Millennials Turn to Annuities. Are You Prepared?

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For all the stereotypes directed toward Millennials, being astute planners for retirement hasn’t typically been one of them. But recent findings indicate otherwise.

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. The result is a less hopeful outlook about the future and their finances.

The State of Millennial Investors

A survey by Nationwide showed that the number of Millennial investors who feel optimistic about their finances dropped from 62% in 2019 to an alarming 38% last year. Perhaps their concerns are what has led four out of five (81%) in this group to say they have a strategy to protect against outliving their savings.1

Included in that strategy is a product that is often associated with clients of an older generation: annuities

More than 40% of Millennials who indicate they have a plan said they use fixed annuities to help protect their assets against market risk; only 31% of Baby Boomers replied that they use fixed annuities. More than one third (36%) in this same group indicated that their protection strategy includes registered index-linked annuities, a far higher number than Gen Xers (10%) and Baby Boomers (4%).1

What may be surprising to some is that Millennials were much less likely than older generations to rely on traditional diversification to manage risk. Only 36% of Millennials rely on traditional diversification compared to 58% of Gen Xers and 66% of Baby Boomers.1

Advisor Conversations With Millennials

It turns out that Millennials may be more risk averse than some may have previously thought. Despite their falling optimism, Millennials are determined to do something about it

Due to their concerns over the future and their finances, many among this younger generation are turning to professional financial help. Only two out of three Millennials indicated they had a financial advisor in 2019; that number jumped to 75% during the height of the pandemic in 2020.1

A takeaway for advisors is that they may need to adjust their approach 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 showed that the top financial concern among Millennials includes protecting their assets in combination with COVID-19 related portfolio losses. And one in five are concerned about generating reliable income in retirement.1

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. Millennials may think otherwise: 75% of them were far more likely than Baby Boomers (44%) to choose an annuity over the next 12 months as part of a holistic financial plan.1

Overlooking annuities for younger investors may be shortsighted and lead to missed opportunities for both the advisor 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.

Also be sure to read through our Rethinking Retirement Planning — Advisors. Annuities. Answers. eBook with additional research and talking points to include as part of your conversations. For further help on ways to position annuities as part of your clients’ strategic financial plans, reach out to your CUNA Mutual Group wholesaler at 877.345.GROW (4769), option 1.

Rethinking Retirement Planning white paper


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