2015 Family Financial Trade-offs Survey Highlights

T. Rowe Price
T. Rowe Price
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2015 FAMILY FINANCIAL TRADE-OFFS SURVEY T. Rowe Price
2 Contents T. Rowe Price Family Financial Trade-offs Survey Saving for retirement Saving for kids’ education Perceptions About Saving for Retirement & College Education Respondent College Experience Family Financial Profile Saving for College Paying for College Saving for Retirement Findings on Millennials vs. Gen Xers Gender Data Cuts Respondent Profile Objectives & Methodology
PERCEPTIONS ABOUT SAVING FOR RETIREMENT & COLLEGE EDUCATION
4 Agree Statements – College Perceptions T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 91% 85% 62% 54% 40% 37% My kids believe they will go to college I think my kids are smarter than their peers Investing in my kids’ college education is actually an investment in my own retirement If my kids don’t have a college education, they won’t get a job and will live with me I don’t care if my children go to college at all. It is their choice College isn’t worth the expense
5 Agree Statements – Paying for College T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 85% 79% 74% 63% 56% 54% 51% 49% 43% Kids who contribute toward paying for college care more and work harder at getting good grades I want my kids to worry about money less than I did while I was in college After experiencing the burden of student loans, I would not want my kids to experience the same thing* I feel guilty that I won’t be able to pay more for their college If a family member is saving for my kids’ college education, I’m comfortable asking how much they are planning on saving I regularly talk to my children about how their college will be paid for I’d be willing to get a second or part-time job to pay for my kids’ college education I’d be willing to delay my retirement to pay for my kids’ college education I’ve raised my kids for 18 years; they’re on their own financially after that * Only asked to those who had student loans (N=837) 60% saying either
6 Agree Statements – Retirement Perceptions T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education 58% 51% 49% 47% 43% 34% I sometimes feel like a failure because I’m not providing enough for my family and our future I am trying not to think about retirement and will worry about it later I don’t think I will ever retire Instead of retiring, I plan on starting a new career I lose sleep worrying about how I’m going to pay for retirement I don’t worry about retirement because I will have a large inheritance How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree)
7 Agree Statements – Saving for Retirement T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 80% 70% 61% 58% 56% 55% It’s important for me that my savings are easily accessible so that I can easily get to my money if I need it How my parents have managed saving for retirement has impacted how I save for retirement Compared to my peers, I feel ahead of the curve in terms of saving for retirement Seeing what happened to my parents' retirement savings during the recession has really had an impact on how much I save and where I put my money I’m more likely to win the lottery than receive any money from Social Security Because my parents are struggling with retirement (or will be), I started saving early for my retirement so I don’t end up like them
8 Agree Statements – Balancing T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 63% 63% 60% 59% 53% 46% I would rather pay any college loans (mine or my kids’) later than divert money now away from retirement saving to college savings I feel overwhelmed by financial pressures Conversations about saving for retirement or college usually fill me with a lot of anxiety Because my kids will go to college before I retire, I feel like I should put money towards that first and save for retirement after I would rather dip into my retirement savings to pay for my kids’ college education than have them take on student loans You shouldn’t put any money in savings until you’ve paid off all your debt
RESPONDENT COLLEGE EXPERIENCE
10 Education Level 1% 10% 17% 14% 42% 18% Did not graduate HS HS graduate Some college Associate degree Bachelor's degree Graduate degree T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q9. What is the highest level of education you’ve completed? • The majority of respondents attended college (89%*), with 60% having a Bachelor’s degree or higher Note: Rounding may cause percentages not to add to 100% * Because of rounding, combined percentage may differ than sum of bars in chart
11 Who Paid for Respondents’ College Education 76% 48% 39% 4% Myself Parents Grants or scholarships Other relatives T. Rowe Price Family Financial Trade-offs Survey N=1,799 (Attended college) Q10. Thinking about all of your undergraduate college expenses, who helped pay for the cost? (Check all that apply) • For respondents who attended college, three-quarters paid at least some of the expense themselves, while just under half relied on their parents to help pay
12 Paying for Undergraduate Expenses 74% 61% 52% Regular income from working Student loans Savings T. Rowe Price Family Financial Trade-offs Survey N=1,368 (Helped pay for their own college expense); N=837 (Took student loan) Q11. Which of the following have you used to pay for the portion of your undergraduate college expenses that you covered yourself? (Check all that apply) • For respondents who helped pay for their own college expense, three-quarters have used regular income, and 61% took college loans • Two-thirds of respondents who took out a student loan are still paying it off Q12. Are you still paying off student loans? 66% 34% Yes No
13 The Impact of Student Loans T. Rowe Price Family Financial Trade-offs Survey N=837 (Took student loan) • The majority of respondents who took out a student loan say they took on too much debt to pay for college, and three-quarters say that paying off student loans has impacted their ability to pay for other things Q13. Looking back, do you think that you took on too much debt to pay for your college education? 63% 37% Yes No 45% 44% 44% 37% 33% 23% 17% 25% Take better vacations Save for retirement Save for my kids' college Buy a house Buy a car Pay for my kids' preschool or primary ed. Get married None of the above Q14. Has paying off student loans impacted your ability to do any of the following? (Check all that apply)
14 How Parents Paid for Respondents’ College Education 55% 41% 27% 22% 22% 20% 16% 13% 12% Regular income from working Regular savings accounts College savings accounts Student loan in my name Credit cards Personal loan in their name Money given to them by my grandparents Retirement savings accounts Home equity loan T. Rowe Price Family Financial Trade-offs Survey N=854 (Parents helped pay for their college education) Q15. Which of the following did your parents use to pay for the portion of your undergraduate college expenses that they paid for? (Check all that apply) • Parents who contributed to respondents’ college education did so primarily through regular income and regular savings accounts • Parents were equally likely to take out a loan themselves or pay off a student loan that was in the respondent’s name
FAMILY FINANCIAL PROFILE
16 Saver vs. Spender T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=1,726 (Married) • Respondents are split relatively evenly between savers (48%) and spenders (52%) • 59% of married respondents say their spouse/partner is a “spender” Q16. Would you consider yourself to be more of a saver or a spender? 18% 34% 38% 10% Definitely a spender More of a spender More of a saver Definitely a saver Q17. Would you consider your spouse/partner to be more of a saver or spender? 23% 36% 31% 10% Definitely a spender More of a spender More of a saver Definitely a saver
17 Financial Advisors T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q18. Do you have a financial advisor (who is paid for their service)? 39% 61% Yes No • Slightly more than one-third of respondents have a paid financial advisor
18 67% 33% Kids’ Monetary Gifts Q62. Do your kids receive monetary gifts from grandparents, friends, and/or family members each year? Yes No • Two-thirds of respondents say their kids regularly receive monetary gifts T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=1,338 (Kids receive monetary gifts) Q63. On average, how much in total does each child receive as gifts each year? 24% 43% 24% 9% Less than $100 $100 to $499 $500 to $999 $1,000 or more
19 What Happens to Monetary Gifts T. Rowe Price Family Financial Trade-offs Survey N=1,338 (Kids receive monetary gifts) • Respondents are most likely to let kids spend the monetary gifts they receive, or they put the money in a regular savings account Saving for retirement Saving for kids’ education Q64. What usually happens to the money your kids receive as gifts? (Check all that apply) 43% 41% 28% 26% 23% We let our kids spend it on an item they want We put it in a regular savings account We put it in a college savings account We place it in our kids’ piggy bank I spend it on things they need such as clothes and school supplies
20 Windfall T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • With a windfall, respondents are equally likely to use it for college savings, retirement savings or reducing debt Saving for retirement Saving for kids’ education Q60. If you suddenly had a windfall of money like an inheritance or bonus, which of the following would you do with the money? (Choose up to three) 44% 44% 44% 29% 21% 17% 14% 12% Put it toward college savings Put it toward retirement savings Use it to reduce my debt Add it to my emergency fund Put it toward a major purchase Put it toward a vacation or trip Give to charity Spend on everyday purchases
21 Marital Arguments 8% 11% 23% 24% 25% 31% 30% 31% 41% 35% 28% 25% 26% 23% 19% 20% Money in general How to raise our kids Saving for retirement Saving for kids' education Never Rarely Occasionally Frequently T. Rowe Price Family Financial Trade-offs Survey N=1,726 (Married) Q20. How often do you and your spouse/partner disagree about each of the following? • Married respondents argue with their spouse/partner most frequently about money in general, followed by how to raise their kids • Spenders are more likely than savers to argue about saving for retirement (58% vs. 36%) and saving for kids’ education (56% vs. 34%) Top 2 Box 67% 58% 47% 45% 54% top 2 box for either
22 Planning for Kids’ Education With an Ex T. Rowe Price Family Financial Trade-offs Survey N=94 (Divorced/separated) • Just under half of separated/divorced respondents argue with their ex-spouse/partner about saving for kids’ education at least occasionally Q21. How often do you and your ex-spouse/partner disagree or argue about the best way to save for your kid’s education? 32% 22% 30% 16% Never Rarely Occasionally Frequently
23 Parental Concerns 64% 63% 60% 60% 60% 59% 50% 48% 48% 45% 40% The cost of health care when I'm retired My kids having the financial resources to go to college Balancing the need to save for retirement and my kids' education Running out of money in retirement My kids being able to support themselves after college Being able to retire young enough to enjoy myself My kids acting irresponsibly in college or as a young adult My parents being able to support themselves through retirement My kids being a target of bullying Having enough money to take regular vacations Giving my kids all the presents I want to this holiday season T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q19. How concerned are you with each of the following? (Five-point scale – displaying top 2 box) • Respondents are most concerned with the rising cost of health care and being able to pay for kids’ college education
24 Family Saving Priorities T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Respondents are more focused on saving for kids’ college than saving for retirement 43% 57% Saving for retirement Saving for kids' education Q22. Which of the following is the higher priority for you and your family?
