserves (discretionary saving), which is the main v a r i able in the studies here reported. In the Crucial Group there appears to be a positive relation, albeit rather small, between net outlays and high discretionary saving (proportion of families saving
more than 5 percent of their income). This was the case even
though the proportion of families having reduced their financial
reserves increases with an increase in net outlays on durables. The
positive correlation between high discretionary saving and net out-
66
Other Variables
67
lays on consumer investment expenditures may be due to the influence of income and liquid wealth on both.
1
T a b l e 34
RELATION OF NET OUTLAY ON DURABLES TO INCOME AND LIQUID WEALTH
(Percentage d i s t r i b u t i o n of C r u c i a l
Net Outlay—^
$3000
-5999
Group)
Income
$6000
-9999
$10,000
and up
24
17
12
$100 -
499
30
27
20
$500 -
1999
24
31
26
9
16
32
13
9
10
100
100
100
None
$2000 and over
Amount n o t a s c e r t a i n e d
Total
None or l e s s
than $100
None
2/
Liquid Wealth-'
$100
$1000
-999
-4999
$5000
and up
23
18
17
17
$100 -
499
29
28
30
22
$500 -
1999
24
31
29
29
$2000 and o v e r
10
14
16
26
Amount not
14
9
8
6
100
100
100
100
Total
ascertained
\J
E x p e n d i t u r e s d u r i n g the 12 n t o n t h B p r i o r to the s u r v e y on a u t o m o b i l e s , h o u s e h o l d a p p l i a n c e s , and a d d i t i o n s and r e p a i r s to homes,
w i t h t r a d e - i n v a l u e s deducted.
_2/
F a m i l y funds i n c h e c k i n g and s a v i n g s a c c o u n t s ,
and s t o c k s .
government
bonds,
' R e g a r d i n g this point, other findings p r e s e n t e d in Chapter 13 Indicate a
negative relationship between net outlays and s a v i n g , a f t e r other f a c t o r s have
been t a k e n into c o n s i d e r a t i o n .
68
Private
Pensions and Individual
Saving
As to the relation of net outlays to participation in private
pension plans or to favorable retirement prospects, the findings are
without exception not significant. Some measures of favorable retirement prospects result in small positive and other measures in
small negative coefficients when net outlay is taken as the dependent
variable. The largest positive, but still not significant, coefficient
is obtained when participation in private pension plans is used as an
independent variable along with income and age. I t appears therefore that while participation in pension plans stimulates discretionary saving, it does not detract f r o m major durable expenditures.
Education
While income is highly dependent upon education, the latter
also appears to exert an independent influence on some measures of
saving. The correlation between education and liquid wealth is quite
pronounced in the Crucial Group (Chapter 9). The relation between
education and the major dependent variables is much less pronounced, but an influence of education on saving behavior and on
saving-mindedness (dependent variables 2 and 3) can be detected
even after the influence of income is partialed out. The higher the
education, the more likely that a respondent has saved (at least
small amounts) or that he is saving-minded.
On the other hand, education does not correlate with the major
independent variables in the study beyond the influence of income on
those variables. Private pension plans are more frequent among
college graduates than among people with lesser education when the
entire Crucial Group is considered, but not when the relation between education and pension plans is studied within each income
group. Therefore, it is not surprising that the influence of the independent variables on saving declines very little when, in addition to
income and age, education is also taken into account in regression
equations.
Home
Ownership
Differences in the behavior of homeowners and renters are of
some interest to this study. According to the traditional definitions
of saving, homeowners are known to save more than renters, p r i marily because of the inclusion of mortgage repayments in saving.
But again, nothing can be concluded a p r i o r i about the relation of
home ownership to discretionary saving even though one may assume
that homeowners as a group have smaller expenses than renters.
(Many homeowners, especially the older ones, own their house
debt-free.)
Other Variables
69
According to data obtained in the present series of surveys, in
the Crucial Group the two major saving variables tend to be positively related to home ownership. Five out of the six comparisons
between homeowners and renters in Table 35 show this, especially
the lower and the higher income groups.
Of particular interest is the question whether the relation between the independent and the dependent variables differs among
homeowners and renters. I t appears that both participation i n p r i vate pension plans and favorable evaluations of retirement prospects exert a greater influence on our saving measures among
homeowners than among renters. A few examples of t-values for
the coefficients of these independent variables may serve to illustrate the findings:
2
With saving more than 5 percent of income as the dependent variable and private pension plans as an independent variable (along with income and age): t-value of 3.0
for homeowners and 1.6 for renters.
With saving behavior as the dependent variable and
"Enough" as an independent variable (along with income and
age): t-value of 4.1 for homeowners and 2.1 for renters.
(These calculations are based on a smaller number of cases than
those shown in Chapter 8 and therefore are not comparable.)
T a b l e 35
SAVING PERFORMANCE BY HOMEOWNERS AND RENTERS
( I n p e r c e n t o f subgroups o f the C r u c i a l
Homeowners
C u r r e n t Income
Dependent
1.
2.
Variables
$3000
-5999
$6000
-9999
$10,000
and up
Group)
Renters
C u r r e n t Income
$3000
-5999
$6000
-9999
$10,000
and up
S a v e 5% o r more
of Income
11
14
26
8
16
16
Saving behavior
27
44
63
11
42
55
Morgan and Kosobud have also presented some evidence that homeowne r s ' rate of saving in banks and securities exceeds that of renters. (See Consumer
Behavior
of Individual
Families
Over Two and Three Years, Survey R e search Center, 1964, edited by R. Kosobud and J . Morgan.)
2
70
Private
Pensions
and Individual
Saving
It is f a r f r o m clear how these findings should be explained.
One might argue that homeowners should expect to need less money
than renters during retirement; therefore they may feel closer to
their goal of having adequate retirement income and are stimulated
to save by private pension plans to a greater extent than renters.
This possibility needs to be studied further in future studies.
Average
Income and Spending
In Chapter 7 we noted that our measures of saving performance over fairly short periods of time are not quite satisfactory
because they may be influenced by unusually favorable or unfavorable developments in the period considered. I t is clearly not possible to eliminate a l l "noise" resulting from circumstances that differ
from one individual to another. An attempt was made, however, to
sort out those families in the sample who thought that their circumstances during the year before they were interviewed had been
"average. *
Two questions were asked. The f i r s t one read, "As f a r as
your family income is concerned, would you say that the last year
was an average year, an unusually bad year, or what?" The second
question was formulated as follows: "Considering what you people
spent altogether during the last twelve months, would you say that
this was about average, more than average, or less than average for
your f a m i l y ? " In reply to the f i r s t question, 68 percent, and in reply
to the second question, 54 percent of the Crucial Group said that
they had had an average year. There was a pronounced correlation
between the two measures. In both instances the majority of those
who denied having an average year said that incomewise the year
was better than average or that they had spent more than the average amount during the preceding year. In other words, by considering exclusively those who professed to be in average circumstances,
we eliminate primarily those who were better off than average.
This fact serves to explain the findings shown in Table 36, in which
the saving performance of people under average circumstances is
presented.
It appears from Table 36 that in the two upper income groups
(not in the income group $3000-5999), the frequency of high savers
is larger among those covered by private-pension plans than among
those not covered. These findings f o r "average people" are quite
similar to the findings presented f o r a l l people in Chapter 8. If anything, they show very slightly less influence of pension plans on
saving than the data tabulated f o r a l l families.
T a b l e 36
PROPORTION OF INCOME SAVED FOR FAMILIES WITH AVERAGE INCOME AND AVERAGE
BY PRIVATE PENSION COVERAGE
( F i g u r e s show p e r c e n t h a v i n g saved 5% o r more o f
$6000
-9999
$10,000
and up
income;—^ C r u c i a l Group o n l y )
Without P r i v a t e P e n s i o n s
C u r r e n t Income
With P r i v a t e P e n s i o n s
C u r r e n t Income
$3000
-5999
EXPENDITURES,
All
$3000
-5999
$6000
-9999
$10,000
and up
All
Average Year Incomewise
6
20
24
20
9
11
16
11
Average E x p e n d i t u r e s
3
20
31
21
11
11
24
14
11
20
32
23
11
11
20
13
All
Families-^
1/
Dependent
2/
Copied from T a b l e 27.
The
q u e s t i o n s were:
V a r i a b l e 1.
"As f a r as your f a m i l y income i s c o n c e r n e d . would you say t h a t ( p r e v i o u s yea r )
was an a v e r a g e y e a r , an u n u s u a l l y bad y e a r , or what? C o n s i d e r i n g what you
p e o p l e spent a l t o g e t h e r d u r i n g the l a s t t w e l v e months, would you say t h a t t h i s
was about a v e r a g e , more than a v e r a g e , or l e s s than a v e r a g e f o r your f a m i l y ? "
JSCS
R
tn
-3
72
Private
Pensions
and Individual
Saving
When the problem of "noise" is approached in another way,
namely, by eliminating those relatively few families who reported
having had unfavorable surprises during the year before they were
interviewed, some improvement of the relationship between Independent and dependent variables is found. But the improvement is
rather small. This is understandable because of the small proportion of families eliminated f r o m the tabulation.
