Advisor Authority Reveals Millennials May Not be Retiring Soon—But They are Already Planning for it
Sixth Annual Study Shows Four out of Five Millennial Investors have a Strategy in Place to Protect Against Outliving their Savings
Columbus, OH — Coming of age in the wake of 9/11, the Market Crash of 2008 and the Great Recession has impacted Millennials’ financial concerns, investing habits, and future earnings potential1. Add a global pandemic during their prime earning years, and it’s no wonder Millennial investors’ financial optimism declined 24 percentage points to 38% in 2020, from 62% in 2019. Yet, after weathering two “once-in-a-lifetime” financial crises, Millennials are clearly bucking the “slacker” perception, with 81% saying that they have a plan to protect themselves against outliving their savings, while 71% have a strategy to protect their assets against market risk.
These are among the latest findings from the sixth annual Advisor Authority Study powered by the Nationwide Retirement Institute®, reflecting the responses of more than 2,500 individual investors, advisors and financial professionals. Taking an in-depth look at Millennials (ages 24 to 39) with investable assets of $100,000 or more, Advisor Authority reveals that this expanding market of emerging investors has unique needs, faces complex challenges—and differs from the generations who precede them.
“Millennials have had more than their fair share of challenges when it comes to their finances, but these younger investors continue to defy stereotypes in unexpected ways—with a focus on long-term goals, a real discipline for planning, and the foresight to seek out an advisor or financial professional to make sure they stay on track,” said Craig Hawley, Head of Nationwide’s Annuity Distribution. “Even in a year where they’ve been hit hard by the pandemic’s impact, it’s clear they understand the power of planning to help protect their assets, and they’re already putting in the work now so they can shoulder the responsibility of retirement in the future.”
Challenged by the Past—Yet Planning for the Future
Millennials now make up over a third of the U.S. population, and are the most diverse and most educated generation so far2. Yet, facing overwhelming student loan debt and challenges entering the job market has forced many to delay important life decisions from marriage, to having children and buying their first home.
But when it comes to their financial futures, year over year, more Millennials are taking action. Not only by having a plan for protecting their retirement and their assets, but also by working with an advisor or financial professional. In 2016, only 50% of Millennials said they had an advisor. A mere four years later, that number had grown to 75% in 2020—possibly a sign of increasing trepidation, as 84% said they could do all the right things to manage their finances, and still be blindsided by outside events.
“When it comes to outside events, the COVID-19 pandemic has had an outsized impact on Millennials—and that kind of uncertainty can make balancing current needs with planning for the future seem like a longshot for a lot of the investors in my generation,” said J.J. Perez, President, Nationwide Financial Corporate Solutions. “Flashing back to the Crash of 2008, it’s great to see that this time around, more Millennials than ever are seeking the help of financial professionals to put a holistic plan into place that will help them manage the pandemic’s impact, protect their assets now, and prepare them to reach their long term goals.”
Managing the Pandemic’s Impact
The COVID-19 pandemic impacted the financial decisions of Millennials (84%) somewhat more than Gen-Xers (80%), and substantially more than Boomers (67%). It also impacted their top financial concerns, driving considerable shifts in 2020. Protecting assets rose to Millennial’s number-one financial concern (29%) and losses in their portfolios due to the pandemic were a close second (27%). Generating reliable income during retirement rose to Millennials’ number-three financial concern, quadrupling to 21% in 2020 from just 5% in 2019.
Millennials were far more likely to say that being unable to meet financial obligations due to the COVID-19 pandemic (15%) was among their top financial concerns, compared to only 4% of Gen-Xers and 5% of Boomers. In response to the pandemic’s impact, Millennials were somewhat more likely to liquidate assets from their qualified retirement savings plans (13%) than Gen-Xers (5%) and much more likely than Boomers (2%). Millennials were also somewhat more likely to liquidate non-qualified investment accounts, such as stocks, bonds and mutual funds (10%) than Gen-Xers (6%) and much more likely than Boomers (2%).
This younger generation may be dealing with the repercussions of their outsized debt and meager savings for decades to come—especially when the pandemic is forcing them to liquidate assets and lock in losses, at the same time that it’s impacting their job prospects. In fact, Millennial investors were much more likely to experience a pay cut due to the pandemic (29%) than Gen-Xers (13%) or Boomers (5%). Millennials were also somewhat more likely to be laid off due to the pandemic (17%) than Gen-Xers (10%), and much more likely than Boomers (2%).
The Power of Planning to Protect Assets
While protecting assets was their number-one financial concern, 88% of Millennial investors said that having a plan for their investments helps them feel in control, even if they can’t plan for everything. To confront an extreme market drop and ongoing volatility, Millennials were much more likely to have a strategy to protect their assets against market risk in 2020 (71%) than they were in 2018 (53%). In fact, in 2020 Millennials were also somewhat more likely than Gen-Xers (62%) and Boomers (63%) to say they had a strategy in place to protect their assets against market risk.
Of those investors who had a strategy, Millennials were far more likely than Gen-Xers and Boomers to use a diverse range of solutions to mitigate market risk. Registered Index Linked Annuities (RILAs) were a top solution for substantially more Millennial investors (36%) than Gen-Xers (10%) and Boomers (4%). Millennials were also somewhat more likely to rely on liquid alternatives (36%) than Gen-Xers (21%) and much more likely than Boomers (17%). Likewise, Smart Beta ETFs were somewhat more likely to be used by Millennials (30%) than by Gen-Xers (14%) and far more likely than by Boomers (1%).
