Research Finds Americans Seek Financial Advice but Lack Planning

New research by Northwestern Mutual indicates that only 20% of Americans feel “very confident” they would be able to achieve their financial goals, while 32% believe they lack a clear and accurate view of their whole financial picture. Two-thirds said their financial planning needs improvement, the study found.

Northwestern Mutual also found that Americans are “increasingly less confident that their savings will last them through retirement,” with two-thirds saying there is some chance they will outlive their savings. Fourteen percent of respondents said that scenario is definite, while one-third said the outcome has at least a 50% chance.

However, the study found that only 21% of respondents are increasing their savings while 44% are doing nothing to “address the financial implications of living longer.” The firm notes that only 24% of Americans say it’s “extremely likely” that Social Security benefits would exist when they retire, and only 35% expect that Social Security will be their sole or primary source of retirement income compared to 49% of current retirees.

The study also found that Americans value financial planning. When asked which they valued more, 89% of respondents chose “a feeling of comfort from knowing I am financially secure for the long-term,” rather than “cash in hand today.” Thirty-five percent of Americans have not talked to anyone about retirement, and only 37% define financial planning as a strategy to “…allow me to live comfortably when I get older or retire.” Still, two in three acknowledged that their planning needs improvement. 

Moreover, 45% said they “do not know where to get the help they need as they move through life stages and need different financial solutions.”

The study found that 68% of U.S. adults are not getting professional financial advice. Of those who are getting advice, 43% of respondents say their “advisors don’t feel like long-term partners with a deep knowledge of their complete financial picture.” This is important to note considering the study found that 33% of respondents said they valued a human relationship “above all else” when receiving financial advice, and 55% said the ideal option for getting financial advice will be through a combination of technology and human support. 

NEXT: Financially Anxious America

Northwestern Mutual’s study found that 85% of Americans feel financially anxious today and 35% say their anxiety has gone up in the last three years with only 14% saying it has decreased. Twenty-eight percent worry about their finances every day, the survey found.

Northwestern Mutual notes “the levels to which financial anxiety is impacting all corners of people’s lives is extraordinary. The study found that 67% say it is negatively impacting their health, 70% say it is negatively impacting their happiness, 61% say it is negatively impacting their home life, 70% say it is negatively impacting their moods, 51% say it is negatively impacting their social life, 41% say it is negatively impacting their career, and 69% say it is negatively impacting their ability to pursue dreams, passions, and interests

When asked about the causes of this financial anxiety, 38% of respondents pointed to “having an unplanned financial emergency” and 34% said “having an unplanned medical expense due to an illness.” Only 17% cited the fear of losing their jobs as a top financial fear, the report stated.

Debt is also a major burden when it comes to financial planning, the study found. According to Northwestern Mutual, Mortgages are the leading source of debt with 29% citing it as a major source of financial pressure. Credit Card debt was cited by 23%, “exceeding student loan debt, car loans, and home equity loans/lines of credit combined,” the firm says.

When it comes to retirement, 45% of respondents cited healthcare costs as a major obstacle to financial security, outpacing planning at 30% and volatile markets at 22%.

NEXT: Looking Ahead

According to the Northwestern Mutual study, 60% of American adults said that “integrated solutions designed to both grow and protect their assets are most important to achieving financial security.” The study found that 45% of respondents have investments including stocks, bonds, mutual funds, Individual Retirement Accounts (IRAs), and Exchange Traded Funds (ETFs). However, only 27% have permanent life insurance, 26% have term life insurance, and 16% have annuities.

“Deepening awareness of their options is essential to helping Americans feel less vulnerable and more secure,” says Dave Simbro, senior vice president, life and annuity products. “For example, many don’t realize that permanent life insurance is the proverbial utility knife of financial solutions because it can be used to tackle a variety of financial objectives over the arc of their lifetime – from building a business and funding college to supplementing retirement income.”

“It’s much easier to navigate the path to financial security with your eyes wide open to all the realities you are facing. Like with any other situation, when you are uninformed it makes the process more challenging and intimidating.” 

Moreover, the study found that 66% of respondents felt the “American Dream” was within their grasp. The firm found that Americans’ definition of this ideal may be shifting “more toward outcomes like happiness and security rather than some traditional notions of the American Dream such as material wealth, opportunities to advance and moving up in social class.”

When asked about the most defining characteristics of the American Dream today, the top two answers were “having a happy family life” (59%), and “being financially secure” (58%).

More findings from the Planning and Progress Study by Northwestern Mutual can be found online here.