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LGBTQ Retirement Investors Take More Risk Than Others: Study

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Four in 10 retirees and pre-retirees who are lesbian, gay, bisexual, transgender, queer or questioning think they should become more conservative with their money as they approach retirement, compared with 28% of this population who maintain a more aggressive investment strategy, MassMutual reported this week.

At the same time, 65% of LGBTQ respondents in a new survey described their investment mix as growth oriented, compared with 52% of the general population.

Thirty-one percent of LGBTQ respondents acknowledged that they may be taking more risk than they should, compared with 22% of other retirees and pre-retirees.

Meanwhile, 17% of both LGBTQ respondents overall and LGBTQ retirees said they wanted their retirement investments to significantly outperform the market, compared with 13% of the general population overall and 9% of general-population retirees.

“MassMutual’s study shows that many LGBTQ retirees and pre-retirees may benefit from consulting a financial advisor about their retirement investment goals,” Catherine Cannon, head of personal markets at MassMutual, said in a statement.

“Of those respondents in our study who do work with a financial advisor, six in 10 say their advisor has encouraged them to change their investment mix and 87% of those folks were advised to become more conservative as they enter retirement.”

Greenwald & Associates conducted the online poll in January among 801 retirees who had left work no more than 15 years earlier and 804 pre-retirees within 15 years of retirement. The study included an oversample of 315 LGBTQ respondents, including 149 pre-retirees and 166 retirees.

Pre-retirees were required to have household incomes of at least $40,000, while retired respondents had at least $100,000 in investable assets and participated in making household financial decisions.

Both the general population and LGBTQ respondents pegged their retirement savings to last 25 years.

However, LGBTQ respondents were more confident that others that their retirement income would last as long as they needed. This may be because they expected to live in retirement for 22 years, two fewer than the general population.

Onward to Retirement

LGBTQ retirees and pre-retirees expressed more confidence than the general population that they would be financially prepared for retirement:

  • Retirement income will last as long as I live: 71% vs. 65%
  • I know how to/did optimize Social Security income: 74% vs. 68%
  • I have enough money to meet retirement lifestyle goals: 68% vs. 62%
  • I’m not worried about financing my retirement: 52% vs. 46%

Despite their relative confidence, stock market volatility and a major downturn in the stock market appeared to worry the LGBTQ community as people approached or lived in retirement.

Seventy-four percent of LGBTQ respondents expressed concern about volatility, with 27% saying they were very concerned. This compared with 72% of the general population who said they were concerned, and 21% who were very concerned.

However, LGBTQ respondents demonstrated more comfort in taking investment risk, with only 20% saying they were willing to accept below-average or low investment returns in exchange for greater safety.  Survey respondents overall appeared to be looking for a balance between growth and preservation.

“One strategy that may help some LGBTQ retirement savers balance investment goals such as growth and safety is the use of target date funds when available through their employer’s 401(k) or other retirement savings plan,” Cannon said.

She noted that TDFs automatically reallocate retirement savings between equities and fixed income, gradually growing more conservative as the investor approaches and enters retirement.

Some newer TDFs are more personalized to investors’ individual needs, including a more focus on managing assets in line with individual risk tolerance.

Sixty-three percent of LGBTQ respondents were familiar with TDFs, compared with 57% of the general population, and 32% of the former said they were invested in these vehicles, versus 26% of the latter.

“The LGBTQ community’s sentiments about investment risk — especially just before and just into retirement — are well-founded,” Cannon said. “With some professional investment assistance and a more disciplined approach, LGBTQ retirees and pre-retirees may become even more comfortable in their retirement.”

The survey found that 44% of LGBTQ investors do not work with an advisor, compared with 35% of the general population. Thirty-seven percent of LGBTQ respondents said they planned to do so in the future, while 31% of the general population planned to do so.


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