April 14, 2011

Boomers Gloomier Than Gen X/Y on Retirement

Younger generations saving, investing more; boomers worry about markets, retirement

According to a study released Tuesday by MFS Investment Management, baby boomers are definitely feeling the heat in the markets and are worrying about the feasibility of retirement, while Gen X/Y investors are both saving and investing more, indicative of higher confidence levels. However, despite their greater enthusiasm for their financial futures, the younger generations still may not be doing enough to ensure future financial stability.

The MFS Investing Sentiment Survey revealed that one of boomers' concerns included a lower level of home equity than that of Gen X/Y or 65+ homeowners. Non-retired boomers also agreed, by a margin of 59%, with the statement, "I'm more concerned than ever about being able to retire when I thought I would." Even if they can retire, they're worried about the quality of that retirement, with 50% saying they've lowered their expectations about what life will be like once they finally get the proverbial gold watch.

On the other hand, Gen X/Y folks are putting more into IRAs and 401(k)s than they did last year—42% compared with only 30%—and 51% said they are saving more in non-retirement accounts. And more (47%) indicated they would feel comfortable at some point investing in the stock market, up from 39% in 2010.

That said, Gen X/Yers have their own financial issues that threaten their fiscal well-being. Among them:

  • Gen X/Y investors on average held only 34% of their portfolios in equities, compared with boomers (36%) or those 65+ (38%)
  • Gen X/Y held more of their portfolios in cash (30%) than their elders
  • 22% of Gen X/Yers are more focused on protecting principal or not losing money
  • 71%, despite keeping 30% of their holdings in cash, think inflation is a primary concern
  • Although they still had a median 23 years before retirement, 61% said they were more concerned than ever about being able to retire on schedule
  • 45% say they are overwhelmed by the variety of investment choices
  • 42% say their need for financial advice has increased in the past year – far more than boomers or investors aged 65+.

William Finnegan, senior managing director of retail marketing for MFS, said in a statement, "From their responses, we can see that Gen X/Y have accumulated significant assets, are willing to invest those assets, and have an increasing need for advice. However, their behavior and sentiment suggests that their needs are not being fully met by financial advisors."

Finnegan suggests approaching investors in the 30-to-40-year-old age group, "who clearly need our help."

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