SAVING FOR COLLEGE
26 Saving for College – Frequency T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Currently, 79% of respondents put away money for their kids’ college education at least sometimes, and an additional 5% are not currently saving, but have some money put aside Q23. Currently, how often do you put money aside for your kids’ college education? Saving for retirement Saving for kids’ education 10% 25% 24% 30% 5% 5% 1% Never Sometimes, but not as often as I should I frequently put money aside I save automatically each month from my bank account I'm not currently saving, but I already have money set aside for my kids' college education I am not saving yet but plan to I'm not sure
27 Saving for College – Starting T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) • Respondents are most likely to begin saving for kids’ college education once their first child is born Saving for retirement Saving for kids’ education Q24. When did you first start saving for your kids’ education? 41% 24% 11% 9% 8% 6% Once my first child was born When my first child started school When my kids started thinking about which college to go to When we were planning to have children When my second child was born When I heard my friends were saving
28 Saving for College – Types of Accounts T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) • Regular savings accounts are the most common account used for college savings • An almost equal number of respondents use a 529 account and a 401(k) Saving for retirement Saving for kids’ education Q25. What types of accounts do you use for college savings? (Check all that apply) 45% 31% 30% 26% 24% 18% 15% 13% 12% 9% 8% 2% Regular savings account 529 account 401(k) account Checking account Savings bond Certificate of deposit (CD) Traditional IRA Roth IRA Individual securities Annuity UGMA or UTMA account I'm not sure Average number of accounts = 2.3
29 Why Not a 529? T. Rowe Price Family Financial Trade-offs Survey N=1,167 (Have college savings, but not a 529) • Lack of awareness is the primary reason respondents don’t use a 529 • One-quarter of respondents believe there is limited access to money in a 529 Saving for retirement Saving for kids’ education Q26. Why aren’t you using a 529 account to save for college? (Check all that apply) 28% 25% 19% 18% 15% 13% 12% 9% 9% I don't know what that is I want to be able to access the money I save at any time for any reason I want to, but haven't had the time to open an account I don't know in which state my kid(s) will go to college Because then I won't be able to get financial aid I've heard negative things about them I can't afford the minimum requirements and fees I don't know how to open an account I don't like the plan that is offered by my state
30 Negative Things About 529 Accounts T. Rowe Price Family Financial Trade-offs Survey N=155 (Have college savings, but not a 529; have heard bad things about 529s) • There are several misperceptions about 529 accounts Saving for retirement Saving for kids’ education Q27. What negative things have you heard about 529 accounts? (Check all that apply) 47% 43% 43% 41% 23% There are high fees The money you don't use for college is lost You can lose money in them There are better accounts for college savings Our state doesn't have a good plan
31 Current College Savings T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) • 43% of respondents have less than $10,000 saved for their kids’ college education • One-third of respondents are very/extremely comfortable with their current college savings Q28. How much money do you have saved for your kids’ college education? 8% 23% 34% 23% 12% Not at all comfortable Not very comfortable Somewhat comfortable Very comfortable Extremely comfortable Q29. How comfortable are you with where you are, in terms of saving for your kids’ college education? 9% 17% 17% 22% 19% 10% 6% Less than $1,000 $1,000 to $4,999 $5,000 to $9,999 $10,000 to $19,999 $20,000 to $49,999 $50,000 to $99,999 $100,000 or more
32 Reducing College Saving T. Rowe Price Family Financial Trade-offs Survey N=1,584 (Currently saving for college) • Job loss would be the primary reason respondents would reduce the amount they save for college Saving for retirement Saving for kids’ education Q30. Which of the following would cause you to reduce the amount you regularly save for your kids’ college education? (Check all that apply) 54% 22% 21% 20% 19% 18% 18% 17% 17% 14% 8% Loss of a job Need a new car Support your parents or other relatives Realize the need to catch up on retirement savings Need to pay for home improvement project Birth or adoption of a new child Need to relocate Holiday shopping Feel it will be impossible to meet increased cost of college Expensive family vacation Discouraged by the low college graduation rates
33 Saving Differently for Different Kids Q44. Do you save differently for your kids’ college education depending on which kid? 36% 64% Yes No • More than one-third of respondents who have more than one kid say they save differently, depending on which kid they are saving for T. Rowe Price Family Financial Trade-offs Survey N=1,221 (Have more than one kid); N=437 (Save differently) Q45. Which of the following are true? 49% 41% 40% 37% 32% I save more for my older kid(s) because they will go first The amount I save for my kids’ college is based on how well I think they’ll do I base how much I save for each kid based on where they want to go I base college savings for each kid based on how much they will receive in grants and scholarships I base how much I save on how well they do in school before college
PAYING FOR COLLEGE
35 Paying for Kids’ College T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=1,678 (Will not be able to cover all college costs) • All but 16% of respondents will need help paying for their kids’ college education • Parents plan to rely on grants/scholarships and their kids (through loans and working) to help cover the cost of their college education Q31. Which of the following best describes how you feel about saving for your kids’ college education? 53% 52% 46% 34% 20% 16% 15% 11% 8% 7% Grants and/or scholarships Student loans (kids responsible) Kids will work Through regular income Personal loan (I am responsible) Credit cards Money from retirement accounts Home equity loan or 2nd mortgage Other family members Sale of real estate Q32. How do you think you will cover the remaining cost for your kids’ college? (Check all that apply) 4% 50% 30% 16% I don’t plan to save anything for college I will be able to save enough to pay for some of the cost of college I will be able to save enough to pay for most of the cost of college I will be able to save enough to pay for the entire cost of college
36 Taking on Debt to Pay for College T. Rowe Price Family Financial Trade-offs Survey N=1,678 (Will not be able to cover all college costs) • Just over half of respondents are willing to take on $25K or more of debt to pay for their kids’ college education • Respondents are consistent in the amount of debt they think is acceptable for themselves and their kids Q33. How much debt are you willing to take on personally to provide your kids with a college education? Q34. How much debt are you willing to let your kids take on to get a college education? 11% 18% 20% 17% 12% 9% 5% 9% None Less than $10,000 $10,000 to $24,999 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $150,000 Whatever it takes 9% 18% 23% 17% 10% 7% 4% 12% None Less than $10,000 $10,000 to $24,999 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $150,000 Whatever it takes
37 Paying Off Student Loans T. Rowe Price Family Financial Trade-offs Survey N=1,678 (Will not be able to cover all college costs); N=316 (Not likely to help pay off student loans) • 44% of respondents say they are very/extremely likely to help their kids pay off student loans Q35. How likely are you to help your kids pay off their student loans after they graduate? 57% 52% 39% 14% If they are working, then they can afford to pay off loans It’s not my responsibility to pay off their loans I’ll need to be saving for retirement I’d prefer my kids live at home after college so they can have money to pay their own loans Q36. Why aren’t you more likely to help your kids pay off their student loans after they graduate? (Check all that apply) 6% 13% 33% 28% 16% 4% Not at all likely Not very likely Somewhat likely Very likely Extremely likley I'm not sure
38 Payback T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Nearly half (43%) of respondents expect their kids to pay them back (at least partially) for college expenses Saving for kids’ education Q37. Do you expect your kids to pay you back for any of their college expenses that you cover? 30% 13% 57% Yes, partially Yes, in full No
39 Acceptable Monthly Loan Payments T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Nearly half of respondents (47%) are willing to let their kids take on monthly debt payments of $300 or more Saving for kids’ education Q38. Assuming they will have 10-year student loans, how much of a monthly payment are you willing to let your kids take on after college to pay off their student loan debt? 7% 9% 20% 17% 8% 7% 7% 4% 5% 3% 3% 10% None Less than $100 $100 to $199 $200 to $299 $300 to $399 $400 to $499 $500 to $599 $600 to $699 $700 to $799 $800 to $899 $900 to $999 Whatever it takes
40 Asking for Help With College Expenses T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Respondents are more likely to ask for help from their spouse’s/partners’ parents than their own Saving for kids’ education Q39. Have you asked any of the following people to help pay for your kids’ college education? 16% 14% 26% 35% 10% 14% 13% 12% 0% 10% 20% 30% 40% 50% Friends Other Family Parents In-Laws Yes Plan on Asking
