Millennials address retirement strategy challenges

PRNEWSWIRE-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 potential.

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, according to a study recently compiled by Nationwide Retirement Institute. Yet, after weathering two "once-in-a-lifetime" financial crises, 81% of millennial respondents in the study say 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 institute's sixth annual Advisor Authority Study, reflecting the responses of more than 2,500 individual investors, advisers, and financial professionals. Taking an in-depth look at millennials-a generation currently ranging in age from 25 to 40- with investable assets of $100,000 or more, the study concludes 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 adviser or financial professional to make sure they stay on track," says Craig Hawley, head of Nationwide's Annuity Distribution.

"Even in a year when 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 they1 re already putting in the work now so they can shoulder the responsibility of retirement in the future," Hawley asserts.

J.J. Perez, president of Financial Corporate Solutions for Columbus, Ohio-based insurance and financial services company Nationwide, says millennials now make up over a third of the U.S. population, and are the most diverse and most educated generation so far. Yet, facing student loan debt and challenges entering the job market has forced many to delay important life decisions including marriage, 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 adviser or financial professional, Perez asserts.

In 2016,50% of millennials said they had an adviser. Four years later, that share had grown to 75%-possibly a sign of increasing trepidation, as 84% now say they could do all the right things to manage their finances, and stil be blindsided by outside events, he says.

"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," says Perez. "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."

The COVID-19 pandemic impacted the financial decisions of millennials (84%) somewhat more than Gen-Xers (80%), and substantially more than boomers (67%). Gen-Xers, who are in the generation preceding millennials, are 41 to 56 years old, and earlier-generation baby boomers currently are 57 to 75 years old.

The pandemic also impacted millennials' top financial concerns, driving considerable shifts in 2020, Perez says. Protecting assets rose to millennial's No. 1 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' No. 3 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 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 nonqualified 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, Perez says.

The study shows 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 more likely to be laid off due to the pandemic (17%) than Gen-Xers (10%), and much more likely than boomers (2%).