The major result of considering additional variables, such as
education, home ownership, and average year, is that such consideration does not result in a significant change in the explanatory
value of the Independent variables.
C H A P T E R 11
DIRECTION
OF
CAUSATION
IT is hardly necessary to repeat the old adage that correlation does not imply causation. But regarding the relationship
found between private pension plans and saving behavior, there is
little justification to doubt that the direction of causation runs from
participation in pension plans to the stimulation of saving.
The alternative assumption would suppose that thrifty people,
or people with large financial reserves, more often participate in
pension plans than people who are not thrifty. This supposition is
not a plausible one. On the whole, people are covered by pension
plans because their employment is of a certain type, and not because of their voluntary action resulting f r o m predispositions they
may have (e.g. thriftiness). A self-employed person is unlikely to
participate in a pension plan, even though he may habitually save a
fair share of his income or may be greatly interested in security
during retirement The same may be said of those employed in a
small business, or in a corporation in which pension plans have not
been instituted. Important in this connection are the findings in
Chapter 5 on the differences between those covered and those not
covered by private pensions.
To be sure, the possibility exists that some employees pressure their employer, or their trade union and through it their employer, to create pension plans. Or, it is conceivable that certain
types of people would seek employment in which pensions are available. Yet i t seems quite improbable that a large number of security-minded people have been sufficiently aware of pension plans to
be so motivated in their job-seeking behavior, let alone successful
in finding employment providing private retirement benefits. However, no data are available to test these possibilities.
1
'New tax regulations that went into effect after the completion of the field
work for this study provide for the establishment of pension plans for the selfemployed.
73
74
Private
Pensions and Individual
Saving
Findings do exist, however, that make it possible to contradict
a related assumption. I t is not true that people who have saved
much i n the past (because of being concerned with security or f o r
other reasons) are those who have found employment with pensions.
The result of past saving consists of present asset holdings and, as
already shown, current liquid wealth does not correlate at a l l with
participation in private pension plans. People with sizable financial
reserves are not more frequently covered by pension plans than are
people with smaller reserves. The rate of saving is high among
people with sizable liquid wealth (due to habitual behavior, etc.)
irrespective of whether they are covered by pensions or not. In addition, the rate of saving is larger among those covered than among
those not covered. The two influences are independent of each other.
On the other hand, the question about the direction of causation
is of major significance with respect to the relationship between expected retirement income, or the evaluation of retirement prospects, and saving behavior. When it is found that people with favorable retirement prospects — for instance, those who feel that they
w i l l have enough resources during retirement — save more than
people with unfavorable retirement prospects, the finding may be i n terpreted in two ways. I t is possible, as assumed in Hypothesis 2
presented in Chapter 1, that perception of favorable retirement
prospects induces people to accumulate financial reserves because
concrete and attainable rewards, or being f a i r l y close to one's goal,
provide special incentives. But the reverse process of causation
would likewise explain the findings. I t is possible that thrifty people,
that is people who have saved much in the past, evaluate their r e tirement prospects more favorably than less thrifty people. In that
case the availability of sizable reserves would make f o r favorable
retirement prospects.
It is also possible that both tendencies operate at the same
time: A person with sizable assets may see his retirement prospects in a favorable light, and the perception of good retirement
prospects may also stimulate additional saving.
2
3
This finding is not inconsistent with the finding that pension coverage
stimulates saving. The bulk of pension plans are of fairly recent origin. Were
it true that (a) most pension plans have been in existence for many years, and
(b) that coverage stimulates saving, then it would follow that covered people
have larger liquid wealth than those not covered, other things equal. In that
case, the distinction between the influence of liquid wealth and of private pensions on saving behavior could not have been made.
One might also assume that some people said they will have enough
money at the time of their retirement because they expected to save much in the
future. Yet in light of the context of the question aBked, and the formulation of
the replies, it does not appear probable that many respondents had this contingency in mind.
2
3
Direction
of Causation
75
Favorable retirement prospects are in fact foreseen somewhat more frequently among those with sizable liquid wealth than
among those with smaller reserves. Liquid wealth (LW) has been
shown to be related to "Enough" and to some extent also to "Expected retirement income > needed." In view of the significant positive relationship between liquid wealth and the variables used to
measure saving behavior, we are inclined to lean toward the second
assumption: People with large financial reserves (savers) tend to
judge their retirement prospects in an optimistic manner. Yet some
data presented in Chapter 9 do not seem to be in accord with this
interpretation. A comparison of Table 33 with Table 31 indicates
that the variable "Enough* is related to saving independent f r o m the
influence of liquid wealth.
Probably, then, the direction of causation is not a simple one.
Favorable retirement prospects may be both a result and a cause of
substantial saving performance. Or, with some people it may be the
one way, and with other people the other way. A definite conclusion
can, however, be presented in a negative f o r m : It is not true that
favorable retirement prospects generally and necessarily inhibit or
retard saving. Hypothesis 1 (Chapter 1) is not supported by the data
collected i n this study. Further, the unambiguous findings with r e spect to the influence of private pension plans' on saving behavior
are in direct contradiction to Hypothesis 1.
C H A P T E R 12
INDIVIDUAL
DIFFERENCES
THUS f a r we have discussed average data obtained f o r
groups of people, since they tend to reveal aggregate trends of significance f o r the entire economy. But these data mask the existence
of substantial individual differences. No doubt there are some people with favorable retirement prospects who save little or nothing
because they substitute their contribution to pension plans f o r saving
in other forms. This procedure has been made attractive to upper
income people through provisions of the tax laws. Similarly, there
are some individuals with unfavorable retirement prospects who
save a relatively high proportion of their income. Yet it appears
that such people constitute a minority; the number of large savers
with favorable prospects and of small savers with unfavorable prospects is greater.
This point may be illustrated by some data on the proportion
T a b l e 37
RATIO OF SAVERS TO D I S S A V E R S - ^
( C r u c i a l Group o n l y )
C o v e r e d by
P r i v a t e Pension
Not C o v e r e d by
P r i v a t e Pension
Income $3000 - 5999
.9
.9
Income $6000 - 9999
1.8
1.2
Income $ 1 0 , 0 0 0 and o v e r
2.9
1.9
1/
See t h e
text
for definitions
of " s a v e r s " and " d i s s a v e r s . "
76
Individual
Differences
77
of savers, both among those covered and among those not covered by
private pensions. As stated before (Chapter 7), the survey method
here used to measure saving performance overstates the proportion
breaking even. In other words, some respondents said that there
had been, in the twelve months preceding the interview, no change in
their savings and checking accounts, bonds, and stocks when there
had in fact been some change. Nevertheless, the ratio of those who
reported having added to their liquid wealth (savers) to those who
reported having reduced their liquid wealth (dissavers) represents
an interesting measure. Table 37 shows that among those with p r i vate pensions the ratio of savers to dissavers is much higher than
among those without private pensions, except in the lowest income
group where the two ratios are the same and the dissavers are more
numerous than the savers.
An attempt was made to determine the types of individuals
who save much, but the simple technique f i r s t used did not prove
very productive. For instance, the 17 percent of the Crucial Group
who had saved more than 5 percent of their income were separated
into those covered by pension plans (10 percent) and those not covered (7 percent). Sizable differences between the two subgroups
were found with respect to income." Among those with pensions,
there were many more with high incomes (over $10,000) and many
fewer with low incomes ($3000-5999) than among those without
pensions (Table 38). The income differences between the two subgroups of high savers (Columns 2 and 5) correspond to the income
differences between a l l people with and without pensions (Columns
1 and 4).
No substantial differences were found between the two subgroups of high savers as to age, liquid wealth, or the ratio of expected retirement income to current income. The last finding indicates that expecting relatively high retirement income f r o m sources
other than pension does occur among some people.
The same procedure is repeated in Table 38 for those who
saved 2 to 5 percent of their income (medium savers). The findings
are similar to those described for high savers, although the income
differences are less pronounced and there are relatively many medium savers without pensions with fairly low expected retirement
income.
When the high and medium savers, with or without pensions,
are analyzed by occupation, substantial differences are found. Table
38 shows that among high savers with pensions there are many
more with managerial occupations and many fewer self-employed
businessmen and farmers than among high savers without pensions.
These differences appear to be somewhat more pronounced than the
differences in coverage by pensions among the occupational groups.
T a b l e 38
CHARACTERIZATION OF HIGH AND MEDIUM SAVERS PARTICIPATING
AND NOT PARTICIPATING I N PENSION PLANS
(Percentage
Current
Income
$3000 - 5999
$6000 - 9999
$ 1 0 , 0 0 0 and o v e r
Total
d i s t r i b u t i o n o f subgroups o f
the C r u c i a l Group)
Have P r i v a t e P e n s i o n
Saved 57.
Saved
o r More
2-57. o f
o f Income
All
Income
(2)
(3)
(1)
All
W
No P r i v a t e P e n s i o n
Saved 5X
Saved
or More
2-5% o f
of Income
Income
(5)
(6)
15
46
39
7
39
54
9
46
45
35
40
25
27
33
40
18
52
30
100
100
100
100
100
100
16
15
22
19
11
9
8
20
23
19
14
12
17
25
25
18
5
8
2
21
13
17
16
6
9
18
22
17
16
15
7
8
15
36
16
11
18
5
2
12
100
100
R a t i o of E x p e c t e d R e t i r e m e n t
Income to C u r r e n t Income
L e s s than 30%
30 - 39%
40 - 4 9 *
50 - 597.