41 Reasons for Not Asking for Help T. Rowe Price Family Financial Trade-offs Survey N=949 (Have not asked anyone for help) • The majority of respondents who have not asked anyone for help believe that it is not others’ responsibility to pay for their kids’ college education Saving for kids’ education Q40. Why haven’t you asked family or friends for help paying for your kids’ college education? (Check all that apply) 68% 37% 30% 18% 9% 7% 6% It's not their responsibility I never ask others for money I would feel uncomfortable asking I don't need any help We don't talk about money in our family I'm too embarrassed I wouldn't want to reveal anything about my finances
42 Does Having a Plan Facilitate Asking for Help? Q41. Would you be more likely to ask others to help pay for your kids’ college if you had a specific plan in place for college savings and knew exactly how much help you needed? 20% 80% Yes No • For one in five respondents, having a college savings plan would make them more likely to ask others for help T. Rowe Price Family Financial Trade-offs Survey N=949 (Have not asked anyone for help)
43 Expectations About Who Will Help T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Over half (57%) of respondents are expecting help from family/friends in paying for their kids’ college education Saving for kids’ education Q42. Whether or not you’ve asked, who of the following do you expect to help pay for your kids’ college education? (Check all that apply) 38% 33% 13% 7% 43% Your spouse's/partner's parents Your parents Friends Other family members None of the above
44 Expectations About Who Will Help T. Rowe Price Family Financial Trade-offs Survey N=Varies by category (based on positive responses to Q42) • Respondents are more likely to be aware of how much friends and in-laws will contribute than how much their parents will Saving for kids’ education Q43. Are you aware of how much each of the following is planning on contributing to your kids’ college education? 77% 69% 59% 41% Friends Your spouse's/partner's parents Your parents Other family members
SAVING FOR RETIREMENT
46 Saving for Retirement – Frequency T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Currently, 89% of respondents put away money for their retirement at least sometimes, and an additional 4% are not currently saving, but have some money put aside Q47. Currently, how often do you put money aside for your retirement? Saving for retirement Saving for kids’ education 5% 19% 22% 48% 4% 2% 1% Never Sometimes, but not as often as I should I frequently put money aside I save automatically each month from my bank account I'm not currently saving, but I already have money set aside for my retirement I am not saving yet but plan to I'm not sure
47 Saving for Retirement – Types of Accounts T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • 401(k) accounts are the most common account used for retirement savings Saving for retirement Saving for kids’ education Q48. What types of accounts do you have for your retirement savings? (Check all that apply) 69% 33% 25% 24% 20% 16% 15% 401(k) account Regular savings account Traditional IRA Roth IRA Regular investment account Certificate of deposit (CD) Annuity
48 Why Not a Roth IRA? T. Rowe Price Family Financial Trade-offs Survey N=1,512 (Do not have a Roth IRA) • Lack of awareness is one of the primary reasons respondents do not have a Roth IRA Saving for retirement Saving for kids’ education Q49. Why don’t you have a Roth IRA account to save for retirement? (Check all that apply) 20% 20% 17% 16% 16% 15% 9% 8% 6% I’m already contributing the maximum to my workplace plan I don't know what that is I’m already saving in a Roth 401(k) at work I want to but haven’t had time to open an account I’m saving enough in my workplace plan and don’t need to save more I want to be able to take out my contributions at any time without penalty I don’t know how to open an account I’ve heard negative things about Roth IRAs I do not meet the eligibility requirements to contribute to a Roth IRA
49 IRA Savings – Frequency T. Rowe Price Family Financial Trade-offs Survey N=815 (Have an IRA) Q50. How often do you put money aside in your IRA? Saving for retirement Saving for kids’ education 20% 31% 34% 13% 2% Sometimes, but not as often as I should I frequently put money aside I save automatically each month from my bank account I haven't put money in my IRA for awhile I'm not sure • Two-thirds of those who have an IRA put money in frequently or automatically each month
50 Current Retirement Savings T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Retirement savings amounts vary consistently from low to high, with 31% saying they are very/extremely comfortable with where they are in terms of saving for retirement Q51. How much money do you have saved for your retirement? 15% 21% 33% 20% 11% Not at all comfortable Not very comfortable Somewhat comfortable Very comfortable Extremely comfortable Q52. How comfortable are you with where you are, in terms of saving for your retirement? 17% 12% 15% 14% 15% 13% 14% Less than $10,000 $10,000 to $24,999 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $149,999 $150,000 or more
51 Old Job Retirement Plans T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Of those who have had a retirement plan with a previous employer, the majority roll it over into an IRA or workplace retirement plan Saving for retirement Saving for kids’ education Q53. Thinking back on old retirement plans you had at previous jobs, what have you done with those accounts? (Check all that apply) 31% 28% 27% 20% 21% Rolled it over into IRA Rolled it into new employer’s workplace retirement plan Cashed it out Left it in my former employer’s workplace retirement plan I’ve never had a retirement plan with a previous job
52 Why Cash Out Retirement Accounts T. Rowe Price Family Financial Trade-offs Survey N=531 (Cashed out a retirement account) • Day-to-day expenses is the primary reason given by those who cashed out a retirement plan Saving for retirement Saving for kids’ education Q54. Why did you cash out a retirement account held with a former employer? (Check all that apply) 37% 29% 28% 25% 21% 21% 19% 19% 12% Needed it for day-to-day living I was young and didn’t know any better It was a really small amount and wouldn’t have made much of a difference Put it toward paying off credit card debt Put it toward student loans or college costs Put it toward a medical expense Put it toward a major purchase (e.g., house, car, etc.) I have plenty of time to save for retirement and needed the money more… I didn’t know what else to do with it
53 Converting to a Roth IRA Q55. Have you ever converted assets held in a Traditional IRA or tax-deferred workplace retirement plan into a Roth IRA? 21% 79% Yes No • One in five respondents have converted a traditional IRA or workplace plan to a Roth IRA T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=424 (Converted account to Roth IRA) Q56. Why did you convert assets into a Roth IRA? (Check all that apply) 58% 44% 36% For the tax-free savings that Roth IRAs offer Someone advised me to do so I’m young, and it’s not a big deal to pay taxes now
54 Reducing Retirement Saving T. Rowe Price Family Financial Trade-offs Survey N=1,780 (Currently saving for retirement) • Job loss would be the primary reason respondents would reduce the amount they save for retirement Saving for retirement Saving for kids’ education Q57. Which of the following would cause you to reduce the amount you regularly save for your retirement? (Check all that apply) 58% 18% 17% 16% 16% 16% 16% 14% 13% 11% 9% Loss of a job Need a new car Support your parents or other relatives Need to pay for home improvement project Birth or adoption of a new child Saving for future health care costs Need to relocate Holiday shopping Reading about the cost of college Expensive family vacation Reading about the cost of retirement
55 Paying for Things With Retirement Money T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • 58% of respondents have taken money out of a retirement account to pay for something else, with the top response being pay off debt Saving for retirement Saving for kids’ education Q58. Which of the following things have you paid for with money taken from a retirement account? (Check all that apply) 20% 13% 12% 12% 11% 11% 11% 10% 10% 9% 9% 8% 42% Pay off debt Day-to-day expenses Kids' education To cover expenses while unemployed Car purchase or repair Vacation To pay taxes Health care costs Downpayment on a home Home repair/renovation Replenish emergency fund Wedding I have never taken money out of retirement savings to pay for something
FINDINGS ON MILLENNIALS VS. GEN XERS
57 Age Differences (21-34 vs. 35-50) T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix Saving for retirement Saving for kids’ education Younger respondents are more likely than older respondents to still be paying off student loans (74% vs. 56%), feel that they took on too much debt to pay for college (70% vs. 55%), and say that paying off student loans has impacted their ability to save for their kids’ college education (48% vs. 38%). In prioritizing saving for kids’ college and saving for retirement, younger respondents are more likely to say kids’ education is the higher priority (62% vs. 53%), and they are more likely to put aside money for college frequently (28% vs. 20%). Younger respondents are less likely to be using a 529 for college savings (22% vs. 39%), and for those who aren’t using a 529, younger respondents are more likely to say they are unaware of what a 529 is (29% vs. 26%). While younger respondents appear to have more financial concerns, they are more likely than older respondents to say they feel comfortable with where they are for college savings (45% vs. 26%) and retirement savings (38% vs. 24%), and they are more likely to say they will be able to pay for most or all of their kids’ college education (52% vs. 39%).
