Des Moines, Iowa – November 17, 2021 – Nearly three quarters of American investors (73%) are very or somewhat worried about inflation impacting their retirement, according to a new survey from F&G. The company’s second annual Risk Tolerance Tracker asked American investors how the events of the last six to nine months have shifted their views on risk.
When it comes to retirement, investors’ concerns are not easing up as the 2021 Risk Tolerance Tracker showed that 61% of American investors are generally worried about their retirement income which is fairly consistent to findings in 2020 (60%). When asked what their top concerns are specifically, investors noted they were most concerned about inflation (81%), increasing health care costs (78%) and market volatility (64%).
“Our survey found external market conditions are primary concerns for American investors, and while it is important for them to be aware of these changes, it is also critical that they don’t panic – especially if their retirement is 20-30 years away,” said Chris Blunt, CEO of F&G. “An advisor can help people figure out what really matters, design a roadmap and solutions to provide peace of mind around unexpected risks and help them avoid reactive decisions that can damage their long-term financial plan.”
American Investors Still Avoiding Risk
F&G’s Risk Tolerance Tracker also found American investors continue to be risk averse when it comes to their finances based on the events of the last 6-9 months, although slightly less so compared with a year ago. In 2020, nearly three of four (74%) American investors said they were less likely to take financial risks, and this year’s survey found 69% of American investors still feel this way. The data underscores how most American investors continue to avoid unnecessary financial risks following the COVID-19 pandemic, even in the face of the vaccine and the easing of certain restrictions nationwide. Interestingly, this trend around risk aversion was consistent across generations:
67% of Gen X are less likely to take financial risks based on events of last 6-9 months compared to 72% in 2020
70% of Baby Boomers are less likely to take financial risks based on events of last 6-9 months compared to 75% in 2020
Over a third of investors (36%) said they would be more likely to explore a new financial product they haven’t used before post-COVID-19 than they were prior to the pandemic as compared to only 28% in 2020. Despite the growing interest in new investment vehicles, only 15% of respondents say they own an annuity. Even among Baby Boomers, the generation closest to (or already in) retirement, only 22% own annuities – signaling that while American investors are generally opened to new products, increasing adoption of underutilized product categories like annuities remains a challenge.
While American investors expressed a variety of worries related to their retirement, interestingly a majority (61%) say they don’t work with financial advisors, despite the fact that Americans who work with an advisor are nearly twice as likely as those who don’t to feel “very prepared” for retirement, according to recent data released by SRI.
When respondents to the Risk Tolerance Tracker were asked why they don’t work with an advisor, the top reasons cited included high fees (36%), that they already know what they are doing (27%) and that they don’t feel they have enough investable income (26%).
“While investors still remain risk averse, there is increasing openness to new financial products,” said Blunt. “We expect this trend to continue – and even accelerate – as we move into 2022. As investors decide how to move forward, they should talk to an advisor about annuity options that can help reduce risk and address their top concerns around market volatility, inflation and high healthcare costs. An advisor can help guide investors through the decision-making process and help them build a plan that meets their individual goals.”
This Xcelerant Survey was conducted online by Directions Research and fielded from September 23 to October 1, 2021 among a demographically balanced nationally representative sample of 1,676 U.S. adults 30 years of age and older. Completed interviews are weighted by five variables: age, sex, geographic region, race and education to ensure reliable and accurate representation of the total U.S. population, 18 years of age and older. Weighting factors for each respondent are developed through a custom algorithm.