60 - 697.
707. or more
Not a s c e r t a i n e d
Total
7
5
100
100
100
100
Table 38" ( c o n t . )
Have P r i v a t e Pension
Saved
Saved 57.
or More
2-5% of
Income
of Income
All
All
No P r i v a t e Pension
Saved
Saved 57.
or More
2-5% of
of Income
Income
L i q u i d Health
4
6
13
16
25
32
4
14
31
18
18
8
9
2
38
9
10
14
10
11
8
6
2
13
31
19
25
4
16
18
23
23
7
9
4
100
100
100
100
100
100
15
13
3
12
44
8
1
4
19
19
5
9
35
7
1
5
17
5
3
9
7
17
10
35
11
8
3
16
4
18
11
30
9
11
1
16
2
16
14
32
7
11
2
100
100
100
100
100
100
42
10
5
52
7
3
33
14
13
13
10
12
5
L e s s than $500
$500 - 999
$1000 - 1999
$2000 - 4999
$5000 - 999 9
$10,000 and over
Not a s c e r t a i n e d
Total
.
Occupation
Professional, technical
Managers, o f f i c i a l s
Self-employed businessmen
C l e r i c a l , s a l e s workers
Craftsmen, operatives
Laborers; service workers
Farmers, and farm managers
Other
Total
Proportion of C r u c i a l Group i n %
* L e s s than 0.5
percent.
*
11
59
5
*
S:
TO
-i
TO
80
Private Pensions and Individual Saving
Disregarding coverage by pensions, we find that business managers,
the self-employed, as well as the professionals are represented
among the high savers to an extent exceeding their representation
in the Crucial Group. These are the occupations in which a high
proportion of people save much.
It appears, then, that substantial saving performance on the
part of people without pensions is characterized by two features
which prevail to a much smaller extent among high savers with pensions. These features are income level between $3000-5999 and
self-employment.
A new approach is called for. In the next chapter we search
for the major determinants of saving and compare the explanatory
power of the crucial variables (private pensions, expecting to have
enough for retirement) with that of the traditional variables (income, liquid wealth, etc.).
CHAPTER
13
COVERAGE
BY PRIVATE
PENSION
DETERMINANT
OF SAVING
AS A
THE influence of coverage by private pension on saving
has been studied by two methods. First, groups of people with and
without coverage have been compared with respect to their saving
performance. Second, it was determined whether the private pension variable correlates with dependent variables representing saving when the effects of other factors are allowed for in a multivariate analysis.
The latter procedure may alternatively be carried out in a
somewhat different manner. The major determinants of saving performance may be investigated and the question raised whether pension coverage contributes to explaining saving. There exists a new
computer program which is eminently suited,to this task.
The Automatic Interaction Detector Program, developed by
James N. Morgan and John A. Sonquist of the Survey Research Center, identifies that split of a sample into two subgroups which
makes the greatest contribution toward explaining the total variation
in the dependent variable. Then, each of these subgroups is similarly examined for the best split, and so on. Since each consecutive
binary split is made on the basis of that independent variable which
"does the most good" In explaining the variance of the dependent
variable within the subgroup being examined, the result is a nonsymmetrical "branching. * For example, if the firBt split is between
families with high and low income (as defined by the computer's
search for the best split), then the search for the best subsequent
splits is carried on separately within each of these two income subgroups. I t is quite possible that one explanatory variable will prove
1
'Sonquist, J . A., and Morgan, J . N., The Detection of Interaction
Effects,
SRC Monograph No. 35, Institute for Social Research, University of Mighlgan,
Ann Arbor, 1964.
81
82
Private Pensions and Individual Saving
most successful in one subgroup and an entirely different variable
in the other subgroup.
In sum, the sample is divided sequentially into that series of
subgroups which maximizes one's ability to predict values of the
dependent variable. The linearity and additivity assumptions inherent in conventional multiple regression techniques are not required.
The nonsymmetrical branching process just described allows for
the explicit recognition of interaction effects.
The technique was used in the present study to explain (a) high
savers, i.e. those in the Crucial Group who saved more than 5 percent of their income (Chart 1), and (b) medium or high savers, i.e.
those in the Crucial Group who saved more than 2 percent of their
income (Chart 2). The following explanatory variables were used:
current income
liquid wealth
age of family head
home ownership
education of family head
net outlay on durable goods and additions to homes
coverage by private pensions
saving-mindedness
expecting to have enough for retirement
expecting retirement income to be larger than needed
retirement income.
The two "trees" produced by the computer are shown in the
charts. I t can be seen in Chart 1 that the first and also the second
choice made by the computer consisted of separating people into
groups having different amounts of liquid wealth. The third choice
among those with liquid wealth of $5000 or more, in which group
over. 40 percent were high savers, was in terms of coverage by p r i vate pensions and the absence of such coverage. The second chart
likewise indicates a first choice in terms of liquid wealth. Among
those with liquid wealth of $500 or more, again over 40 percent were
medium or high savers. Here already the second choice was in
terms of private pensions.
The paramount position of liquid wealth in explaining saving is
in full accord with the regression equations presented in Chapter 9.
The very high correlation between liquid wealth and the proportion
of income saved in the prior year is revealed by both methods. The
2
Not-ascertained cases were excluded from the computer runs. This accounts for some small differences from data In tables presented previously.
3
Chart 1
MUQR DETERMDWn-S OF SAVING 51 OK MORE OF IK CO HE IH 12 HDHTHS
2nd S p l i t
l » t SpLit
3rd S p i l t
5th S p i l t
Het outlay
$1000 and over
Liquid wealth
undar 31000
Liquid wealth
31000-4999
49
Net outlay
under 31000
24.9
Crucial
Group
4th S p l i t
Not
enough
26
51
Liquid wealth
91000 and over
Inccne
undar $15,000
Enough
Incowe $15,000
and over
Expected
Income l e a l
No private
pension
13
25
Expected
incoaa greater
Liquid woalth
$5000 and over
High achool
diploma
12
Have private
penaton
In bones indicate proportion In percent aavlng more than 5%
Flgur
f i g u r e ! above l i n e s Indicate aize of group a p l l t o f f ln percont of
C r u c i a l Group
No high achool
diploma
Chart 2
MAJOR DETBEHINAHTS OF SAVLHB 2% OR MOUE OF INCOME IM 12 MONTHS
let
Split
2nd S p l i t
3rd S p l i t
ith Split
LW undar
25/)S2O0
5th S p l i t
6th S p l i t
7th S p l i t
Not enough
LW under
$500
LW $200-499
Age of haad
LW $500-999
Enough
.4
No private
penaion
32.4
Crucial
Group
Age of head
- 44
46.6
Net outlay
$3000 and up
9
Net outlay
under $3000
Haa college
degree
Not
enough
LW $500
and up
LW $50&-49$9"
Net outlay
$300 and up
6.9
.2
F i if urea ID boxea indicate proportion in percent aaving nor* than 21;
figure* above H E ea indicate a i r e of group a p l l t o f f in percent of
C r u c i a l Group.
n\j.Enough
Exp
Have private
penaion
6
LW $5000
and up
degree
Hat outlay
$200 and up
5.1
Net outlay
under $200
7.8
needed
needed
Coverage by Private Pension
85
computer runs for Charts 1 and 2 also indicate that If liquid wealth
had not been considered, the first choice would have been made on
the basis of income.
Within the upper liquid wealth groups, which contain most of
the high and medium savers, subdividing by private pension coverage does more good than subdividing by any of the other explanatory
variables. The contribution of variables other than liquid wealth in
explaining high and medium saving was less powerful than that of
coverage by private pensions.
A closer scrutiny of the charts indicates that in both cases the
first choice consisted of separating out those broad groups of people
who are without great interest in a study of saving. For example, in
studying those who saved more than 5 percent of income in one year,
the families whose total past saving was less than $1000 were discarded. It can be seen from the chart that 49 percent of the Crucial
Group had less than $1000 liquid wealth. In this group only 3.6 percent saved more than 5 percent of their income; 3.6 percent of 49
percent is equal to 1.8 percent of the Crucial Group; These relatively few high savers were separated out before proceeding with
the analysis. Similarly in Chart 2, those split off because of having
less than $500 liquid wealth contain only a small number of high
savers (6.4 percent of 38 percent). According to both charts the
computer did not continue by splitting the two small groups on variables other than liquid wealth. This means that no other variable,
in addition to liquid wealth, was of any importance in explaining the
dependent variable.
In analyzing saving more than 5 percent of income among
those with $1000 to $4999 liquid wealth, the computer found just one
useful explanatory variable. The split was in terms of net outlay on
durable goods. Among those who spent large amounts on durables
in the year, there were fewer high savers than among those who
spent little or nothing on durables.
The bulk of high savers were found among those with liquid
wealth of more than $5000. In this group, private pensions made the
largest difference. High saving among those without coverage was
explained primarilyby having very high income (over $15,000). High
savers among those with pensions were differentiated by education:
Among those who have less than a high school diploma, the proportion of high savers was larger than among those with a high school
diploma. (Many of the latter also have a college education.) A ready
explanation for this finding is not available.
