While Confident About Investing, Millennials Open to Advice

Sixty-four percent of Millennials say they are confident about making investment decisions—but this soars to 85% when working with an adviser.

Nearly two-thirds, 64%, of Millennials, those between the ages of 25 and 36, say they are very or extremely confident making investment decisions on their own, Schwab Retirement Plan Services found in a nationwide, online survey of 500 workers. This is far higher than the 47% of Gen Xers and 39% of Baby Boomers who feel the same way.

However, 85% of Millennials say that were they to work with a financial adviser, they would be very or extremely confident about making investment decisions. Among Gen Xers working with an adviser, 73% express such confidence, and among Boomers, 72%.

And while Millennials have less saved in a 401(k) than older generations, 64% think they would benefit from financial advice. Eighty-four would like personalized advice for their 401(k) plan, and 93% say that if they were offered a financial wellness program at work, they would take advantage of it.

However, 35% of Millennials say financial stress is affecting their job performance, compared to only 18% of Gen Xers and 11% of Boomers. Although student loans are certainly a source of Millennials’ financial stress, cited by 24%, they are more likely to put any extra money left over at the end of the month into their 401(k) (34% of Millennials, compared to 20% of Gen Xers and 8% of Boomers).

Millennials are also more attuned to the impact of investment fees, with 51% saying they pay attention to fees when selecting an investment for their 401(k) plan. By comparison, only 40% of Gen Xers and 38% of Boomers say the same.

Schwab says these findings indicate that despite the financial challenges they face, Millennials are taking positive steps when it comes to saving and investing—especially with their 401(k)s. Seventy-eight percent say their 401(k) will be their largest—or their only—source of income in retirement.

“It’s heartening to see that saving for retirement has become a priority for so many workers, especially the youngest generation of workers, for whom retirement can seem like a lifetime away,” says Steve Anderson, president of Schwab Retirement Plan Services.

Koski Research conducted the survey for Schwab in June.

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Younger and Older Investors Have Different Savings Goals

Research also found the youngest and oldest investors were most perceptive to using employer-sponsored retirement planning resources.

Only about one third (35%) of U.S. consumers use or would use “retirement planning resources provided through employer” while 41% do not or would not, according to Hearts & Wallets research.

Younger Americans are most receptive, while pre-retirees had the biggest increase, of 15 percentage points, in receptivity.

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One in three (32%) Accumulator households does not know where their income in retirement will come from in 2017, and there was no real improvement compared to 2016. Understanding about where income in retirement will come from increases dramatically above the $100,000 in investable assets threshold, jumping from 36% in the $100,000 and under group to 62% in the $100,000 to $500,000 group, and even higher in the asset classes above $500,000. 

Personal finance tasks are getting more difficult for Accumulators, especially younger ones. And they are seeking help more often than five years ago. Steep increases include “getting started saving and investing” (18% vs. 8%) and “paying off or consolidating debt” (21% vs. 13%). But there are major advice gaps where Accumulators aren’t getting help. The biggest is “identifying what year I might stop working full-time.”

The survey found that “Build up an emergency fund” is this year’s No. 1 financial goal, cited by 49% of consumers nationally. The goal of “take a vacation” is second at 39% of 12 goals tracked by Hearts & Wallets IQ Database. Vacations are high on the list for younger consumers, as the goal of a vacation is neck and neck with other goals. Younger people rank “build up an emergency fund” as the top goal with 64% and “take a vacation” as second with 60%.

In contrast, the goal of a vacation drops for older consumers. Consumers ages 53 to 64 are focused on the future work-life balance goal rather than immediate vacations. Their top goals are “work less when older” (47%) and “stop work/retire when older” (46%), and they are focused on investing to make that happen.

“People who laugh about the desire to take a vacation instead of saving for retirement misses a key insight into what drives consumers,” Laura Varas, CEO and founder of Hearts & Wallets, says. “Current versus future work-life balance is an important issue, and the need to refresh and reset should be acknowledged. Younger consumers need help aligning current work-life balance with the equally important goal of setting themselves up for success in the decades to come. The reality sets in for older consumers when they realize they need to prepare for the long vacation that comes when they stop working voluntarily or involuntarily. In effect, the whole conversation about retirement is actually work-life balance.”

Health care is a top issue across consumer life stages, with important nuances from the youngest to the oldest. Purchase of health care, long-term care or life insurance is one of the top three actions either taken during the past 12 to 18 months or planned by Accumulators as well as Pre-Retirees and Post-Retirees.

“Consumers are really focused on the unpredictability of future health care costs,” Varas says. “Financial firms can help by including saving for future health care in advice and guidance, without preying inappropriately on this fear. Improving health savings account (HSA) solutions can also help firms help consumers prepare for future.”

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