Millennials take guarded approach to retirement savings

Survey notes millennials interest in fixed annuities

Millennials Focus

The millennial generation has been described as tech-savvy, highly educated and individualistic. Although a recent survey found that millennials are the least prepared group for retirement, according to area financial advisors, ‘discerning investor’ might be another descriptor to add to the mix.

The survey in question was conducted by Porter Novelli Styles for the Indexed Annuity Leadership Council. Among its findings: 37 percent of millennials have no money saved for retirement.

Research firms are not in agreement on the dates to define this generation. Some use 1977 to the late 1990’s, while others compile data using the years 1980 up to 2000. Generally speaking, however, it’s agreed the age range is between 21 to 36 years old. While it might seem frightening to hear one falls into the “least prepared” retirement group, Frank Shuman, financial associate with Thrivent Financial in Vancouver, said it best.

“How prepared were you at 25?” Shuman asked.

Point well taken, but Alex Whitehouse, president and CEO of Whitehouse Wealth Management (also based in Vancouver) emphasized an important difference.

“This is a major concern because with the demise of corporate pensions and the uncertain future of social security, millennials face the heavy burden of funding the majority of their own retirement income,” Whitehouse said.

The good news, according to Jeff Grubb, senior managing director for Wells Fargo Wealth Management, is that millennials are aware of their larger role in retirement planning, and survey results support that idea. Of the 6,836 polled, 46 percent said they expect to rely on personal savings, 43 percent cited a 401(k) and 30 percent responded that an individual retirement plan (IRA) will carry them through their golden years.

So, where does this awareness come from? All three financial representatives interviewed agreed that the Great Recession of 2008 had a significant impact on millennials.

“The reality is the things they’ve experienced have forced them to look at things at a younger age than I did and, as a result, I think they’ll be fine,” Shuman said.

“Millennials may be apprehensive about the stock market and retirement planning because of their personal experiences,” noted Whitehouse. “They have witnessed two stock market crashes, highly interconnected global economic volatility, and multiple instances of corporate greed and malfeasance.”

The result of what has been witnessed could become another cautionary tale. The same survey found that “52 percent of millennials – more than any other age group – are interested in fixed indexed annuities…” This type of investment strategy protects the principal deposited into it from market fluctuations while using a passive indexing investment strategy that, by its own admission, will not mirror the stock market. In short, caution also comes with some risk.

Whitehouse pointed out that “fixed index annuities can have caps and participation rates which could limit the upside potential in good environments.”

In 2009 alone – the year after the housing market crash – the S&P 500 experienced a nearly 26 percent return on investment. Grubb and Shuman both agreed that diversity is still the key for a successful retirement plan. While fixed index annuities could be a great product, depending on each individual’s long-term goals, it should still be considered one part; not the whole.

Financial institutions face a conundrum. Many have excellent products and a sound marketing strategy to draw a younger audience – including online tools, mobile applications, Facebook and Twitter – but very few of them employ the age range that millennials identify with. According to Whitehouse, a 2014 Cerulli Associates study found that only 11 percent of financial advisors are under 35. The rules of engagement, therefore, must be as diverse as the audience.

As a faith-based organization, Thrivent invests in community outreach – particularly Habitat for Humanity – and has learned that millennials are involved in community in a big way. Shuman said that millennials, in part because of their physical capabilities, make up a large portion of volunteer efforts and that “when you’re sweating with people, swinging a hammer or digging a ditch, it opens conversations.”

Another arm of that thought-process is socially-responsible investing (SRI). Supporting millennials’ strong convictions regarding sustainable growth, Whitehouse Wealth Management offers an impressive portfolio of environmentally and socially-conscious investment options.

Wells Fargo takes a one-foot-in-the-future, one-foot-in-the past approach, using the latest technology to reach out to a younger generation while employing equal energy on the basics. Programs like hands-on banking, which has been used in schools and nonprofit organizations, aim to educate customers on savings accounts, checking accounts and debt management to lay a firm foundation for retirement investing.

The general consensus is that this generation is educated, entrepreneurial and securing well-paying positions. They’re aware of what lies ahead of them retirement-wise and, according to a 2014 Wells Fargo survey, 80 percent of millennials realize the importance of saving now even if only 55 percent currently are. They have time on their side and the curiosity to fuel active knowledge-seeking in the investment realm. They watched their parents lose thousands of dollars during the economic downturn and are carrying those lessons with them as they formulate their own strategies that they can sleep soundly through at night.


  • Be judicious about discretionary income – it’s not about what you earn, it’s about what you save
  • Build an emergency fund
  • Use debt wisely
  • Work with a professional to develop a plan
  • If a 401(k) is available, contribute to it at least up to the company match – According to a recent Consumer Reports blurb, $24 billion across the US is being wasted on unclaimed 401(k) matching.
  • Start saving early, save often and save automatically – have money transferred directly from your checking account into a savings and/or retirement vehicle.

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