Chart 2 reveals that among those with more than $500 liquid
wealth and without private pensions, liquid wealth made the largest
difference. Those with substantial liquid wealth tended to be savers
86
Private Pensions and Individual Saving
even without pensions, especially if they were 35 to 44 years of age
and did not make large net outlays on durables. Among older people
with substantial liquid wealth and no pensions, expecting to have
enough for retirement made a difference. Among these people the
proportion of medium or high savers was much greater than among
those who said that they did not have enough for retirement. Regarding the determinants of saving among those not having private
pensions, the new technique provided significant information not
available by using other methods.
The first subdivision of medium or high savers with pensions
was again made in terms of liquid wealth and the second was made
in terms of net outlay on durables. These splits of the group with
pension coverage are in accord with a priori notions. Expectations
about the adequacy of retirement income appear fairly late in Chart
2. When they do appear (in the 5th and 7th splits), the proportion of
savers was found to be larger among those who expected to have
enough, or who expected to have more than they would need, than
Table
39
RELATION OF LIQUID WEALTH TO PROPORTION OF INCOME S A V E D ^
( P e r c e n t a g e d i s t r i b u t i o n o f subgroups of
Proportion of
Income Saved
L e s s than
$500
the C r u c i a l
Group)
L i q u i d Wealth
$500 o r More
Private
No P r i v a t e
Pension
Pension
10% o r more
1
20
11
5 - 9%
1
12
10
2 - 4%
4
15
10
-4 t h r o u g h +1%
76
33
42
D i s s a v e d 5% o r more
12
13
19
6
7
8
100
100
100
Not a s c e r t a i n e d
Total
1/ The subgroups i n the t a b l e c o r r e s p o n d to the f i r s t and second
s p l i t s shown i n C h a r t 2 .
The f r e q u e n c i e s shown h e r e d i f f e r
s l i g h t l y from the f r e q u e n c i e s i n C h a r t s 1 and 2 because! not
a s c e r t a i n e d c a s e s were e x c l u d e d from the computer r u n s from
which the c h a r t s a r e drawn.
Coverage by Private Pension
87
among the opposite groups. These findings supplement those presented in Chapter 9 on the interaction of different motivational variables. It appears that for those covered by pension plans, the plans
are a more important factor in explaining saving performance than
other considerations that make for favorable retirement prospects.
Since the computer has "discovered" that dividing the Crucial
Group into two parts — those with more and those with less than
$500 liquid wealth — represents the most significant single explanation of saving more than 2 percent of income, it may be of interest
to look at the saving performance of the two subgroups in some detail. Table 39 shows how infrequent the savers are among those
with less than $500 in liquid wealth, and also that beyond that limit
savers are more frequent among those covered by pensions than
among those not covered.
Table 40 expands on the third split shown in Chart 2. Only
some, rather than all, liquid wealth groups are shown in the chart,
and it is of some interest to obtain the full picture. The proportion
of those saving more than 2 percent of income shows an uninterrupted progression: The frequency rises monotonically with
T a b l e 40
RELATION OF PENSION PLANS AND LIQUID WEALTH
TO SAVING MORE THAN IX OF INCOME^'
P r o p o r t i o n S a v i n g IX or
More of Income
Liquid Wealth
Do Not Have P e n s i o n
$500 - 999
16%
$1000 - 4 9 9 9
35
$5000 and o v e r
39
Have P r i v a t e P e n s i o n
$500 - 999
42
$1000 - 4 9 9 9
44
$5000 and o v e r
62
1/
~
The s u b g r o u p s I n t h e t a b l e c o r r e s p o n d to the t h i r d s p l i t shown
i n C h a r t 2.
The f r e q u e n c i e s shown h e r e d i f f e r s l i g h t l y from
t h o s e i n C h a r t 2 b e c a u s e not a s c e r t a i n e d c a s e s were e x c l u d e d
from t h e computer r u n from which the c h a r t i s drawn.
88
Private Pensions and Individual Saving
increasing liquid wealth among those without private pension and
rises further with liquid wealth among those with pensions.
We conclude from the findings obtained by means of the new
computer technique that coverage by private pensions makes a difference in explaining saving performance, encouraging more saving
rather than inhibiting i t In evaluating these findings we must keep
in mind that we have not compared people who expect some kind of
old-age pension with others who do not have any such expectation.
Rather, in view of the almost universal coverage of the labor force
by social security, we have compared people who expect both social
security and private pensions with people who expect social security
benefits alone after they retire. The findings indicate that the former tend to save more than the latter.
Appendix to Chapter 13
EXPLANATORY VARIABLES FOR COVERAGE
BY PRIVATE PENSIONS
THE new computer technique described above has also
been applied to coverage by private pension plans as a dependent
variable. The same explanatory variables were used as in Charts 1
and 2, except that occupation was added (and pension coverage was,
obviously, omitted). Chart 3 sheds further light on the determinants
of pension coverage, although it does not provide significant insights
beyond what has been described in Chapter 5.
The first two splits were made in terms of occupation. Selfemployed businessmen and farmers as well as unskiUed workers
are split off from the rest of the Crucial Group since for them coverage by pensions is relatively rare. Among people with other occupations, representing three-fourths of the Crucial Group, income
makes the most significant difference. Pension plans start to be
frequent around $5000 annual income. Further splits of that group
are made in terms of saving-mindedness and available liquid wealth.
The latter two variables can hardly be viewed as casual factors
making for coverage by pensions.
Chart 3
MAJOR DETERMINANTS OF PARTICIPATION IH PRIVATE PENSION PLAH3
l i t Split
2nd S p l i t
3rd S p l i t
ith Split
Self-employed,
farmeri
Self-emfloyed,
fanaara,
laborers,
service workers
21.2
Laborers,
aervice workers
Crucial
Group
Income
35000-7499
Incoma
33000-4999
40.3
Not
saving-nlnded
Profeaalonal,
managers,
clerical, sales,
c r a f t s a e n , others
52.2
Income $7500
and over
Income $5000
and over
o
ft
I
TO
5
Liquid wealth
under $500
TO
Saving-minded
Figures in boxes indicate proportion in percent having privata panaiona;
figures above l i n e s indicate s i z e of group a p l i t o f f In percent of C r u c i a l
Group.
Liquid wealth
$500 and over
CO
CHAPTER
SAVING
14
TOO MUCH
OR TOO
LITTLE?
UNDER the conditions that prevail today, coverage by
private pension plans stimulates individual saving. The notion that
people tend to reduce the amounts they voluntarily save by the
amounts they are compelled to save through their own and their employer's contributions to pension plans has been contradicted. So
has the argument that expectation of retirement income from pension plans weakens the motivation to save and induces more liberal
spending.
Regarding the question of the impact of favorable retirement
prospects on saving behavior, irrespective of the source of the favorable prospects, the conclusions are less clear since the direction
of the cause-effect relationship remains in doubt People who think
that they will have enough for retirement tend to save more than
people who foresee financial problems during retirement, but among
the former many have saved much in the past as well.
It follows that collective retirement arrangements, which provide most needed support to millions of people, do not deprive their
recipients of incentives. Rather than making people rely on the benevolence of impersonal government or business, the collective retirement plans help people to help themselves.
This finding strongly supports previous survey findings about
incentives available in an affluent society: Many people with "satisfactory" incomes work hard to add to their incomes; many people
with "adequate" savings continue to exert effort to add to their savings; new wants for goods and services arise when more pressing
needs and wants have been satisfied. In short, levels of aspiration
are raised with accomplishment.
The effectiveness of this principle depends, however, on prevailing conditions. According to indications from past studies, aspirations for higher income and for an improved standard of living
are raised when people are optimistic and confident, rather than
pessimistic or uncertain in their views of the future. The present
90
Saving Too Much or Too Little?
91
study of behavior under the impact of pension plans and favorable
retirement prospects suggests that concrete and attainable rewards
represent a major motivating force. This motive is of particular
significance today when incentives are needed for people wellendowed with consumer durable goods to purchase such goods, and
needed for people with sizable reserve funds to add to their savings.
Of course, the stimulating effect on saving of coverage by pension plans may not persist. Clearly, collective security arrangements could have a different effect on individual saving if they were
to guarantee retirement incomes representing a much larger share
of pre-retirement incomes than they do at present. Greater assurance that pension plans would not be lost to a worker who changes
his employment might have a similar effect. We have here studied
behavior at a specific point in time, when business trends were favorable, when consumer expectations were fairly optimistic, and
when many pension plans were fairly new. Circumstances may
change, and habituation to pension plans may change attitudes and
therefore saving behavior. The studies reported in this monograph
need to be repeated later.
It has been frequently argued that Americans in the post-World
War n era have been saving too little, that is, less than what would
be required for financing a level of investment which would guarantee a high rate of economic growth. Some writers have pointed to
the "thing mindedness" of our society, or to the consumers' wastefulness and their predilection for gadgets, in order to explain the
alleged lack of interest in saving. Others have written of the adverse impact on saving of inflation, installment buying, and relatively low interest rates. Simon Kuznets has emphasized four
factors making for low rates of saving: He argues that our society
is geared to high consumption, that technical changes create manifold new consumer wants, that full employment policy and progressive taxation make incomes less unequal, and that international tensions and the threat of war create a climate which is not favorable
to fostering concern about providing for future wants and needs.
