Millennials' outlook on retirement & risk control

For all the stereotypes directed toward Millennials, being astute planners for retirement hasn’t typically been one of them. But those stereotypes are likely based on misperceptions from more than a decade ago.

It’s time for a wake-up call. The oldest Millennials are now in their 40s, meaning they likely have families, established careers, a home and possibly even grandchildren! 

That’s right, retirement for some Millennials may be less than 20 years away.

Let that sink in.

But there’s a problem: Millennials are getting older and now make up the largest generation, having surpassed the number of Baby Boomers. Yet Baby Boomers hold nearly 10 times more wealth than Millennials.1

The financial impact of the COVID-19 pandemic during their prime earning years, in combination with the Great Recession and other global events over the last 20 years, may have impacted Millennials to a greater extent than other generations. 

Despite significant wealth gaps and other challenges, Millennials may not see their futures as doom and gloom.

The state of millennial investors

Millennial investor optimism is relatively high, according to one survey. They’re actively planning to reach their long-term goals to have a comfortable financial future. What’s more, they’re more confident than older generations about their ability to protect their investments in the event of another crisis.2

It’s possible that their preparedness is in response to the number of disruptive events they’ve experienced in their lifetimes. Could it be that Millennials are better prepared to handle a financial crisis than older generations? More than half (56%) feel confident in their ability to do so, compared to only 43% of Gen Xers and one-third of Baby Boomers.2 

There are some concerning findings, however. Only 28% of Millennials say they’ve established that all-important emergency fund, and about the same number (31%) say they’ve established a budget.2

While it can seem like a disconnect, there may be a reason for Millennial optimism. Financial professionals have long called it the Great Wealth Transfer; Millennials may eventually inherit the nearly $75 trillion held by their Baby Boomer parents.1

Conversations with Millennials

Millennials may be more risk-averse than some have previously thought. Due to their concerns over the future and their finances, many among this younger generation are turning to professional financial help. Two in three (66%) Millennials say they work with a financial planner.2 Perhaps there’s a connection to the similar number of Millennials (60%) who say they feel confident in their ability to prepare for and live in retirement.2

Financial professionals may need to adjust their approaches to Millennial investing strategies. While conversations surrounding diversification remain appropriate, a greater emphasis on loss protection may be in order. To back this up, the survey said that 78% in this group have a strategy to protect against outliving their savings, and 83% said they have risk-protection strategies in place.2 

Educating younger clients about various types of annuities and dispelling common annuity myths can help them make informed decisions. However, there may also be misconceptions among some financial professionals that need to be resolved – mainly that annuities are often best suited for seniors or those nearing retirement. Knowing that Millennials are interested in risk control indicates that they may be more receptive to annuity products than originally thought.

Overlooking annuities for younger investors may be shortsighted and lead to missed opportunities for both the financial professional and their Millennial clients. In future meetings, consider bringing up the findings in this report to gauge whether your Millennial clients share a similar sentiment. It could open doors for deeper conversations surrounding loss protection and the role that annuities may play in helping them reach their retirement goals.

Want to take a deeper dive into the mindset of this generation? Put away other misconceptions you may have about Millennials by accessing our Three Myths About Millennials whitepaper. 

Marshall Heitzman
Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™

Marshall is TruStage's Advanced Planning Expert and has more than 25 years of experience in the insurance and financial services industry. He consults Financial Professionals on advanced retirement planning concepts for retirement and wealth management clients.

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