Younger and Older Investors Have Different Savings Goals

Only about one third (35%) of U.S. consumers use or would use “retirement planning resources provided through employer” while 41% do not or would not, according to Hearts & Wallets research.

Younger Americans are most receptive, while pre-retirees had the biggest increase, of 15 percentage points, in receptivity.

One in three (32%) Accumulator households does not know where their income in retirement will come from in 2017, and there was no real improvement compared to 2016. Understanding about where income in retirement will come from increases dramatically above the $100,000 in investable assets threshold, jumping from 36% in the $100,000 and under group to 62% in the $100,000 to $500,000 group, and even higher in the asset classes above $500,000. 

Personal finance tasks are getting more difficult for Accumulators, especially younger ones. And they are seeking help more often than five years ago. Steep increases include “getting started saving and investing” (18% vs. 8%) and “paying off or consolidating debt” (21% vs. 13%). But there are major advice gaps where Accumulators aren’t getting help. The biggest is “identifying what year I might stop working full-time.”

The survey found that “Build up an emergency fund” is this year’s No. 1 financial goal, cited by 49% of consumers nationally. The goal of “take a vacation” is second at 39% of 12 goals tracked by Hearts & Wallets IQ Database. Vacations are high on the list for younger consumers, as the goal of a vacation is neck and neck with other goals. Younger people rank “build up an emergency fund” as the top goal with 64% and “take a vacation” as second with 60%.

In contrast, the goal of a vacation drops for older consumers. Consumers ages 53 to 64 are focused on the future work-life balance goal rather than immediate vacations. Their top goals are “work less when older” (47%) and “stop work/retire when older” (46%), and they are focused on investing to make that happen.

“People who laugh about the desire to take a vacation instead of saving for retirement misses a key insight into what drives consumers,” Laura Varas, CEO and founder of Hearts & Wallets, says. “Current versus future work-life balance is an important issue, and the need to refresh and reset should be acknowledged. Younger consumers need help aligning current work-life balance with the equally important goal of setting themselves up for success in the decades to come. The reality sets in for older consumers when they realize they need to prepare for the long vacation that comes when they stop working voluntarily or involuntarily. In effect, the whole conversation about retirement is actually work-life balance.”

Health care is a top issue across consumer life stages, with important nuances from the youngest to the oldest. Purchase of health care, long-term care or life insurance is one of the top three actions either taken during the past 12 to 18 months or planned by Accumulators as well as Pre-Retirees and Post-Retirees.

“Consumers are really focused on the unpredictability of future health care costs,” Varas says. “Financial firms can help by including saving for future health care in advice and guidance, without preying inappropriately on this fear. Improving health savings account (HSA) solutions can also help firms help consumers prepare for future.”