This author has recently discussed the influence of diverse
factors on saving, including the effects of inflation, installment buying, interest rates and international tensions, and found wanting the
1
2
The Report by the President's Committee issued early in 1965 recommended improvements in the vesting and funding provisions of pension funds so
as to make sure that employees do not lose their rights and obtain some payments If they change employment. Such provisions might also counteract the
adverse effects of pension plans on labor mobility.
'Simon Kuznets, Capital in the American Economy, National Bureau-of
Economic Research. Princeton University Press, 1961. p. 456.
1
92
Private Pensions and Individual Saving
argument that they act to depress the rate of individual saving.
Only one aspect of older findings needs to be summarized here,
since that aspect is closely related to problems raised by the spread
of pension plans. The notion that accumulation of consumer assets
necessarily retards future saving, widely held by economists and
often associated with the name of the British economist Pigou, must
be contradicted.
Studies carried out over several years have indicated that the
attitudes toward saving and the saving behavior of people owning
relatively large financial reserves are not homogeneous. On the
one hand there are motivational forces in line with an adverse effect
of assets on saving. Retired people and people under temporarily
unfavorable circumstances frequently dissave when they have fairsized reserve funds. Furthermore, liquid assets are meant to be
used and represent enabling conditions for spending. When the opportunity arises to make the large and unusual expenditures for
which savings have been accumulated — trips, additions or repairs
to homes, purchases of durables, hobby and luxury items, etc. — reserves are reduced. Thus years of dissaving occasionally interrupt
the years of saving in most individual people's life cycles. But motives to save do not appear to weaken under the influence of such
uses of savings. Recent studies show that savings accounts, after
they have been reduced, are most usually restored to their earlier
level or even beyond.
On the other hand, there exist motivational forces that induce
behavior which is the reverse of that just described. These forces
are based on the prevalence of rising aspiration levels and of saving
habits. There is evidence that the size of assets considered adequate for one's needs grows with the accumulation of assets. Secondly, large asset holders are mostly those who have saved much in
the past. (The relative infrequency of inheritance was discussed in
Chapter 9.) Irrespective of whether earlier saving is due to certain
personality traits, to favorable circumstances, or to special needs,
saving over many years becomes habitual and strengthens the motives to save. Therefore, it is to be expected that large asset holders are strongly motivated to continue to save.
9
4
5
G . Katona, The Mass Consumption Society, Chapters, 18 and 20.
*See Katona, Psychological
Analysis of Economic Behavior, pp. 167 ff; The
Powerful Consumer, pp. 133 ff; The Mass Consumption Society, pp. 213 ff; "On
the So-Called Wealth Effect," Review of Economics and Statistics,
43, pp. 59 ff,
1961; as well as R. F . Kosobud and J . N. Morgan, Consumer Behavior of Individual Families Over Two and Three Years, Survey Research Center, University of Michigan, 1964.
Eva Mueller and Harlow Osborne, "Consumer Time and Savings Balances," Proceedings,
American Economic Review, 55, May, 1965.
3
9
Saving Too Muck or Too Little?
93
In accordance with the existence of the two sets of forces,
longitudinal studies, carried out over periods of one year or two
years following the determination of "initial" asset holdings, have
indicated that relatively many holders of large assets save a large
proportion and relatively many dissave a large proportion of their
incomes. Both forms of behavior were found to be much less frequent among the holders of small assets, as shown in Table 10 of
The Mass Consumption Society (page 216). Thus it is not true that
large liquid assets, or large wealth, necessarily retard saving, although in certain years the retarding influence may exceed the stimulating influence, while In other years it may be the other way
around. It is probable that the net effect of assets on saving, whether
operative in the one or the other direction, has been small in the
postwar period.
The circumstances which favor either a positive or a negative
effect of assets on saving are of particular interest. Income' level
appears to be of great importance. In the early 1960s, the stimulating effect of assets was more pronounced among upper income
groups and the retarding effect was more pronounced among lower
income groups.* In earlier studies, Morgan showed that income declines are associated with a negative and income increases with'a
positive effect of assets on saving. The same is probably true of
income expectations.
Assurance of retirement income through pension plans represents a form of wealth which has not been included among assets in
studies of the wealth effect Moreover, assurance of retirement income constitutes a particularly relevant form of wealth, since providing for retirement is one of the major motives to save. Therefore, the findings reported in this monograph must be understood in
the context of previous findings on the relation of wealth to saving.
Since the two sets of studies were conducted with different samples
and independently of each other, each of them may be viewed as supporting the other. Together they form a set of generalizations of
significance for future research as well as for practical problems
of the day.
It may easily be that during the late 1950s and early 1960s the
American people have saved too much, rather than too little. The
large reserves accumulated by pension and welfare funds, about half
of which have been invested in common stock, have been supplemented by heightened saving effort on the part of millions of individuals, directed primarily toward accumulating savings deposits.
"See Kosobud and Morgan, op. cit., and C. A. Lininger, "Estimates of Rates
of Saving," Journal of Political Economy, 72, June, 1964.
94
Private Pensions and Individual Saving
Naturally, when the time arrives for private pension funds to pay out
as much as they take in, the aggregate effect on the economy will be
changed. But this time is still far off. For the next ten years or
so, economic policy concerned with stimulating individual saving
appears to be misplaced.
One additional consideration must be mentioned, however.
Population trends may adversely affect consumer saving during the
next ten years. In this period the age groups 35 to 64 will grow
slowly, while the number of younger family heads as well as the
number of retired people will grow rapidly. Accumulation of financial reserves is most pronounced in the two decades before retirement, when incomes reach their peak. On the other hand, retired
people often use up some of their reserves. Young family heads accumulate physical assets, frequently through incurring mortgage and
installment debt, to a larger extent than financial reserves. Therefore demographic trends may slow down consumers'total financial
saving during the next decade.
A final question concerns the origin of the presently prevailing
widespread and strong desires for the accumulation of financial reserves. This question is not answered by finding that the variety of
forces which allegedly retard individual saving are not operative.
Only a tentative answer can be given to the question. It appears that
in the minds of very many Americans, the accepted or desired standard of living consists not only of the possession of consumer
goods — own home, car, appliances, etc. — but also of the possession
of reserve funds. With many large contractual obligations —payments due on life insurance, mortgage and installment debt, as well
as a variety of dues and fees — and extensive everyday expenses that
are viewed as inevitably necessary, any income decline, even if
slight and temporary, appears to be catastrophic unless reserve
funds are available. The American people are not only thingminded, but also security-minded. They desire to have reserve
funds and try hard to accumulate them.
7
'According to the Report by the President's Committee cited in Chapter 1,
even in 1980 payments into private pension funds (estimated at $10.9 billion)
will exceed the funds' payments to beneficiaries ($9 billion).
Appendix A
APPENDIX
95
A
Appendix A:
THE QUESTIONNAIRE
I n t e r v i e w e r ' s Name:
Date:
Your I n t e r v i e w Number:
Length of I n t e r v i e w :
Town or C i t y :
(mln. )
State:
L i s t below a l l a d u l t s l i v i n g i n the D w e l l i n g U n i t .
( L i s t a l l persons
o v e r , and everyone who l a m a r r i e d , r e g a r d l e s s of a g e . )
age
18 and
L I S T I N G BOX
(Col.
(Col.
1)
A d u l t s by R e l a t i o n s h i p
or C o n n e c t i o n to Head
HEAD of D w e l l i n g
2)
Sex
Age
3)
(Col.
4)
Family
U n i t No.
(Col.
5)
I n d i c a t e Respondent by ( y )
1
Unit
I n t e r v i e w the person
(Col.
i n d i c a t e d on the cover
s h e e t by a red •/.
Hake no
(c) Copyright
substitutions..
1962
and
1963
The U n i v e r s i t y of M i c h i g a n
96 Private Pensions and Individual Saving
1.
We are i n t e r e s t e d i n how people are g e t t i n g a l o n g f i n a n c i a l l y t h e s e d a y * .
Would
you say t h a t you and your f a n l l y a r e b e t t e r o f f or worse o f f f i n a n c i a l l y than
you were a y e a r ago?
•
la.
2.
Why i s
2a.
WORSE HOW
Q
UNCERTAIN
MORE NOW
How i s
Q
ABOUT THE SAME
•
or more,
less?
chat?
3a.
BETTER
p r e t t y much a s
What was thaC?
Q
SAME
Q
WORSE
Q
We would a l l l i k e more money.
F o r some people i t
i n c r e a s e t h e i r Incowe; f o r oCher people i t i s not
Are t h e r e t h i n g s you f e e l
your p r e s e n t i n c o a e ?
( I F YES)
or
LESS NOW
Now l o o k i n g s h e a d - - d o you Chink t h a t a y e a r from now you people w i l l be
o f f f i n a n c i a l l y , or worse o f f , or J u s t abouc tho same aa now?
