Great Recession Flips the Script for Boomers and Millennials

Baby Boomers Aggressive with Retirement Assets, Millennials Focused on Income

Investor Behavior out of Step with Financial Advisors' Perceptions

BOSTON--()--Maximizing growth is the number one priority baby boomers have for their retirement assets, according to the latest results from the MFS Investing Sentiment Insights Survey. One third (32%) say maximizing growth is their most important criterion when making decisions about their retirement assets. This aggressive stance points to the lasting impact the Great Recession has had on baby boomers and their retirement savings. Meanwhile, millennials are surprisingly focused on other objectives. When it comes to their retirement savings, 60% indicate criteria other than growth are top priorities: 29% say capital protection while another 31% identify income generation.

"The Great Recession has flipped the script, with boomers remaining growth oriented, even as retirement approaches, and younger investors becoming income oriented. Boomers appear desperate to rebuild their nest egg before retirement, with significant equity exposure in the face of a compressed investment time horizon," said Doug Orton, vice president of Business Development for MFS. "Millennials, even with time on their side, would rather preserve what they have and avoid the market. We are concerned that investors — boomers and millennials alike — are maintaining asset allocations inconsistent with their true risk tolerances and investment time horizons."

Time is on whose side?

The contrast between boomers and millennials is significant. Boomers, on average, report holding 40% of their retirement assets in equities, 14% in bonds and 21% in cash. Millennials report holding less equity — 30% — with greater allocations to bonds and cash — 17% and 23%, respectively. More than a fifth of millennials (22%) believe that maximizing income is the most important factor when making decisions related to their retirement assets versus just 17% for boomers.

More than half (51%) of boomers say that they are concerned about being able to retire when they thought they could, and 37% say that over the past few years they have lowered their expectations about what life would be like in retirement. Half agree that a drop in the stock market is the biggest risk to their retirement assets, and only 45% are highly confident their portfolio is properly balanced.

"Whether it is fear or desperation, boomers appear to think they can grow their way out of the problem of not having a large enough retirement nest egg," added Orton. "Millennials seem determined to avoid the risk of the stock market, even though on average they have 30 years or more to ride out the ups and downs."

Out of sync with advisors

Baby boomer and millennial behaviors do not match the priorities that financial advisors have for their retirement assets. Advisors indicate that maximizing income is their top consideration when advising boomers and growing assets should be the most important objective for millennials. In fact, only 14% of advisors say that maximizing growth is their top criterion when advising boomers and only 2% say that income generation is a priority when advising younger investors on retirement assets. Three quarters (74%) indicate that maximizing growth is their top consideration when advising younger investors about retirement assets.

More than half of advisors (55%) believe baby boomers think "investing in retirement is all about income and preservation, not growth." However, only 28% of baby boomers agree. Similarly, 44% of advisors think baby boomers believe that "it is too risky to invest in the stock market once you are fully retired." Again, only 28% of baby boomers actually agree with the notion.

Advisors believe younger investors have approximately 54% of their retirement assets in equities, while millennials report holding only 30% on average. Alarmingly, advisors also believe cash makes up roughly 6% of the retirement assets of younger investors. According to the survey, however, millennial investors have 23% of their retirement accounts in cash.

"The US stock market has nearly tripled in value since the market bottom of March 2009, while interest rates have remained historically low. We need to start preparing investors for the expected — interest rates rise and recessions occur — not the unexpected," said Orton. "To be prepared, investors must discuss their mindset and current allocations with their financial advisors. Regardless of age, investors, along with their advisors, need to understand the risks that come with asset allocations that do not match investment time horizons."*

For more results from the ongoing MFS Investing Sentiment Insights Survey, click here.

*The S&P 500 Index closed on March 9, 2009, at 676.53; it closed at 1930.67 on July 31, 2014, the final day this survey was fielding responses.

About the current survey

MFS, through Research Collaborative, an independent research firm, sponsored an online survey from July 21 – 31, 2014, of 951 individual US investors with $100,000 or more in household investable (nonretirement) assets and 623 licensed US financial advisors (either FINRA or SEC) who have been licensed for at least three years with $500,000 or more in annual mutual fund sales. All investor respondents make or share in making financial decisions for their households. MFS was not identified as the sponsor of the survey. Millennial (Generation Y) investors are those under the age of 35; 219 participated in the survey. Generation X is defined as investors between the ages of 35 and 49; 239 participated in the survey. Baby boomer investors are those between the ages of 50 and 68; 320 participated in the survey. There were 173 participants age 69 or older.

About MFS Investment Management

Established in 1924, MFS is an active, global asset manager with investment offices in Boston, Hong Kong, London, Mexico City, São Paulo, Singapore, Sydney, Tokyo and Toronto. We employ a uniquely collaborative approach to build better insights for our clients. Our investment approach has three core elements: integrated research, global collaboration and active risk management. As of August 31, 2014, MFS manages US$438.1 billion in assets on behalf of individual and institutional investors worldwide. Please visit mfs.com for more information.

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Contacts

MFS Investment Management:
Dan Flaherty, 617-954-4256
or
James Aber, 617-954-6154

Release Summary

Baby boomers take aggressive stance toward retirement savings; Millennials continue to be scared from 2008's great recession.

Contacts

MFS Investment Management:
Dan Flaherty, 617-954-4256
or
James Aber, 617-954-6154