Notably, Millennials said they were much less likely to rely on traditional diversification for risk management (36%) compared to Gen-Xers (58%) and Boomers (66%). On the other hand, Millennials (72%) were somewhat more likely than Gen-Xers (61%) and far more likely than Boomers (36%) to choose an annuity over the next 12 months to protect against market loss as part of their holistic financial plans.
Preparing to Shoulder the Responsibility of Retirement
While they still have several decades before retirement begins, Millennial investors (81%) were just as likely as Gen-Xers (81%) and Boomers (80%) to have a strategy to help protect themselves against outliving their savings. Likewise, Millennials (78%) were somewhat more likely than Gen-Xers (75%) and nearly as likely as Boomers (82%) to have a strategy in place to generate guaranteed income in retirement.
As the retirement safety net frays, and the future of Social Security comes into question, among those who have a strategy to protect themselves against outliving their savings, it’s notable that both Millennials (42%) and Gen-Xers (49%) said they would be far less likely than Boomers (86%) to rely on Social Security.
With the knowledge that they’re expected to shoulder more responsibility for funding their own retirement, younger investors are open to other solutions. Millennials (75%) were somewhat more likely than Gen-Xers (69%) and far more likely than Boomers (44%) to choose an annuity over the next 12 months to protect against outliving their savings as part of their holistic financial plans. Meanwhile, Millennials (67%) and Gen-Xers (66%) were both far more likely than Boomers (28%) to incorporate an in-plan income guarantee within their defined contribution plan.
While Millennials’ retirement could last 30 years or more, it’s not clear they’re fully aware of their longevity risk. In fact, only 40% of Millennials expect to require retirement income for 30 years or more, compared to 47% Gen-Xers and 35% of Boomers. With decades of savings ahead of them, many Millennial investors are off to a good start. Asked how long they could comfortably live off their current retirement savings, 27% of Millennials said 10 years, 36% said 20 years, while 18% said they already had enough saved for 30 years or more. Considering that more than one-third of Americans are forced into retirement sooner than they’d planned3, it’s increasingly important for all investors to be prepared for the possibility of funding retirement for longer than expected.
Top Factors for Attracting Millennials
The opportunity to work with Millennials is substantial. Advisors and financial professionals can tap into Advisor Authority insights to better understand these younger investors, meet their needs, earn their trust and win their business.
Millennial investors, like other generations, said that years of experience was the number one-factor for choosing an advisor or financial professional—but Millennials (41%) cited this slightly less than Gen-Xers (47%) and far less than Boomers (57%). And while all generations said personalized advice for a holistic plan was the number-two-factor—this was cited by more Millennials (31%) than Gen-Xers (25%) and Boomers (25%).
When choosing an advisor, Millennials also expressed different priorities and unique values. Technology clearly matters more to these digital natives when choosing an advisor or financial professional, with two different technology solutions tied for their number-three factor. Millennials were more likely to prioritize increased use of mobile technology (19%) than Gen-Xers (9%) and far more likely than Boomers (4%). Millennials were also far more likely to prioritize enhancements to their advisor’s website or client portal (19%) than Gen-Xers (7%) or Boomers (3%).
Multi-generational teams, including younger advisors, was another influential factor to work with a financial advisor for more Millennials (17%) than Gen-Xers (11%) or Boomers (2%). Likewise, Millennials were more likely to cite additional strategies for charitable giving (16%) than Gen-Xers (7%) and much more likely Boomers (3%), suggesting that this generation cares deeply about where their money goes. Not surprisingly, reducing fees for younger clients was influential to more Millennials (15%) than Gen-Xers (7%) or Boomers (1%).
Finally, in a year of the unexpected and unprecedented, when concerns about a declining economy, falling markets and ongoing volatility were top of mind, it increased the demand for guided advice. Asked the number-one benefit of working with their advisor when markets are volatile, younger investors were focused on the emotional impact while their older counterparts were more focused on the financial impact. Millennials with an advisor were more likely to say that helping them stay calm and avoid emotional reactions (19%) was the number-one benefit. Meanwhile, Gen-Xers (20%) and Boomers (26%) with an advisor agreed that protecting assets against market risk was the number-one benefit.
For additional insights on Millennial investors, advisors and financial professionals can download the latest Advisor Authority infographic at: https://news.nationwide.com/millennials-planning-retirement/
About Advisor Authority: Methodology
The sixth annual Advisory Authority Survey was conducted online within the United States by Harris Poll on behalf of Nationwide Advisory Solutions from May 27 – June 25, 2020 among 1,768 advisors and financial professionals and 817 investors, ages 18+. Among the 817 investors, there were 12 Gen Z (18 – 23) 119 Millennials (24 – 39), 161 Gen X (40 – 55), 433 Boomers (56 – 74) and 92 Matures (75+). Investors are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, household size, investable assets and propensity to be online to bring them in line with their actual proportions in the population. Respondents for this survey were selected from among those who have agreed to participate in Harris Poll surveys. Because the sample is based on those who were invited to participate in the Harris Poll online research panel, no estimates of theoretical sampling error can be calculated.
About The Harris Poll
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.
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1 Pew Research Center. Young, Underemployed and Optimistic: Coming of Age, Slowly, in a Tough Economy. Washington, DC. 2019.
2 Pew Research Center. How Millennials Today Compare with Their Grandparents 50 Years Ago. Washington, DC. 2018.
3 Center for Retirement Research at Boston College. Retiring Earlier Than Planned: What Matters Most? Boston, 2019