Lingering Student Debt Hinders Millennials’
Retirement Savings
Feelings of guilt over not investing enough this year outpace
common year-end regrets such as poor eating and drinking choices,
not sharing enough time with loved ones or spending too much money
on oneself. These are among the insights revealed by Bank of
America’s latest Merrill Edge® Report released today.
Fewer than one in four (23 percent) feel “proud” of how they
handled their money this year, and only half (50 percent) of
respondents said they are “content” with the financial decisions
they made in 2014. The new data suggests mass affluent Americans
know they need to do more investing and saving for the future.
“Many mass affluent Americans feel they didn’t do enough this
year to put themselves in a good place for the financial future
they desire,” said Aron Levine, head of Preferred Banking and
Merrill Edge at Bank of America Corporation. “Millennials, in
particular, feel they are held back from investing and saving
enough for retirement because of debts from unpaid student loans.
The good news is investors of all ages are rethinking their
priorities and plan to make retirement saving a top goal in
2015.”
The bi-annual survey conducted among 1,046 mass affluent
Americans (individuals with $50,000-$250,000 in investable assets)
found more than half (51 percent) of respondents did not save for
retirement at all in 2014. However, a majority of this group plans
to take action in 2015, with nearly six out of 10 (59 percent)
making retirement savings and investing a goal for the upcoming
year. This is a more popular goal than losing weight, which was
cited by 42 percent of the people.
When asked about the role finances play in their day-to-day
decisions, respondents revealed these daily choices merit more of
their attention:
- Long-term finances are taken into
consideration by most respondents when conducting routine financial
activities, including paying bills (73 percent) and receiving extra
funds (66 percent). However, fewer than half (47 percent) make the
same connection between daily purchases such as groceries and their
long-term financial goals.
- Most respondents do not believe other
spending activities will impact their long-term financial goals.
Just 33 percent believe spending on entertainment would have an
impact, while fewer than four in 10 think eating at restaurants (37
percent) and paying for gas (38 percent) would make a difference on
these goals.
- More than eight out of 10 (82 percent)
believe some of the best decisions they are making today are
financial, specifically in the areas of avoiding debt (33 percent),
saving for the future (27 percent) and budgeting (22 percent).
- In contrast, many respondents admit
they are making some of their worst decisions when it comes to
their health (22 percent) and romantic relationships (21
percent).
Millennials prioritize investing and saving
In comparison to older generations, the Merrill Edge Report also
found that Millennials are the most focused on their investments.
One-third (33 percent) of Millennials report that among a number of
other common tasks, they spend the most time each week on their
investments. Just 20 percent of Gen Xers and 17 percent of Baby
Boomers report the same. Instead, Gen Xers place budgeting (40
percent) on the top of this list of common activities, while
grocery lists (40 percent) are most popular among Seniors.
The survey also indicates more than half of Millennials (52
percent) currently seek investment advice online, and more than
four out of 10 (43 percent) have a financial advisor they
consult.
“Earlier this year, our Spring 2014 Merrill Edge Report revealed
Millennials felt confident about having enough money for
retirement, and we continue to see a promising long-term financial
focus from them,” Levine said. “With some uncertainty still
surrounding the economy and the job market, the younger generation
is taking matters into their own hands by making investing and
saving a top priority.”
Millennials, however, are affected the most by debt, the survey
found. A majority of Millennials (75 percent) surveyed have student
debt, and nearly half (46 percent) report they are putting off
retirement saving and investing until they have paid off
outstanding student loans. The group does seem determined to break
the debt cycle though, as a majority of Millennials were able to
pay down their debt (51 percent) in 2014.
Definition of financial success yields differing
opinions
While 82 percent of respondents agree some of the best decisions
they are making today are financial, genders and generations differ
greatly when attempting to define financial success.
When describing financial success, women are more apt than men
(74 percent vs. 61 percent) to focus on being debt-free. Men,
however, are more likely than women to believe that if they’re
financially successful, it’s because they can live comfortably now
(70 percent vs. 60 percent) or have attained a high income (19
percent vs. 10 percent).
Millennials are equally likely to cite living comfortably now
(73 percent) and not having any debt (73 percent) as a mark of
financial success. Only 46 percent of Millennials believe attaining
a high income is a definition of financial success. With retirement
closer on the horizon, Gen Xers (86 percent) and Baby Boomers (89
percent) were most likely to define financial success as having
enough for the retirement they want.
For more in-depth information about the financial behaviors and
priorities of mass affluent Americans, read the entire Fall 2014
Merrill Edge Report here.
Merrill Edge Survey MethodologyBraun Research, Inc. (an
independent market research company) conducted a
nationally-representative telephone survey on behalf of Merrill
Edge. The survey was conducted from September 10 through September
18, 2014, and consisted of 1,046 mass affluent respondents
throughout the U.S., defined as individuals with investable assets
(value of all cash, savings, mutual funds, CDs, IRAs, stock, bonds
and all other types of investments excluding primary home and other
real estate investments). Respondents in the study were defined as
aged 18 to 34 (Millennials) with investable assets between $50,000
to $250,000 or those aged 18 to 34 who have investable assets of
between $20,000 and under $50,000 with an annual income of at least
$50,000; or aged 35-plus with investable assets between $50,000 to
$250,000. An oversampling of 300 mass affluent was surveyed in San
Francisco, Los Angeles, Orange County, Calif., Dallas, New Jersey
and South Florida. Also, as part of this study, we interviewed a
total of 502 Millennials (defined as 18-34 years old) in the
national U.S. sample. The n=502 Millennials are comprised of n=201
completes that came from the main, national sample. The remaining
n=301 were obtained from an oversample of additional Millennials to
achieve the total n of 502. The margin of error is +/- 3.0 percent
for the national sample; about +/- 5.7 percent for the oversample
markets; and about +/-4.4 percent for the national Millennial
group, with each reported at a 95 percent confidence level. Kelton
(an independent global insights firm) consulted with Merrill Edge
and Braun Research, Inc., on the study implementation.
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