5a.
6.
Q
L o o k i n g back over the p a s t twelve months, d i d t h i n g s work out
you e x p e c t e d f i n a n c i a l l y , or d i d a n y t h i n g unexpected happen?
•
5.
SAME
chat?
( I F UNEXPECTED)
4.
Q
Are you people making as much money now a s you were o year ago,
•
3.
BETTER NOW
5b.
What k i n d of
you would l i k e
things
are
better
UNCERTAIN
i s important Co f i n d a uay t o
important.
How i s i t f o r you?
to hava or do,
but c a n ' t
with
these?
C o n s i d e r i n g whaC you people spent a l c o g e t h e r d u r i n g Che l a s c twelve wontha,
would you say chat t h i s was about a v e r a g e , more chan a v e r a g e , or l e s s t h a n
average f o r your f a m i l y ?
Q
6a.
AVERAGE
Why i s
that?
Q
MORE THAN AVERAGE
f j
L E S S THAN AVERAGE
Appendix A
97
Suppose y o u had some e x t r a money - soy, an amount e q u a l to one week's wages or
s a l a r y ( i n c o m e ) - what would you do w i t h t h i s money?
( I F SPEND I T )
7a.
On what would you apand i t ?
S p e a k i n g of p r i c e s i n g e n e r a l , I mean the p r i c e s of the t h i n g s you buy - do you
t h i n k t h e y w i l l go up i n the next y e s r or ao, o r go down, or s t a y where they
are nowT
Now, t u r n i n g to b u s i n e s s c o n d i t i o n s i n the c o u n t r y as a whole - do you t h i n k
t h a t d u r i n g the next t w e l v e months w e ' l l have good times f i n a n c i a l l y , o r bad
t i m e s , o r what?
9a.
•
GOOD TIMES
Q
Q
BAD, WITH QUALIFICATIONS
Why do you t h i n k
GOOD, WITH QUALIFICATIONS
Q
BAD TIMES
Q
•
PRO-CON
UNCERTAIN
that?
D u r i n g the l a a t few months, have you h e a r d of any f a v o r a b l e o r u n f a v o r a b l e
changes i n b u s i n e s s c o n d i t i o n s ?
(IF YES)
10a.
What d i d you h e a r ?
98
11.
Private Pensions and Individual Saving
Is
(HEAD) w o r k i n g now, unemployed o r l a i d - o f f , r e t i r e d , o r what?
Q
HEAD I S RETIRED -
(SKIP TO Q,
30)
Q
HEAD I S STUDENT -
(SKIP TO Q.
30)
•
HEAD I S HOUSEWIFE, KEEPIKG HOUSE - ( S K I P TO Q-
•
HEAD I S WORKING HOW
Q
HEAD I S UNEMPLOYED OR L A I D - O F F
12.
What i a (HEAD'S)
13.
What k i n d of b u s i n e s s i s t h a t
w.
Most of the t i m e ,
•
14fl.
SOMEONE E L S E
30)
occupation?
in?
does (HEAD) work f o r h i m s e l f o r f o r aoneone
•
SELF -EMPLOYED - (GO TO Q.
else?
15)
Has (HEAD) been unemployed or l a i d o f f a t any time d u r i n g the
twelve months; t h a t i s , s i n c e J u l y 1962?
•
Y E S , SOME UNEMPLOYMENT
•
NO UNEMPLOYMENT
15.
Now I have a few q u e s t i o n s about r e t i r e m e n t . When do you t h i n k (HEAD)
r e t i r e from the work (he does', you do) ; I mean, a t what age?
17.
How do you f e e l about (HEAD'S) r e t i r e m e n t ,
t o , or i s i t to be d r e a d e d , or what?
18.
Where w i l l
is i t
past
will
something to be l o o k e d f o r w a r d
you l i v e a f t e r r e t i r e m e n t , i n t h i s town or some p l a c e
else?
Appendix A
19.
Do you t h i n k you w i l l gee a l o n g a l l r i g h t f i n a n c i a l l y uheo (HEAD) r e t i r e s , o r do
you t h i n k that r e t i r e m e n t w i l l cause f i n a n c i a l problems f o r you people?
19a.
20.
Why i s
that?
W i l l y o u r expenses
a f t e r r e t i r e m e n t be l e s s
LESS
20a.
21.
What a r e the t h i n g s
Q
21a.
than now?
SAME
Q
MORE
t h a t make the d i f f e r e n c e ?
What w o u l d you say - how much w i l l
1
DON'T KKOW.
CAN'T SAY. E T C .
you people need e a c h y e a r a f t e r r e t i r e m e n t ?
S
OR
9_
(per month)
(per y e a r )
C o u l d you g i v e roe a rough e s t i m a t e of what your needs w i l l be?
$
22.
99
( p e r month)
OR
$
(per year)
C o n s i d e r i n g what you have now or i s a s s u r e d f o r you - what r e t i r e m e n t
does (HEAD) e x p e c t a l t o g e t h e r ?
i
DON'T KNOW,
CAN'T SAY, E T C .
22a.
$
( p e r month)
OR
$
income
(per y e a r )
Nobody c a n be s u r e , but aany people c a n g i v e us an e s t i m a t e of how
(HEAD'S) income a f t e r r e t i r e m e n t w i l l compare w i t h c u r r e n t income - w i l l
i t be h a l f a s much, o n e - q u a r t e r , t h r e e - q u a r t e r s , or what?
100
23.
Private Pensions and Individual Saving
W i l l (HEAD) get
pension?
social
•
security,
YES
Q
NO
23a.
W i l l (WIFE OF HEAD) be e l i g i b l e
from ( h e r ) own work?
( I F Y E S TO
23 OR 23a)
23b.
What monthly or y e a r l y income
e x p e c t from t h i s ?
YES
•
$
- will
•
security
benefits
DON'T KNOW
can you (and your w i f e ,
OR
you and y o u r ( w i f e ,
•
government
DON'T KNOW
for s o c i a l
NO
( p e r month)
What about p r i v a t e p e n s i o n s
like that?
•
YES
or some o t h e r
Q
( I F HEAD I S
MARRIED)
•
24.
railroad retirement,
$
husband)
(per year)
husband) have
NO
Q
anything
DON'T KNOW
(GO TO Q. 25)
24a.
What income do you o x p e c t from t h i s ?
3
( p e r month)
OR
$
(per
year)
24b.
How many y e a r s have you been i n a p r i v a t e p e n s i o n p l a n ?
24c.
Suppose you wanted to change j o b s , would you l o s e your p e n s i o n
r i g h t s or some p a r t of them by q u i t t i n g your p r e s e n t Job?
24d.
What i s the e a r l i e s t age a t w h i c h you c o u l d r e t i r e from your
Job and s t a r t r e c e i v i n g a r e t i r e m e n t pension?
25.
Does the p r o s p e c t of r e c e i v i n g a check r e g u l a r l y a f t e r
d i f f e r e n c e i n the way you spend o r save money now?
26.
Do you o r your ( w i f e ,
retirement?
YES
1
26a.
present
r e t i r e m e n t make any
husband) e x p e c t t o e a r n money by w o r k i n g a f t e r
•
NO
About how much do you people e x p e c t t o e a r n ?
3
( p a r month)
OR
3
(per year)
(HEAD'S)
Appendix A 101
27.
I a t h a r a a n y t h i n g e l s e from which you e x p e c t income a f t e r r e t i r e m e n t - l i k e l i f e
i n s u r a n c e or a n n u i t i e s , f o r I n s t a n c e ?
.
•
HO
J
Q YES
> . . . (GO TO Q. 29)
Q
DON'T KNOW I
27a.
What i a
it?
27b.
About how much do you expect from the
S
28.
s
(per
Would y o u say t h a t what you can look f o r w a r d to w i l l be enough,
for retirement?
28a.
Why do you say
( I F HOT
ENOUGH)
29,
..?
OR
( p e r month)
28b.
29a.
or not
enough
BO?
Would you need much more, or o n l y a l i t t l e more a f t e r
retirement?
A l t o g e t h e r , about how much do you e x p e c t to have i n s a v i n g s .
r e s e r v e funds when you r e t i r e (not I n c l u d i n g your house)?
•
•
•
•
year)
Investments,
or
LESS-THAN $500
$500 - 2499
•
$10,000 -
24,999
$2500 - 4999
Q
$25,000 -
99,999
$5000 -
•
$100,000 OR OVER
9999
Uow does t h a t compare to what you have now?
•
NOW MUCH MORE
Q
NOW A L I T T L E MORE
(COMMENTS, I F ANY)
Q
ABOUT
THE SAME
Q
NOW A L I T T L E LESS
•
NOW HUCH LESS
102
30.
Private Pensions and Individual Saving
I n C h i 8 s u r v e y a l l over the c o u n t r y we a r e C r y i n g to get an a c c u r a t e p i c t u r e of
people's f i n a n c i a l s i t u a t i o n .
One c h l n g we need Co know i s the Income of a l l
Che people we i n t e r v i e w .
30a.
31.
32.
Did (HKAD) r e c e i v e any ( o t h e r )
a)
business,
b)
dividends,
c)
ocher sources
(INTERVIEWER
•
•
•
33.
