Poll Finds General Interest in Non-Traditional Investments

Baby Boomers and financial advisers remain concerned about market volatility in retirement accounts, a MetLife poll shows.

MetLife’s Market Volatility Poll found a strong desire among financial advisers to seek other options beyond traditional asset allocation models to better handle market risk and volatility. Half of advisers (51%) agreed that alternative investments are needed to better manage volatility — the same percentage disagreed that “a mix of stocks, bonds and cash” is enough to manage volatility in their clients’ retirement portfolios.  Moreover, 57% of advisers are interested in a “product that could provide more consistent returns.”    

Boomers lagged behind advisers in awareness of alternatives, with almost two-thirds (64%) saying they are unsure about whether “retirement portfolios need to be managed differently in today’s economy.” However, there was corresponding uncertainty about traditional investment strategies as well — 58% are unsure whether “retirement portfolios should be set and left for the long term.” At the same time, many Boomers (42%) unfamiliar with alternative investments wanted to learn more.  

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Younger boomers and sophisticated investors were most open to getting information about alternative investments – 61% of those 45-54 years old and 45% of those 55-64 who are unfamiliar with alternatives want to learn more, compared with just 23% of those over the age of 65. Those Boomers who described themselves as sophisticated investors expressed considerable interest in alternative products – 58% would like to be educated, the MetLife survey found. 

More than one-half (54%) of  Boomers and 58% of advisers cited 10% or less as their comfort zone for volatility, and one-fourth of Boomers  were only at ease with 5% or less.  Underscoring uneasiness about retirement security, only 32% of Boomers expressed confidence in their investments, a finding highlighted by the fact that almost one-half (45%) said that they check their account balances at least once a week.   

The link between volatility and client wariness is a strong one in the eyes of advisers -- 88% said that seeing volatility in their retirement accounts raised clients’ concerns about retirement and financial security, while 56% of Boomers say the same.  Still, Boomers are taking a more balanced stance now as they invest for retirement than was the case in the aftermath of the financial crisis two years ago. At that time, three fourths of this group expressed a preference for protecting against losses versus participating in market gains, according to a MetLife survey in 2009. Now, there is roughly a 50-50 split in preferences between protecting and participating in gains.  

MetLife’s Market Volatility Poll, fielded in February of this year, included 520 financial advisers and 1,038 adults over the age of 45 with at least $100,000 in investable assets.

Social Security Statements Increase Knowledge

The Social Security Statement received annually by workers increases the probability that they will be able to estimate their benefit more accurately by 4.5 percentage points, according to a new study.

The Center for Retirement Research at Boston College conducted the Health and Retirement Study (HRS), a longitudinal, biennial, and nationally representative survey of older Americans that began in 1992. It found that before the Statements started circulating, around 50% of households would contact the Social Security Administration by age 62. The CRR found the Statement appears to have improved the estimates for workers who did not contact the SSA, bringing the accuracy of their estimates in line with those of the workers who did contact the SSA. 

However, the analysis found no impact of the Statement on retirement behavior. CRR said this might mean workers are already behaving optimally, or the information in the Statement is not sufficient to improve their retirement behavior.   

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CRR contends that the Statement might still improve workers’ retirement planning if they become less likely to be surprised by the amount of their benefits. For example, if workers learned that their Social Security benefits would be less than anticipated, they might not change when they plan to retire, but they could decide to save more ahead of retirement.  

The CRR Issue Brief is available here.

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