Data & Research December 21, 2020

Millennials Hit Hardest During the Pandemic

Many have dipped into their retirement savings, and some have even stopped or cut back on their contributions.

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Of all of the generations, Millennials have been hit the hardest during the coronavirus pandemic, with nearly half (48%) saying they have had to dip into their retirement savings, according to a survey by Allianz Life Insurance Co. of North America, the “Q4 Quarterly Market Perceptions Study.” This compares with 32% of Generation Xers and 22% of Baby Boomers. Further, half of Millennials have either stopped or reduced their retirement savings—compared with 41% of Gen Xers and 36% of Boomers.

Among all age groups, 34% have dipped into their retirement savings due to the economic impacts of COVID-19.

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Of all investors, 72% believe the markets will continue to be very volatile in 2021. Thirty-three percent say they do not feel financially prepared to ride out the economic impacts of COVID-19. And 44% feel the market hasn’t bottomed out yet.

As a result, only 25% of the people surveyed say they are ready to invest, down from 29% the previous quarter.

“We’ve watched as the pandemic continues to wreak havoc on peoples’ financial and retirement strategies, whether that is from unexpected job loss or early withdrawal of retirement assets,” says Aimee Johnson, vice president of advanced markets and solutions at Allianz Life. “It’s clear that people remain nervous about market risks and how their finances will continue to be impacted, not only in 2021 but for many years ahead.”

Fifty-three percent of those surveyed say the COVID-19 pandemic is having a negative impact on their retirement savings.

Nonetheless, 66% think the economy will improve in 2021, and 67% think their personal financial situation will ultimately improve.

Sixty-seven percent say the impact of the pandemic on the economy has prompted them to rethink how to protect their retirement savings, and 56% say they will adjust their retirement strategy if the volatility continues in the next year.

“We shouldn’t forget some of the things we can take away from this unprecedented year, including how to prepare for and manage risks within a retirement strategy,” Johnson adds. “Taking steps to help mitigate these risks now can make a big difference in both the long-term and short-term as we wait to see what 2021 has in store for us.”

Allianz conducted the online survey of 1,003 participants this month. 

The Markets December 21, 2020

401(k) Investors Returned to Equities in November

By the end of the month, investors had nearly 70% of their balances in equities, according to the Alight Solutions 401(k) Index.

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With the S&P 500 posting its best November ever, investors resumed trading into equities, according to the Alight Solutions 401(k) Index.

There were nine days in November in which trades went from fixed income into equities—a sharp contrast from October, when there were no such days. By the end of the month, investors had 66.9% of their balances in equities, the highest value since January, before the COVID-19 pandemic hit.

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In November, 401(k) investors traded a mere 0.16% of their starting balances. There were 11 fixed income days, comprising 55% of all trading days, and nine equity days, comprising 45%.

Only three trading days were above normal.

Asset classes with the most trading inflows in November were bond funds, taking in 61% of inflows, valued at $219 million, followed by stable value funds (19%; $66 million) and target-date funds (TDFs) (8%; $28 million).

Asset classes with the most trading outflows in November were company stock (47%; $167 million), large U.S. equity funds (20%; $72 million) and balanced funds (13%; $46 million).

Asset classes with the largest percentage of total balance at the end of November were TDFs (29%; $69.8 billion), large U.S. equity funds (25%; $61.1 billion) and stable value funds (10%; $29.9 billion).

Asset classes with the most contributions in November were TDFs (47%; $479 million), large U.S. equity funds (20%; $204 million) and international equity funds (7%; $72 million).

All indexes gained in November, with all equities reaching doubt-digit returns. U.S. small equities were up 18.4%, international equities were up 13.5% and U.S. large equities gained 11%. U.S. bonds managed a 1% gain.

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