How much d i d (READ) r e c e i v e from wages and s a l a r i e s i n
1962, t h a t i s , b e f o r e d e d u c t i o n s f o r t a x e s or a n y t h i n g ?
p r o f e s s i o n a l p r a c t i c e , f a r m i n g , and the l i k e ? .
. .
. $_
interest
$_
S
- CHECK ONE)
R I S SINGLE AND THE ONLY MEMBER OF FAMILY UNIT - (GO TO q . 35)
R I S S I N G L E , L I V I N G WITH OTHER FAMILY UNIT MEMBER - (GO TO Q. 34)
R I S MARRIED —
(GO TO q.
33)
Did y o u r w i f e have any income d u r i n g the y e a r ?
33a,
How much d i d she r e c e i v e ,
33b.
(INTERVIEWER - CHECK ONE)
'Q
Q
YES
Q
NO
i
altogether?
S
HO OTHER FAMILY UNIT MEMBER BESIDES WIFE - (GO TO Q. 35)
R HAS OTHER FAMILY UNIT MEMBERS BESIDES
WIFE - (GO TO Q. 34)
•
Did
(MENTION OTHER MEMBERS OF FAMILY UNIT LIVING
HERE) have any income?
i
(^j YES
j 34a.
35.
. . 3
income from:
Z _
34.
.
How much?. \
\
^
.
^
Adding e v e r y t h i n g up, I g e t
f o r ( y o u , your f a m i l y ) t n 1962.
Q
\
\ ^
\ \
m
\
\
\
\ \
\
^ . . .
.9
$
I a Chat about r i g h t ?
(CORRECT TOTAL TF NECESSARY)
Appendix A 103
36.
I n your c a a o , what a r e the main purposes of saving?
( I F MENTIONS
MORE THAN
ONE PURPOSE)
37.
36a.
Anything else?
Which o f t h e s e do you t h i n k i s the more important reason
f o r saving?
D u r i n g t h e p a s t twelve months or so, d i d you people save any money, o r d i d you
d e c r e a s e your s a v i n g s , o r d i d you j u s t break even?
Do you and your (husband, w i f e )
carry l i f e insurance?
O
•
YES
NO
1
38a.
How much d i d y o u put i n t o
t h e l a s t twelve months?
l i f e i n s u r a n c e payments (premiums) d u r i n g
$
39.
D i d you take out any new p o l i c i e s d u r i n g the l a s t
40.
Do you o r o t h e r s i n y o u r f a m i l y have any r e g u l a r government
s a v i n g s bonds, war bonds, o r d e f e n s e bonds?
•
41.
NO
•
YES
12 months?
Q
YES
»-How much?
S
Do you or o t h e r s tn your f a m i l y have any s a v i n g s a c c o u n t s i n
b a n k s , s a v i n g s or b u i l d i n g or l o a n a s s o c i a t i o n s o r c r e d i t
unions?
•
NO
O YES
>-How much?
S
42
Do you o r o t h e r s i n your f a m i l y have any c h e c k i n g a c c o u n t s
at banks?
Q NO
Q YES
"-How much?
43.
A d d i n g up your c h e c k i n g a c c o u n t s ,
s a v i n g s bonds, I get
I s that right?
s a v i n g s a c c o u n t s , and
(CORRECT TOTAL I F NECESSARY)
Q
NO
104
44.
Private Pensions and Individual Saving
How d o e s t h i s amount you now h a v e , compare t o what you had a y e a r ago?
•
NOW MUCH MORE
C3
NOh A L I T T L E MORE
•
r1
NOW A L I T T L E LESS
ABOUT THE SAME - (GO TO Q. 45)
r_j| NOW MUCH LESS
44a.
45.
How much (more,
less)?
/$
Oo you own any coumon or p r e f e r r e d s t o c k Ln a c o r p o r a t i o n , I n c l u d i n g companies
you h a v e worked f o r , o r own s t o c k through an i n v e s t m e n t c l u b , or own s h a r e s of
a m u t u a l fund?
Q
OWN NO STOCKS OR SHARES
[
j
] OWNS STOCK OR MUTUAL FUND SHARES
46.
I s i t s t o c k t h a t i s s o l d to the g e n e r a l p u b l i c , or s t o c k i n a
p r i v a t e l y held corporation?
•
SOLD TO GENERAL PUBLIC
•
BOTH
Q
PRIVATELY HELD
DON'T KNOW
47.
How much a r e t h e s e s t o c k s worth?
43.
S t o c k p r i c e s change and people a l s o put money i n t o s t o c k s or t a k e
money o u t .
Did you put new money i n t o s t o c k o r take money out
"on b a l a n c e " over the l a s t twelve months?
Q
48a.
49.
•
PUT HONEY I N
5
Q
About how much was t h l a ?
,
TOOK MONEY OUT
Q
SAME - (GO TO
$_
Nov t a k i n g a l l the f i n a n c i a l r e s e r v e s you h a v e , s t o c k s , bonds, bank d e p o s i t s and
the l i k e , how does the amount you now have compare to what you' had two y e a r s ago?
Q
NOW MUCH MORE
•
NOW A L I T T L E MORE
Q
ABOUT THE SAME
Q
•
NOW A L I T T L E LESS
•NOW MUCH L E S S
Appendix A 105
50.
51.
52.
D i d you a c c u m u l a t e moit o f the f i n a n c i a l a s s e t s you now have d u r i n g the
or t h r e e y e a r s , s e v e r a l y e a r s ago, more Chan t e n y e a r s ago, or when?
•
DURING THE LAST TWO OR THREE YEARS
Q
SEVERAL YEARS AGO
Among y o u r c u r r e n t a s s e t s ,
from income, or what?
Q
Q
last
MORE THAN TEN YEARS AGO
OTHER ( s p e c i f y ) :
would you say t h a t you i n h e r i t e d most of
it,
or saved
•
MOST OF I T INHERITED
( L I T T L E OR NOTHING SAVED)
•
VERY L I T T L E OF I T INHERITED,
MOST SAVED
Q
SOME OF I T INHERITED,
SOME SAVED
Q
OTHER ( s p e c i f y ) :_
Now, s p e a k i n g of the a u t o m o b i l e market - do you t h i n k the
so w i l l be a good time or a bad time to buy a c a r ?
•
52a.
GOOD
Q
PRO-CON
Why do you say s o ?
two
Q
BAD
Q
next twelve months or
UNCERTAIN
i
106
53.
Private Pensions and Individual Saving
Do you or does anyone cLae
1
54.
YES
I n the
f a m i l y here own an
automobile?
Q HO
Does your f a m i l y own more than one
•
ONLY ONE
•
car?
TWO
Q
THREE OR MORE (use
margin f o r 3rd c a r )
MAIN FAMILY CAR
55.
Did you buy i t
(IF
BOUGHT
USED)
55a.
new or
• NEW
used?
Where d i d you buy
the used c a r you
now d r i v e , a t a
used c a r d e a l e r ,
a t the u s e d c a r
l o t of a new c a r
d e a l e r , from a
private person,
or what?
QUSED
What y e a r model
57.
I s i t a regular size c a r ,
or a d o m e s t i c compact, or
a foreign car?
58.
When d i d you buy t h i s
(what y e a r ? )
(IF IN
1962
OR 1963)
is
I
-USED CAR LOT O F NEW CAR DEALER
QUSED
-•
I
—PRIVATE PERSON-
I
OTHER
(specify)
it?
car?
19
58a.
I n w h i c h month?
5Sb.
What was the t o t a l
p r i c e , not c o u n t i n g
f i n a n c i n g charges?
59.
QNEW
-USED CAR DEALER"
|
56.
SECOND CAR
How much d i d you
from T r a d e - i n or
of your o l d c a r ?
19
get
sale
(REPEAT QUESTIONS FOR SECOND CAR)
( I F FAMILY OWNS
TWO OR MORE CARS)
t
I
I 60.
How l o n g have you been a t w o - c a r
family?
(YEARS)
Appendix A 107
61.
Do you own C h i a home or pay r e n t or what?
•
OWNS OR I S BUYING
•
PAYS RENT
•
NEITHER OWNS NOR RENTS
62.
How long have you l i v e d
i n t h i s house?
63.
D i d you have any e x p e n s e s f o r work done on your house o r p r o p e r t y d u r i n g the
l a s t 12 months - t h i n g s l i k e upkeep, a d d i t i o n s , or iraprovemancs, or p a i n t i n g
and d e c o r a t i n g ?
(FARMERS--EXCLUDE FARM BUILDINGS)
YES
63a.
64.
•
How much d i d i t
(YEARS)
NO
cost?
G e n e r a l l y s p e a k i n g , do you t h i n k now i s a good time or a bad time Co buy a house?
Q
64a.
GOOD
•
Why do you say so?
PRO-CON
Q
BAD
•
DON'T KNOW
108
65.
Private Pensions and Individual Saving
T u r n i n g Co t h i n g s people buy f o r t h e i r house - I mean f u r n i C u r e , houae
f u r n i s h i n g s , r e f r i g e r a t o r , s t o v e , T V , and t h i n g s l i k e t h a C , do you t h i n k now
a good or a bad Cine co buy such l a r g e household i t e m s ?