58 Age Differences (21-34 vs. 35-50) (Cont.) T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix Saving for retirement Saving for kids’ education Younger respondents appear to have lower expectations about their kids’ level of responsibility, as they are more likely to say they will help pay off student loans (48% vs. 39%) and less likely to say they expect kids to pay them back for the college expenses they cover (49% vs. 65%). Younger respondents are more likely than older respondents to have a Roth IRA (19% vs. 29%), and of those who do not have a Roth account, younger respondents are more likely to say they don’t know what it is (23% vs. 17%).
59 Agree Statements – Findings by Age T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 68% 62% 64% 49% 58% 44% 49% 37% I feel overwhelmed by financial pressures I would rather dip into my retirement savings to pay for my kids’ college education than have them take on student loans I’m more likely to win the lottery than receive any money from Social Security I lose sleep worrying about how I’m going to pay for retirement Millennials Gen X
60 The Impact of Student Loans T. Rowe Price Family Financial Trade-offs Survey N=837 (Took student loan) Q13. Looking back, do you think that you took on too much debt to pay for your college education? 70% 30% Yes No 55% 45% Yes No Millennials Gen X
61 How Parents Paid for Respondents’ College Education 18% 9% Retirement savings accounts Millennials Gen X T. Rowe Price Family Financial Trade-offs Survey N=854 (Parents helped pay for their college education) Q15. Which of the following did your parents use to pay for the portion of your undergraduate college expenses that they paid for? (Check all that apply)
62 Saving for College – Types of Accounts T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) Saving for retirement Saving for kids’ education Q25. What types of accounts do you use for college savings? (Check all that apply) 34% 25% 401(k) account Millennials Gen X
63 Paying for Things With Retirement Money T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for retirement Saving for kids’ education Q58. Which of the following things have you paid for with money taken from a retirement account? (Check all that apply) 35% 49% I have never taken money out of retirement savings to pay for something Millennials Gen X
64 24% 76% Converting to a Roth IRA Q55. Have you ever converted assets held in a Traditional IRA or tax-deferred workplace retirement plan into a Roth IRA? Yes No T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=424 (Converted account to Roth IRA) Millennials Gen X 19% 81% Yes No
GENDER DATA CUTS
66 Gender Differences T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix Saving for retirement Saving for kids’ education In terms of paying for their own college expenses, women are more likely than men to rely on grants and scholarships (43% vs. 35%) and have used student loans (64% vs. 58%). Men are more likely to have parents who used home equity loans (14% vs. 8%) and retirement savings (17% vs. 9%) to pay for their college education. Similarly, women are more likely than men to say they will use grants and scholarships (60% vs. 46%) and student loans (56% vs. 49%) to cover the cost of their kids’ college education. Women are more likely than men to expect their kids to work to help pay for college (49% vs. 43%) and to pay them (parents) back for the expenses they incur paying for college (64% vs. 50%). In general, women are willing to take on less debt (for themselves or their kids) than men are, and men are more willing to ask others to help pay for their kids’ education. Women are more likely than men to be concerned about running out of money in retirement (63% vs. 57%) and the cost of health care when they are retired (66% vs. 61%), while men are more concerned about their ability to buy presents during the holiday season (43% vs. 36%).
67 Gender Differences (Cont.) Saving for retirement Saving for kids’ education Men are more likely than women to save regularly/frequently for retirement (61% vs. 47%), have more money saved for kids’ education (45% vs. 32% - $10K or more), and have more money saved for retirement (80% vs. 62% - $25K or more). Women are more likely than men to be unaware of what a 529 is (32% vs. 23%) and what a Roth IRA is (25% vs. 15%). Women are more likely than men to say they have never taken money out of retirement to pay for something else (47% vs. 38%). Women are more likely than men to say they feel overwhelmed by financial pressures (68% vs. 58%). T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix
RESPONDENT PROFILE
69 50%50% Respondent Profile T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) 27% 25% 24% 23% South Northeast West Midwest Q2. RegionQ1. Age 50%50% 35-5021-34 Q3. Gender MenWomen 39% 43% 13% 4% 1 2 3 4+ Q4. # Kids in HH (<16) 28% 72% Q5. Expecting Yes No 86% 9% 5% 0% Married Single Separated/Divorced Widow/Widower Q8. Marital Status Note: Rounding may cause percentages not to add to 100%
70 Respondent Profile T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q66. What is your annual household income before taxes? 73% 11% 9% 4% 2% 1% 0% 0% Employed full time Stay-at-home parent Employed part time Self-employed Not currently employed Student Retired Prefer not to answer Q67. What is your current employment status? 3% 3% 3% 4% 6% 22% 23% 14% 7% 4% 3% 2% 1% 2% 2% Less than $25,000 $25,000 to less than $30,000 $30,000 to less than $35,000 $35,000 to less than $40,000 $40,000 to less than $50,000 $50,000 to less than $75,000 $75,000 to less than $100,000 $100,000 to less than $125,000 $125,000 to less than $150,000 $150,000 to less than $175,000 $175,000 to less than $200,000 $200,000 to less than $225,000 $225,000 to less than $250,000 $250,000 or more Prefer not to answer
OBJECTIVES & METHODOLOGY
72 Objective & Methodology T. Rowe Price Family Financial Trade-offs Survey Saving for retirement Saving for kids’ education Objective Primary Objective: After T. Rowe Price's 2014 Parents, Kids & Money Survey found that 52% of parents said it was more important to save for their kids' college rather than their own retirement, the firm endeavored to further understand how families balance the competing priorities of saving for retirement and college. Methodology • T. Rowe Price commissioned an online survey of parents of children age 15 and younger who have a retirement savings account • The survey was fielded from December 18-29, 2014, with 50/50 quotas for gender and age group • A total of 2,000 parents in the U.S. participated; the sampling error for a sample of 2,000 is +/-2.2% at the 95% confidence interval • The survey was fielded through MarketTools, Inc.
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2015 Family Financial Trade-offs Survey Highlights

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Economy & Finance

T. Rowe Price's 2015 Family Financial Trade-offs Survey revealed that parents are putting their own retirement security on the back-burner to support their kids’ education and cover their own personal student loans. In this survey, we examined how families are saving and paying for college, saving for retirement, and their current attitudes and feelings about their competing financial priorities. The survey is based on a national sample of 2,000 parents who have a retirement account, and have kids ages 15 and under.

