By Linda Koco
A common stereotype about baby boomers and retirement might need some tweaking. This is the commonly held view that the “me” generation puts a very high priority on being able to retire whenever they want. Some are said to make it their highest financial priority. It is said that a lot of retirement planning for this generation spins around that goal.
But new Harris Poll sponsored by the Million Dollar Round Table (MDRT) found that it is Generation X, not the boomers, who are most concerned about not being able to retire when they want. The December survey sampled the views of more than 2,000 adults.
Nearly half (48 percent) of the Gen Xers ranked this as a top financial concern right now. That’s only three points shy of the 51 percent of Gen Xers who named not having enough money in emergency savings funds as a top concern.
As for the baby boomers, the poll found that only 19 percent of them ranked not being able to retire when desired as their greatest financial fear. In fact, that concern is only the third most pressing financial concern for boomers. First place went to concern about having enough money in emergency savings (34 percent), similar to Gen X. The boomers even put being unable to pay off monthly expenses (31 percent) ahead of retiring when desired.
These findings might provide advisors with ideas for new ways of reaching the different generations, through clues to their financial concerns and motivations in today’s market.
For instance, retirement may be more of an issue for the younger generations than typically thought, and perhaps less of an issue for boomers than often portrayed.
Even Generation Y (ages 18-34) has retirement on the mind. Thirty-two percent of this group told the researchers that being unable to retire when desired is among their top financial concerns.
This is Gen Y’s fourth-ranked concern, so it’s not dominant. But it is just a hair behind their third-ranked concern, which is being unable to pay off student loan debt (34 percent). This is a more-or-less-expected concern and it is not much farther away from their second-ranked concern, being unable to pay off monthly expenses (42 percent) — also a more-or-less-expected concern.
So, the Gen Yers in this survey do give more than a moment’s notice to the fact that they will be retiring some day, their very young years notwithstanding. That’s a heads-up for retirement industry professionals who are trying to reach this demographic, or are thinking of doing so.
A group-think surrounding Gen X is that this generation is pretty much focused on paying for the college educations of their children and/or paying off their own school debt, and perhaps also having enough money coming in to pay off the mortgage.
This financial exposure is the basis for many life insurance sales to this age group. The Gen X adults who want to ensure that there will be funds available to meet those financial needs in event of early death are the typical buyers. Among younger Gen Xers, 529 college savings plans get attention too.
But the poll shows that Gen X’s top-ranked financial concern is not about education funding or mortgage debt. It is about not having enough money in emergency funds, followed by retiring-when-wanted as a close second. Having enough money to send the kids to college is a concern, too, but only 17 percent of Gen X named it, making this only a fourth-ranked concern. (Mortgage debt showed up in another part of the survey, identified as the debt to pay off first, but only 29 percent of Gen Xers said they’d do that.)
Based on this, it may be that some Gen Xers would welcome discussion about the cash value buildup in permanent life insurance (and access to that value if needed). That’s in addition to welcoming discussion about retirement planning, including identifying the ways to increase the odds of retiring when desired.
Gen Y and boomers also named not having enough money in emergency savings funds as their top financial concern (51 percent and 34 percent, respectively), right along with Gen X. Given the unemployment numbers during the prolonged post-recession era, perhaps that is not very surprising.
The survey points to a disquieting aspect of all three generations’ retirement concerns. This is that 50 percent of Gen Y reported they have not done anything to prepare for retirement, according to MDRT. That is even though 32 percent had said they are concerned about not being able to retire when desired.
Along the same lines, 35 percent of Gen X and 25 percent of boomers, also reported they have done nothing to prepare for retirement, MDRT said.
On the brighter side, at least some of those polled said they have done some retirement preparation. One example cited is contributing to an employer-sponsored plan at work — 30 percent of boomers, 37 percent of Gen Xers and 20 percent of Gen Yers said they have done this.
All three generations in the “prepared” group also said they had established personal savings. However, the percentages of those who said this were pretty low, ranging from 7 percent to 12 percent. That helps explain the finding that the top-most financial concern across the generations was not having enough money in emergency savings funds (reported by 51 percent of Gen Y, 50 percent of Gen X and 34 percent of boomers).
Insurance and financial advisors might find the following figures to be of concern. Only a small percentage of those who have prepared for retirement said they had spoken to an advisor as part of their preparation.
Among boomers in this group, just 13 percent said they had spoken with an advisor. Among Gen Y, it was 10 percent, and among Gen X, it was 7 percent.
The survey findings “reinforce the need for people to speak to a financial advisor and develop a tailored plan to accomplish their short and long-term financial goals,” commented MDRT Secretary James Pittman in a statement accompanying the release of the MDRT survey.
To the point about building up savings, MDRT First Vice President Brian D. Heckert noted that by saving just 5 percent a month through expense cutbacks, the average family making $60,000 a year could save about $3,000 per year or $250 per month.
“That sum, saved over a 10-year period, would amount to a very nice fund for college or an addition to a retirement program,” Heckert said.
InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].
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