Q
65a.
66.
GOOD
•
PRO-CON
• B A D
Q
is
UNCERTAIN
Why do you say so?
Did y o u buy any l a r g e i t e m s f o r the home d u r i n g the l a s t twelve months - l i k e
f u r n i t u r e , a r e f r i g e r a t o r , s c o v e , washing n a c h l n e , T V , a i r c o n d i t i o n e r ,
household
a p p l i a n c e s , and so on?
YES
66a.
66b.
•
NO
What d i d you buy?
(ENTER)-*Anything e l s e ?
67.
How much d i d
not c o u n t i n g
charges?
i t cost,
financing
68.
Was t h e r e a t r a d e - i n ,
or d i d you s e l l your
o l d one, or whaC?
Q
TRADE-IN
•
SALE
•
^ I F TRADE IN OR SALE)
68a.
How much d i d
get f o r i t ?
you
|
NO
Q
TRADE-IN
•
SALE
•
NO
Q
TRADE-IN
SALE
Appendix A
109
(ASK EVERYONE)
( I F HEAD I S HARRIED)
WIPE
HEAD
How many g r a d e s of
d i d (you) f i n i s h ?
school
D «
OR LESS
C
9 - 11
]
a
OR L E S S
c
J
£j] 12 OR MORE
9 -
11
•
12 OR MORE
1
( I F MORE THAN 8)
69a.
Have (you) had any
other schooling?
•
XHS
•
NO
•
\
69b.
YES
•
NO
1
What o t h e r
s c h o o l i n g have
( y o u ) had?
(COLLEGE, SECRETARIAL,
BUSINESS, E T C . )
(COLLEGE, SECRETARIAL,
BUSINESS, E T C . )
( I F ANY COLLEGE)
69c.
Do you^have a
c o l l e g e yegree?
•
YES
•
NO
•
(REPEAT Q . 69 -
70.
(BY
•
NO
69c FOR WIFE)
What i s y o u r m a r i t a l s t a t u s ?
•
71.
YES
HARRIED
•
WIDOWED
Q
DIVORCED
•
SEPARATED
How many c h i l d r e n under
I S a r e t h e r e i n your f a m i l y ?
( I F ANY)
the age of your youngest c h i l d ?
71a.
What i s
OBSERVATION)
72.
Race:
73.
Sex of
Q
WHITE
Respondent:
•
NEGRO
•
MALE
l~l OTHER ( s p e c i f y )
•
FEMALE
•
SINGLE
APPENDIX B
Sampling Methods and Sampling Errors
THE samples of the Survey Research Center represent
a cross section of the population living in private households in the
continental United States (Alaska and Hawaii are excluded). Transients, residents of Institutions, and persons living on military reservations are not represented. A multi-stage, area probability
sample of dwelling units is drawn using counties or groups of contiguous counties as primary sampling units. During the survey
periods covered by this report, the number of sample points varied
from 66 to 73 (the 12 largest metropolitan areas and from 54 to 61
other areas, selected on the basis of various controls). Within the
selected primary areas, there is an average of three to six secondary selections which are cities, towns, census tracts and rural
areas. In a third stage of sampling, urban blocks and small portions
("blocks") of rural areas are chosen. For each survey a new sample of dwellings, in clusters of about four, is drawn from the block
selections.
The basic unit for sampling is the dwelling unit and for interviewing, the family unit. A family unit is defined as all persons living in the same dwelling unit who are related to each other by blood,
marriage, or adoption. In some dwelling units there are several
family units. A single person who is unrelated to the other occupants of the dwelling or who lives alone is a family unit by himself.
In the January-February 1963 survey the head of each family unit
was selected as the respondent; in the June 1962 and August 1963
surveys, husband and wife were alternately designated as respondents. (Since there are family units headed by women, the head was
the respondent in the latter surveys in over 60 percent of the cases.)
Five calls, and in some cases even more, are made at diHerent times of the day and week at dwelling units in which no one has
been found at home. If a designated respondent refuses to be interviewed or refuses to give relevant information, a letter is sent from
the central office urging him to reconsider. The letter is followed
by another visit.
110
Appendix B
111
The Survey Research Center maintains a national staff of interviewers. They are selected and trained by a staff of traveling
supervisors. The interviewers are instructed in the careful and
uniform use of the fixed-question open-answer technique. They pay
particular attention to the establishment of rapport with respondents. Many'questions are open-ended, that is, are answered in the
respondents' own words which the interviewers record verbatim (or
as nearly verbatim as possible). Nondirective probes are used to
clarify the answers received.
Response rates amounted to 80 to 85 percent. About half of
the nonresponse resulted from refusal to be interviewed or to give
important data; most of the remainder resulted from inability of the
interviewer to contact anyone at the dwelling unit.
Data obtained from sample interview surveys are subject to
sampling errors. They are presented in Table 41, which consists of
two parts, one relating to sampling errors of findings and the other
to sampling errors of differences between findings for two different
subgroups of the population. As shown in the table, the sampling
errors relate to the size of the sample (or the subgroups of. the
sample) and the reported percentage. Therefore, in order to use
Table 41, it is necessary to know the number of cases from which a
particular percentage figure derives. As shown in Chapter 2, the
entire Crucial Group consists of 1853 cases. Table 42 gives the
number of cases in the most important subgroups.
The sampling errors shown in Table 41, presented as two
standard errors, are average values based on computations from
earlier surveys with similar subject matter and using the Survey
Research Center's stratified and clustered area probability sampling techniques. Depending upon the type of data involved, some
survey findings will tend to have slightly higher sampling errors
and some will have slightly lower sampling errors than those presented in the table.
On the other hand, the sampling errors presented in Table 30
for regression coefficients are derived from a computer program
which calculates standard errors on the basis of simple random assumptions. Calculations carried out by Professor Leslie Kish indicate, however, that the error figures for simple random samples
represent reasonably good estimates for the survey methods actually
used. These calculations add greatly to the confidence placed in the
regression coefficients presented in this monograph.
Actual standard errors were calculated for the major regression equations presented in Table 30 on the basis of 48 separate
computations, where each computation was based on the difference
between two computed values and each value utilized half of the
sample. On the average, the actual standard error turned out to be
1.06 of the standard error computed on the basis of simple random
112
Private
Pensions and Individual Saving
assumptions. This means that instead of a t-value of 1.96, one
should actually use a t-value of 2.08, and instead of a t-value of
2.58, one of 2.73, in order to obtain the probability limits of errors
of 5 and 1 percent, respectively.
Table 41
A.
Reported
Percentage
Samp H P S Errors of Percentagea
2000
S i z e of Sample or Group
500
1000
700
30O
100
50
3
4
5
5
7
11
30 or 70
3
4
4
5
6
10
20 or SO
2
3
4
4
5
9
10 or 90
2
2
3
3
4
7
5 or 95
1
2
2
2
3
5
B.
Size of
Group
SamplioR E r r o r s of Differences
1000
700
Size of Group
500
300
200
For percentages from about 357. to 65%
1000
5
700
6
7
8
6
7
8
9
7
8
10
9
11
500
300
9
11
200
For percentages around 207. and BOX
1000
700
500
300
4
5
5
6
7
5
6
6
7
7
8
8
8
6
9
200
Note:
The chances are 95 i n 100 that the value being estimated l i e s
within a range equal to the reported percentage plus or minus
the number of percentage points shown in Part A. Differences
larger than those shown i n Part B a r i s e by chance i n 5 cases
i n 100. Part B may be used to compare percentages derived
from two d i f f e r e n t surveys or from two d i f f e r e n t subgroups of
the same survey.
Appendix B
113
Table 42
NUMBER OF CASES IN VARIOUS SUBGROUPS^
(Crucial Group only)
Family Income
Private Pension and Income
$3000-3999
116
Have pension; $3000-5999
126
$4000-4999
173
Have pension; $6000-9999
359
$5000-5999
241
Have pension; $10,000 and up
304
$6000-7499
348
No pension; $3000-5999
350
$7500-9999
414
No pension; $6000-9999
380
$10,000-14,999
365
No pension; $10,000 and up
241
$15,000 and over
196
Whether Have Private Pension
Age of Head
3 5 - 4 4 years
765
4 5 - 5 4 years
675
5 5 - 6 4 years
413
Have pension
787
Do not have pension
971
Income and Whether Have
Enough for Retirement
2/
Have enough; $3000-5999
Liquid Wealth^
Have enough; $6000-9999
385
None or l e s s than $200 320
Have enough; $10,000 and up
370
$200-499
172
Not enough^; $3000-5999
236
$500-999
137
Not enough^; $6000-9999
287
$1000-4999
341
Not enough^; $10,000 and up
142
$5000-9999
123
$10,000 and over
154
190
Those Who Saved in the P a s t /
Twelve Months
~~
2
5 % of income or more
222
2 X of income or more
336
If
Not ascertained cases are excluded from the tabulation.
2/
Data for these Items are available from the two surveys i n 1963
only.
3_/
The "not enough" category includes those respondents who were
uncertain whether or not they would have enough for retirement or
whether or not they would experience f i n a n c i a l problems a f t e r
retirement.
114
Private
Pensions and Individual Saving
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