T. Rowe Price
T. Rowe Price

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2015 Family Financial Trade-offs Survey Highlights

  • 1. 2015 FAMILY FINANCIAL TRADE-OFFS SURVEY T. Rowe Price
  • 2. 2 Contents T. Rowe Price Family Financial Trade-offs Survey Saving for retirement Saving for kids’ education Perceptions About Saving for Retirement & College Education Respondent College Experience Family Financial Profile Saving for College Paying for College Saving for Retirement Findings on Millennials vs. Gen Xers Gender Data Cuts Respondent Profile Objectives & Methodology
  • 3. PERCEPTIONS ABOUT SAVING FOR RETIREMENT & COLLEGE EDUCATION
  • 4. 4 Agree Statements – College Perceptions T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 91% 85% 62% 54% 40% 37% My kids believe they will go to college I think my kids are smarter than their peers Investing in my kids’ college education is actually an investment in my own retirement If my kids don’t have a college education, they won’t get a job and will live with me I don’t care if my children go to college at all. It is their choice College isn’t worth the expense
  • 5. 5 Agree Statements – Paying for College T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 85% 79% 74% 63% 56% 54% 51% 49% 43% Kids who contribute toward paying for college care more and work harder at getting good grades I want my kids to worry about money less than I did while I was in college After experiencing the burden of student loans, I would not want my kids to experience the same thing* I feel guilty that I won’t be able to pay more for their college If a family member is saving for my kids’ college education, I’m comfortable asking how much they are planning on saving I regularly talk to my children about how their college will be paid for I’d be willing to get a second or part-time job to pay for my kids’ college education I’d be willing to delay my retirement to pay for my kids’ college education I’ve raised my kids for 18 years; they’re on their own financially after that * Only asked to those who had student loans (N=837) 60% saying either
  • 6. 6 Agree Statements – Retirement Perceptions T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education 58% 51% 49% 47% 43% 34% I sometimes feel like a failure because I’m not providing enough for my family and our future I am trying not to think about retirement and will worry about it later I don’t think I will ever retire Instead of retiring, I plan on starting a new career I lose sleep worrying about how I’m going to pay for retirement I don’t worry about retirement because I will have a large inheritance How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree)
  • 7. 7 Agree Statements – Saving for Retirement T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 80% 70% 61% 58% 56% 55% It’s important for me that my savings are easily accessible so that I can easily get to my money if I need it How my parents have managed saving for retirement has impacted how I save for retirement Compared to my peers, I feel ahead of the curve in terms of saving for retirement Seeing what happened to my parents' retirement savings during the recession has really had an impact on how much I save and where I put my money I’m more likely to win the lottery than receive any money from Social Security Because my parents are struggling with retirement (or will be), I started saving early for my retirement so I don’t end up like them
  • 8. 8 Agree Statements – Balancing T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 63% 63% 60% 59% 53% 46% I would rather pay any college loans (mine or my kids’) later than divert money now away from retirement saving to college savings I feel overwhelmed by financial pressures Conversations about saving for retirement or college usually fill me with a lot of anxiety Because my kids will go to college before I retire, I feel like I should put money towards that first and save for retirement after I would rather dip into my retirement savings to pay for my kids’ college education than have them take on student loans You shouldn’t put any money in savings until you’ve paid off all your debt
  • 10. 10 Education Level 1% 10% 17% 14% 42% 18% Did not graduate HS HS graduate Some college Associate degree Bachelor's degree Graduate degree T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q9. What is the highest level of education you’ve completed? • The majority of respondents attended college (89%*), with 60% having a Bachelor’s degree or higher Note: Rounding may cause percentages not to add to 100% * Because of rounding, combined percentage may differ than sum of bars in chart
  • 11. 11 Who Paid for Respondents’ College Education 76% 48% 39% 4% Myself Parents Grants or scholarships Other relatives T. Rowe Price Family Financial Trade-offs Survey N=1,799 (Attended college) Q10. Thinking about all of your undergraduate college expenses, who helped pay for the cost? (Check all that apply) • For respondents who attended college, three-quarters paid at least some of the expense themselves, while just under half relied on their parents to help pay
  • 12. 12 Paying for Undergraduate Expenses 74% 61% 52% Regular income from working Student loans Savings T. Rowe Price Family Financial Trade-offs Survey N=1,368 (Helped pay for their own college expense); N=837 (Took student loan) Q11. Which of the following have you used to pay for the portion of your undergraduate college expenses that you covered yourself? (Check all that apply) • For respondents who helped pay for their own college expense, three-quarters have used regular income, and 61% took college loans • Two-thirds of respondents who took out a student loan are still paying it off Q12. Are you still paying off student loans? 66% 34% Yes No
  • 13. 13 The Impact of Student Loans T. Rowe Price Family Financial Trade-offs Survey N=837 (Took student loan) • The majority of respondents who took out a student loan say they took on too much debt to pay for college, and three-quarters say that paying off student loans has impacted their ability to pay for other things Q13. Looking back, do you think that you took on too much debt to pay for your college education? 63% 37% Yes No 45% 44% 44% 37% 33% 23% 17% 25% Take better vacations Save for retirement Save for my kids' college Buy a house Buy a car Pay for my kids' preschool or primary ed. Get married None of the above Q14. Has paying off student loans impacted your ability to do any of the following? (Check all that apply)
  • 14. 14 How Parents Paid for Respondents’ College Education 55% 41% 27% 22% 22% 20% 16% 13% 12% Regular income from working Regular savings accounts College savings accounts Student loan in my name Credit cards Personal loan in their name Money given to them by my grandparents Retirement savings accounts Home equity loan T. Rowe Price Family Financial Trade-offs Survey N=854 (Parents helped pay for their college education) Q15. Which of the following did your parents use to pay for the portion of your undergraduate college expenses that they paid for? (Check all that apply) • Parents who contributed to respondents’ college education did so primarily through regular income and regular savings accounts • Parents were equally likely to take out a loan themselves or pay off a student loan that was in the respondent’s name
  • 16. 16 Saver vs. Spender T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=1,726 (Married) • Respondents are split relatively evenly between savers (48%) and spenders (52%) • 59% of married respondents say their spouse/partner is a “spender” Q16. Would you consider yourself to be more of a saver or a spender? 18% 34% 38% 10% Definitely a spender More of a spender More of a saver Definitely a saver Q17. Would you consider your spouse/partner to be more of a saver or spender? 23% 36% 31% 10% Definitely a spender More of a spender More of a saver Definitely a saver
  • 17. 17 Financial Advisors T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q18. Do you have a financial advisor (who is paid for their service)? 39% 61% Yes No • Slightly more than one-third of respondents have a paid financial advisor
  • 18. 18 67% 33% Kids’ Monetary Gifts Q62. Do your kids receive monetary gifts from grandparents, friends, and/or family members each year? Yes No • Two-thirds of respondents say their kids regularly receive monetary gifts T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=1,338 (Kids receive monetary gifts) Q63. On average, how much in total does each child receive as gifts each year? 24% 43% 24% 9% Less than $100 $100 to $499 $500 to $999 $1,000 or more
  • 19. 19 What Happens to Monetary Gifts T. Rowe Price Family Financial Trade-offs Survey N=1,338 (Kids receive monetary gifts) • Respondents are most likely to let kids spend the monetary gifts they receive, or they put the money in a regular savings account Saving for retirement Saving for kids’ education Q64. What usually happens to the money your kids receive as gifts? (Check all that apply) 43% 41% 28% 26% 23% We let our kids spend it on an item they want We put it in a regular savings account We put it in a college savings account We place it in our kids’ piggy bank I spend it on things they need such as clothes and school supplies
  • 20. 20 Windfall T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • With a windfall, respondents are equally likely to use it for college savings, retirement savings or reducing debt Saving for retirement Saving for kids’ education Q60. If you suddenly had a windfall of money like an inheritance or bonus, which of the following would you do with the money? (Choose up to three) 44% 44% 44% 29% 21% 17% 14% 12% Put it toward college savings Put it toward retirement savings Use it to reduce my debt Add it to my emergency fund Put it toward a major purchase Put it toward a vacation or trip Give to charity Spend on everyday purchases
  • 21. 21 Marital Arguments 8% 11% 23% 24% 25% 31% 30% 31% 41% 35% 28% 25% 26% 23% 19% 20% Money in general How to raise our kids Saving for retirement Saving for kids' education Never Rarely Occasionally Frequently T. Rowe Price Family Financial Trade-offs Survey N=1,726 (Married) Q20. How often do you and your spouse/partner disagree about each of the following? • Married respondents argue with their spouse/partner most frequently about money in general, followed by how to raise their kids • Spenders are more likely than savers to argue about saving for retirement (58% vs. 36%) and saving for kids’ education (56% vs. 34%) Top 2 Box 67% 58% 47% 45% 54% top 2 box for either
  • 22. 22 Planning for Kids’ Education With an Ex T. Rowe Price Family Financial Trade-offs Survey N=94 (Divorced/separated) • Just under half of separated/divorced respondents argue with their ex-spouse/partner about saving for kids’ education at least occasionally Q21. How often do you and your ex-spouse/partner disagree or argue about the best way to save for your kid’s education? 32% 22% 30% 16% Never Rarely Occasionally Frequently
  • 23. 23 Parental Concerns 64% 63% 60% 60% 60% 59% 50% 48% 48% 45% 40% The cost of health care when I'm retired My kids having the financial resources to go to college Balancing the need to save for retirement and my kids' education Running out of money in retirement My kids being able to support themselves after college Being able to retire young enough to enjoy myself My kids acting irresponsibly in college or as a young adult My parents being able to support themselves through retirement My kids being a target of bullying Having enough money to take regular vacations Giving my kids all the presents I want to this holiday season T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q19. How concerned are you with each of the following? (Five-point scale – displaying top 2 box) • Respondents are most concerned with the rising cost of health care and being able to pay for kids’ college education
  • 24. 24 Family Saving Priorities T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Respondents are more focused on saving for kids’ college than saving for retirement 43% 57% Saving for retirement Saving for kids' education Q22. Which of the following is the higher priority for you and your family?
  • 26. 26 Saving for College – Frequency T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Currently, 79% of respondents put away money for their kids’ college education at least sometimes, and an additional 5% are not currently saving, but have some money put aside Q23. Currently, how often do you put money aside for your kids’ college education? Saving for retirement Saving for kids’ education 10% 25% 24% 30% 5% 5% 1% Never Sometimes, but not as often as I should I frequently put money aside I save automatically each month from my bank account I'm not currently saving, but I already have money set aside for my kids' college education I am not saving yet but plan to I'm not sure
  • 27. 27 Saving for College – Starting T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) • Respondents are most likely to begin saving for kids’ college education once their first child is born Saving for retirement Saving for kids’ education Q24. When did you first start saving for your kids’ education? 41% 24% 11% 9% 8% 6% Once my first child was born When my first child started school When my kids started thinking about which college to go to When we were planning to have children When my second child was born When I heard my friends were saving
  • 28. 28 Saving for College – Types of Accounts T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) • Regular savings accounts are the most common account used for college savings • An almost equal number of respondents use a 529 account and a 401(k) Saving for retirement Saving for kids’ education Q25. What types of accounts do you use for college savings? (Check all that apply) 45% 31% 30% 26% 24% 18% 15% 13% 12% 9% 8% 2% Regular savings account 529 account 401(k) account Checking account Savings bond Certificate of deposit (CD) Traditional IRA Roth IRA Individual securities Annuity UGMA or UTMA account I'm not sure Average number of accounts = 2.3
  • 29. 29 Why Not a 529? T. Rowe Price Family Financial Trade-offs Survey N=1,167 (Have college savings, but not a 529) • Lack of awareness is the primary reason respondents don’t use a 529 • One-quarter of respondents believe there is limited access to money in a 529 Saving for retirement Saving for kids’ education Q26. Why aren’t you using a 529 account to save for college? (Check all that apply) 28% 25% 19% 18% 15% 13% 12% 9% 9% I don't know what that is I want to be able to access the money I save at any time for any reason I want to, but haven't had the time to open an account I don't know in which state my kid(s) will go to college Because then I won't be able to get financial aid I've heard negative things about them I can't afford the minimum requirements and fees I don't know how to open an account I don't like the plan that is offered by my state
  • 30. 30 Negative Things About 529 Accounts T. Rowe Price Family Financial Trade-offs Survey N=155 (Have college savings, but not a 529; have heard bad things about 529s) • There are several misperceptions about 529 accounts Saving for retirement Saving for kids’ education Q27. What negative things have you heard about 529 accounts? (Check all that apply) 47% 43% 43% 41% 23% There are high fees The money you don't use for college is lost You can lose money in them There are better accounts for college savings Our state doesn't have a good plan
  • 31. 31 Current College Savings T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) • 43% of respondents have less than $10,000 saved for their kids’ college education • One-third of respondents are very/extremely comfortable with their current college savings Q28. How much money do you have saved for your kids’ college education? 8% 23% 34% 23% 12% Not at all comfortable Not very comfortable Somewhat comfortable Very comfortable Extremely comfortable Q29. How comfortable are you with where you are, in terms of saving for your kids’ college education? 9% 17% 17% 22% 19% 10% 6% Less than $1,000 $1,000 to $4,999 $5,000 to $9,999 $10,000 to $19,999 $20,000 to $49,999 $50,000 to $99,999 $100,000 or more
  • 32. 32 Reducing College Saving T. Rowe Price Family Financial Trade-offs Survey N=1,584 (Currently saving for college) • Job loss would be the primary reason respondents would reduce the amount they save for college Saving for retirement Saving for kids’ education Q30. Which of the following would cause you to reduce the amount you regularly save for your kids’ college education? (Check all that apply) 54% 22% 21% 20% 19% 18% 18% 17% 17% 14% 8% Loss of a job Need a new car Support your parents or other relatives Realize the need to catch up on retirement savings Need to pay for home improvement project Birth or adoption of a new child Need to relocate Holiday shopping Feel it will be impossible to meet increased cost of college Expensive family vacation Discouraged by the low college graduation rates
  • 33. 33 Saving Differently for Different Kids Q44. Do you save differently for your kids’ college education depending on which kid? 36% 64% Yes No • More than one-third of respondents who have more than one kid say they save differently, depending on which kid they are saving for T. Rowe Price Family Financial Trade-offs Survey N=1,221 (Have more than one kid); N=437 (Save differently) Q45. Which of the following are true? 49% 41% 40% 37% 32% I save more for my older kid(s) because they will go first The amount I save for my kids’ college is based on how well I think they’ll do I base how much I save for each kid based on where they want to go I base college savings for each kid based on how much they will receive in grants and scholarships I base how much I save on how well they do in school before college
  • 35. 35 Paying for Kids’ College T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=1,678 (Will not be able to cover all college costs) • All but 16% of respondents will need help paying for their kids’ college education • Parents plan to rely on grants/scholarships and their kids (through loans and working) to help cover the cost of their college education Q31. Which of the following best describes how you feel about saving for your kids’ college education? 53% 52% 46% 34% 20% 16% 15% 11% 8% 7% Grants and/or scholarships Student loans (kids responsible) Kids will work Through regular income Personal loan (I am responsible) Credit cards Money from retirement accounts Home equity loan or 2nd mortgage Other family members Sale of real estate Q32. How do you think you will cover the remaining cost for your kids’ college? (Check all that apply) 4% 50% 30% 16% I don’t plan to save anything for college I will be able to save enough to pay for some of the cost of college I will be able to save enough to pay for most of the cost of college I will be able to save enough to pay for the entire cost of college
  • 36. 36 Taking on Debt to Pay for College T. Rowe Price Family Financial Trade-offs Survey N=1,678 (Will not be able to cover all college costs) • Just over half of respondents are willing to take on $25K or more of debt to pay for their kids’ college education • Respondents are consistent in the amount of debt they think is acceptable for themselves and their kids Q33. How much debt are you willing to take on personally to provide your kids with a college education? Q34. How much debt are you willing to let your kids take on to get a college education? 11% 18% 20% 17% 12% 9% 5% 9% None Less than $10,000 $10,000 to $24,999 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $150,000 Whatever it takes 9% 18% 23% 17% 10% 7% 4% 12% None Less than $10,000 $10,000 to $24,999 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $150,000 Whatever it takes
  • 37. 37 Paying Off Student Loans T. Rowe Price Family Financial Trade-offs Survey N=1,678 (Will not be able to cover all college costs); N=316 (Not likely to help pay off student loans) • 44% of respondents say they are very/extremely likely to help their kids pay off student loans Q35. How likely are you to help your kids pay off their student loans after they graduate? 57% 52% 39% 14% If they are working, then they can afford to pay off loans It’s not my responsibility to pay off their loans I’ll need to be saving for retirement I’d prefer my kids live at home after college so they can have money to pay their own loans Q36. Why aren’t you more likely to help your kids pay off their student loans after they graduate? (Check all that apply) 6% 13% 33% 28% 16% 4% Not at all likely Not very likely Somewhat likely Very likely Extremely likley I'm not sure
  • 38. 38 Payback T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Nearly half (43%) of respondents expect their kids to pay them back (at least partially) for college expenses Saving for kids’ education Q37. Do you expect your kids to pay you back for any of their college expenses that you cover? 30% 13% 57% Yes, partially Yes, in full No
  • 39. 39 Acceptable Monthly Loan Payments T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Nearly half of respondents (47%) are willing to let their kids take on monthly debt payments of $300 or more Saving for kids’ education Q38. Assuming they will have 10-year student loans, how much of a monthly payment are you willing to let your kids take on after college to pay off their student loan debt? 7% 9% 20% 17% 8% 7% 7% 4% 5% 3% 3% 10% None Less than $100 $100 to $199 $200 to $299 $300 to $399 $400 to $499 $500 to $599 $600 to $699 $700 to $799 $800 to $899 $900 to $999 Whatever it takes
  • 40. 40 Asking for Help With College Expenses T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Respondents are more likely to ask for help from their spouse’s/partners’ parents than their own Saving for kids’ education Q39. Have you asked any of the following people to help pay for your kids’ college education? 16% 14% 26% 35% 10% 14% 13% 12% 0% 10% 20% 30% 40% 50% Friends Other Family Parents In-Laws Yes Plan on Asking
  • 41. 41 Reasons for Not Asking for Help T. Rowe Price Family Financial Trade-offs Survey N=949 (Have not asked anyone for help) • The majority of respondents who have not asked anyone for help believe that it is not others’ responsibility to pay for their kids’ college education Saving for kids’ education Q40. Why haven’t you asked family or friends for help paying for your kids’ college education? (Check all that apply) 68% 37% 30% 18% 9% 7% 6% It's not their responsibility I never ask others for money I would feel uncomfortable asking I don't need any help We don't talk about money in our family I'm too embarrassed I wouldn't want to reveal anything about my finances
  • 42. 42 Does Having a Plan Facilitate Asking for Help? Q41. Would you be more likely to ask others to help pay for your kids’ college if you had a specific plan in place for college savings and knew exactly how much help you needed? 20% 80% Yes No • For one in five respondents, having a college savings plan would make them more likely to ask others for help T. Rowe Price Family Financial Trade-offs Survey N=949 (Have not asked anyone for help)
  • 43. 43 Expectations About Who Will Help T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Over half (57%) of respondents are expecting help from family/friends in paying for their kids’ college education Saving for kids’ education Q42. Whether or not you’ve asked, who of the following do you expect to help pay for your kids’ college education? (Check all that apply) 38% 33% 13% 7% 43% Your spouse's/partner's parents Your parents Friends Other family members None of the above
  • 44. 44 Expectations About Who Will Help T. Rowe Price Family Financial Trade-offs Survey N=Varies by category (based on positive responses to Q42) • Respondents are more likely to be aware of how much friends and in-laws will contribute than how much their parents will Saving for kids’ education Q43. Are you aware of how much each of the following is planning on contributing to your kids’ college education? 77% 69% 59% 41% Friends Your spouse's/partner's parents Your parents Other family members
  • 46. 46 Saving for Retirement – Frequency T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Currently, 89% of respondents put away money for their retirement at least sometimes, and an additional 4% are not currently saving, but have some money put aside Q47. Currently, how often do you put money aside for your retirement? Saving for retirement Saving for kids’ education 5% 19% 22% 48% 4% 2% 1% Never Sometimes, but not as often as I should I frequently put money aside I save automatically each month from my bank account I'm not currently saving, but I already have money set aside for my retirement I am not saving yet but plan to I'm not sure
  • 47. 47 Saving for Retirement – Types of Accounts T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • 401(k) accounts are the most common account used for retirement savings Saving for retirement Saving for kids’ education Q48. What types of accounts do you have for your retirement savings? (Check all that apply) 69% 33% 25% 24% 20% 16% 15% 401(k) account Regular savings account Traditional IRA Roth IRA Regular investment account Certificate of deposit (CD) Annuity
  • 48. 48 Why Not a Roth IRA? T. Rowe Price Family Financial Trade-offs Survey N=1,512 (Do not have a Roth IRA) • Lack of awareness is one of the primary reasons respondents do not have a Roth IRA Saving for retirement Saving for kids’ education Q49. Why don’t you have a Roth IRA account to save for retirement? (Check all that apply) 20% 20% 17% 16% 16% 15% 9% 8% 6% I’m already contributing the maximum to my workplace plan I don't know what that is I’m already saving in a Roth 401(k) at work I want to but haven’t had time to open an account I’m saving enough in my workplace plan and don’t need to save more I want to be able to take out my contributions at any time without penalty I don’t know how to open an account I’ve heard negative things about Roth IRAs I do not meet the eligibility requirements to contribute to a Roth IRA
  • 49. 49 IRA Savings – Frequency T. Rowe Price Family Financial Trade-offs Survey N=815 (Have an IRA) Q50. How often do you put money aside in your IRA? Saving for retirement Saving for kids’ education 20% 31% 34% 13% 2% Sometimes, but not as often as I should I frequently put money aside I save automatically each month from my bank account I haven't put money in my IRA for awhile I'm not sure • Two-thirds of those who have an IRA put money in frequently or automatically each month
  • 50. 50 Current Retirement Savings T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Retirement savings amounts vary consistently from low to high, with 31% saying they are very/extremely comfortable with where they are in terms of saving for retirement Q51. How much money do you have saved for your retirement? 15% 21% 33% 20% 11% Not at all comfortable Not very comfortable Somewhat comfortable Very comfortable Extremely comfortable Q52. How comfortable are you with where you are, in terms of saving for your retirement? 17% 12% 15% 14% 15% 13% 14% Less than $10,000 $10,000 to $24,999 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $149,999 $150,000 or more
  • 51. 51 Old Job Retirement Plans T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • Of those who have had a retirement plan with a previous employer, the majority roll it over into an IRA or workplace retirement plan Saving for retirement Saving for kids’ education Q53. Thinking back on old retirement plans you had at previous jobs, what have you done with those accounts? (Check all that apply) 31% 28% 27% 20% 21% Rolled it over into IRA Rolled it into new employer’s workplace retirement plan Cashed it out Left it in my former employer’s workplace retirement plan I’ve never had a retirement plan with a previous job
  • 52. 52 Why Cash Out Retirement Accounts T. Rowe Price Family Financial Trade-offs Survey N=531 (Cashed out a retirement account) • Day-to-day expenses is the primary reason given by those who cashed out a retirement plan Saving for retirement Saving for kids’ education Q54. Why did you cash out a retirement account held with a former employer? (Check all that apply) 37% 29% 28% 25% 21% 21% 19% 19% 12% Needed it for day-to-day living I was young and didn’t know any better It was a really small amount and wouldn’t have made much of a difference Put it toward paying off credit card debt Put it toward student loans or college costs Put it toward a medical expense Put it toward a major purchase (e.g., house, car, etc.) I have plenty of time to save for retirement and needed the money more… I didn’t know what else to do with it
  • 53. 53 Converting to a Roth IRA Q55. Have you ever converted assets held in a Traditional IRA or tax-deferred workplace retirement plan into a Roth IRA? 21% 79% Yes No • One in five respondents have converted a traditional IRA or workplace plan to a Roth IRA T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=424 (Converted account to Roth IRA) Q56. Why did you convert assets into a Roth IRA? (Check all that apply) 58% 44% 36% For the tax-free savings that Roth IRAs offer Someone advised me to do so I’m young, and it’s not a big deal to pay taxes now
  • 54. 54 Reducing Retirement Saving T. Rowe Price Family Financial Trade-offs Survey N=1,780 (Currently saving for retirement) • Job loss would be the primary reason respondents would reduce the amount they save for retirement Saving for retirement Saving for kids’ education Q57. Which of the following would cause you to reduce the amount you regularly save for your retirement? (Check all that apply) 58% 18% 17% 16% 16% 16% 16% 14% 13% 11% 9% Loss of a job Need a new car Support your parents or other relatives Need to pay for home improvement project Birth or adoption of a new child Saving for future health care costs Need to relocate Holiday shopping Reading about the cost of college Expensive family vacation Reading about the cost of retirement
  • 55. 55 Paying for Things With Retirement Money T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) • 58% of respondents have taken money out of a retirement account to pay for something else, with the top response being pay off debt Saving for retirement Saving for kids’ education Q58. Which of the following things have you paid for with money taken from a retirement account? (Check all that apply) 20% 13% 12% 12% 11% 11% 11% 10% 10% 9% 9% 8% 42% Pay off debt Day-to-day expenses Kids' education To cover expenses while unemployed Car purchase or repair Vacation To pay taxes Health care costs Downpayment on a home Home repair/renovation Replenish emergency fund Wedding I have never taken money out of retirement savings to pay for something
  • 56. FINDINGS ON MILLENNIALS VS. GEN XERS
  • 57. 57 Age Differences (21-34 vs. 35-50) T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix Saving for retirement Saving for kids’ education Younger respondents are more likely than older respondents to still be paying off student loans (74% vs. 56%), feel that they took on too much debt to pay for college (70% vs. 55%), and say that paying off student loans has impacted their ability to save for their kids’ college education (48% vs. 38%). In prioritizing saving for kids’ college and saving for retirement, younger respondents are more likely to say kids’ education is the higher priority (62% vs. 53%), and they are more likely to put aside money for college frequently (28% vs. 20%). Younger respondents are less likely to be using a 529 for college savings (22% vs. 39%), and for those who aren’t using a 529, younger respondents are more likely to say they are unaware of what a 529 is (29% vs. 26%). While younger respondents appear to have more financial concerns, they are more likely than older respondents to say they feel comfortable with where they are for college savings (45% vs. 26%) and retirement savings (38% vs. 24%), and they are more likely to say they will be able to pay for most or all of their kids’ college education (52% vs. 39%).
  • 58. 58 Age Differences (21-34 vs. 35-50) (Cont.) T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix Saving for retirement Saving for kids’ education Younger respondents appear to have lower expectations about their kids’ level of responsibility, as they are more likely to say they will help pay off student loans (48% vs. 39%) and less likely to say they expect kids to pay them back for the college expenses they cover (49% vs. 65%). Younger respondents are more likely than older respondents to have a Roth IRA (19% vs. 29%), and of those who do not have a Roth account, younger respondents are more likely to say they don’t know what it is (23% vs. 17%).
  • 59. 59 Agree Statements – Findings by Age T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for kids’ education How much do you agree or disagree with each of the following statements? (Four-point scale – displaying percent that agree) 68% 62% 64% 49% 58% 44% 49% 37% I feel overwhelmed by financial pressures I would rather dip into my retirement savings to pay for my kids’ college education than have them take on student loans I’m more likely to win the lottery than receive any money from Social Security I lose sleep worrying about how I’m going to pay for retirement Millennials Gen X
  • 60. 60 The Impact of Student Loans T. Rowe Price Family Financial Trade-offs Survey N=837 (Took student loan) Q13. Looking back, do you think that you took on too much debt to pay for your college education? 70% 30% Yes No 55% 45% Yes No Millennials Gen X
  • 61. 61 How Parents Paid for Respondents’ College Education 18% 9% Retirement savings accounts Millennials Gen X T. Rowe Price Family Financial Trade-offs Survey N=854 (Parents helped pay for their college education) Q15. Which of the following did your parents use to pay for the portion of your undergraduate college expenses that they paid for? (Check all that apply)
  • 62. 62 Saving for College – Types of Accounts T. Rowe Price Family Financial Trade-offs Survey N=1,683 (Have college savings) Saving for retirement Saving for kids’ education Q25. What types of accounts do you use for college savings? (Check all that apply) 34% 25% 401(k) account Millennials Gen X
  • 63. 63 Paying for Things With Retirement Money T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Saving for retirement Saving for kids’ education Q58. Which of the following things have you paid for with money taken from a retirement account? (Check all that apply) 35% 49% I have never taken money out of retirement savings to pay for something Millennials Gen X
  • 64. 64 24% 76% Converting to a Roth IRA Q55. Have you ever converted assets held in a Traditional IRA or tax-deferred workplace retirement plan into a Roth IRA? Yes No T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents); N=424 (Converted account to Roth IRA) Millennials Gen X 19% 81% Yes No
  • 66. 66 Gender Differences T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix Saving for retirement Saving for kids’ education In terms of paying for their own college expenses, women are more likely than men to rely on grants and scholarships (43% vs. 35%) and have used student loans (64% vs. 58%). Men are more likely to have parents who used home equity loans (14% vs. 8%) and retirement savings (17% vs. 9%) to pay for their college education. Similarly, women are more likely than men to say they will use grants and scholarships (60% vs. 46%) and student loans (56% vs. 49%) to cover the cost of their kids’ college education. Women are more likely than men to expect their kids to work to help pay for college (49% vs. 43%) and to pay them (parents) back for the expenses they incur paying for college (64% vs. 50%). In general, women are willing to take on less debt (for themselves or their kids) than men are, and men are more willing to ask others to help pay for their kids’ education. Women are more likely than men to be concerned about running out of money in retirement (63% vs. 57%) and the cost of health care when they are retired (66% vs. 61%), while men are more concerned about their ability to buy presents during the holiday season (43% vs. 36%).
  • 67. 67 Gender Differences (Cont.) Saving for retirement Saving for kids’ education Men are more likely than women to save regularly/frequently for retirement (61% vs. 47%), have more money saved for kids’ education (45% vs. 32% - $10K or more), and have more money saved for retirement (80% vs. 62% - $25K or more). Women are more likely than men to be unaware of what a 529 is (32% vs. 23%) and what a Roth IRA is (25% vs. 15%). Women are more likely than men to say they have never taken money out of retirement to pay for something else (47% vs. 38%). Women are more likely than men to say they feel overwhelmed by financial pressures (68% vs. 58%). T. Rowe Price Family Financial Trade-offs Survey * A complete list of significant findings by gender is available in the appendix
  • 69. 69 50%50% Respondent Profile T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) 27% 25% 24% 23% South Northeast West Midwest Q2. RegionQ1. Age 50%50% 35-5021-34 Q3. Gender MenWomen 39% 43% 13% 4% 1 2 3 4+ Q4. # Kids in HH (<16) 28% 72% Q5. Expecting Yes No 86% 9% 5% 0% Married Single Separated/Divorced Widow/Widower Q8. Marital Status Note: Rounding may cause percentages not to add to 100%
  • 70. 70 Respondent Profile T. Rowe Price Family Financial Trade-offs Survey N=2,000 (Total respondents) Q66. What is your annual household income before taxes? 73% 11% 9% 4% 2% 1% 0% 0% Employed full time Stay-at-home parent Employed part time Self-employed Not currently employed Student Retired Prefer not to answer Q67. What is your current employment status? 3% 3% 3% 4% 6% 22% 23% 14% 7% 4% 3% 2% 1% 2% 2% Less than $25,000 $25,000 to less than $30,000 $30,000 to less than $35,000 $35,000 to less than $40,000 $40,000 to less than $50,000 $50,000 to less than $75,000 $75,000 to less than $100,000 $100,000 to less than $125,000 $125,000 to less than $150,000 $150,000 to less than $175,000 $175,000 to less than $200,000 $200,000 to less than $225,000 $225,000 to less than $250,000 $250,000 or more Prefer not to answer
  • 72. 72 Objective & Methodology T. Rowe Price Family Financial Trade-offs Survey Saving for retirement Saving for kids’ education Objective Primary Objective: After T. Rowe Price's 2014 Parents, Kids & Money Survey found that 52% of parents said it was more important to save for their kids' college rather than their own retirement, the firm endeavored to further understand how families balance the competing priorities of saving for retirement and college. Methodology • T. Rowe Price commissioned an online survey of parents of children age 15 and younger who have a retirement savings account • The survey was fielded from December 18-29, 2014, with 50/50 quotas for gender and age group • A total of 2,000 parents in the U.S. participated; the sampling error for a sample of 2,000 is +/-2.2% at the 95% confidence interval • The survey was fielded through MarketTools, Inc.