NEW YORK, Nov. 5, 2018 /PRNewswire/ -- Legg Mason, Inc. (NYSE: LM) Only a minority of
the 1,000 U.S. investors surveyed by Legg
Mason for its 2018 Global Investment Survey (LMGIS) believe
they will have enough money saved to enjoy a comfortable life in
retirement – a mere 31%.
Their pessimism was reflected in investing confidence: asked if
they can "successfully choose investments that could last into
their 80s or 90s," only 32% reported being "very confident."
Generational differences were marked, and surprising: 60% of
Millennials were very confident, but only 17% of Baby Boomers were
equally confident.
If they come up short of their retirement funding target, close
to 4 in 10 respondents (36%) reported they or their spouse would
work longer and/or participate in the gig economy.
"The biggest risk investors face in retirement is outliving their
financial assets," said Will
Coleman, Legg Mason's Head of
Retirement in the U.S. "They must plan, save and invest wisely so
they can be certain they will have enough to live good, long lives.
If not, rather than fishing or volunteering, many retirees may find
themselves among the growing number of Americans working in the gig
economy out of necessity, not a choice."
Yet saving for retirement is a critical priority: 86% responded
that their investment goals are focused on long-term returns like
retirement income or leaving an inheritance.
The sixth annual LMGIS was conducted between July and
August 2018 among 1,000 U.S.
investors who each reported planning to invest a minimum of
$50,000 over the next 12
months.
EMOTIONAL DECISIONS CAN LEAD TO POOR CHOICES
A whopping 60% of Millennials – and 29% overall – reported
making an emotional decision to sell in a 401K plan they later regretted. Other demographic
splits included:
- 34% of men vs. 21% of women
- 54% of investors with kids in household vs. 13% without
kids
- 41% of investors with annual income of $100,000 and over vs. 21% of investors with
annual income under $100,000
- 47% of investors who self-identify their investment knowledge
as "expert/advanced" vs. 11% as "beginner/rudimentary."
"Investors must be confident in selecting proper investments
over the long term," Mr. Coleman said. "Uncertainty can derail
well-considered plans and, worst of all, lead to emotional
reactions to buy or sell that investors might regret. Even the most
sophisticated can benefit from the help of experienced financial
advisors, particularly for retirement."
"How retirement savers allocate their assets can make a big
difference in both the timing and quality of their retirement. So,
it's crucial for them to know and maintain the right mix of
investments, especially as they move closer to retirement," said
Tina Wilson, Head of MassMutual
Investment Solutions Innovation. "Baby Boomers should be thinking
in terms of preservation while Millennials need to emphasize
growth."
EQUITIES LEAD THE WAY IN 401K
ALLOCATIONS
LMGIS respondents were overwhelmingly bullish on equities in
their retirement holdings. By noteworthy margins, they reported
higher concentrations of equity risk in their defined contribution
401K plans than in their investment
portfolios overall. They also reported having surprisingly high
levels of cash, given long-running bull markets.
Also surprising: 22% of employed investors– including 34% of
Baby Boomers, but only 11% of Millennials – reported not knowing
the details of their 401K
allocations.
Average Overall Reported 401K
Allocations* (among those who knew)
- 51% equities (28% in their other (non-401k) accounts)
- 15% fixed income
- 12% cash
- 11% target date funds
- 10% commodities
"It is surprising to see employed Baby Boomers with
substantially higher allocations to equities in retirement accounts
(60%), compared to their other (non-401k) accounts (34%)," observed
Adam Petryk, President of
Legg Mason affiliate QS Investors.
"In general, as individuals get closer to retirement, their
portfolios are more vulnerable to market volatility, as they have
less time to recover from a large drawdown. Boomers may be making
large allocations to equities in order to reach their retirement
goals, but in doing so are not protecting the capital already
accumulated from a potential market shock."**
Given the differences in time horizons between Millennials and
Baby Boomers, Mr. Petryk was also surprised that the LMGIS data
showed employed Millennials hold less in equities in their
401K plans (43%) than employed Baby
Boomers (60%).
Millennials v. Baby Boomers* (among those who are employed and
knew)
- 43%/60% equities (18%/34% in their total investment
allocation)
- 17%/14% fixed income
- 13%/13% cash
- 12%/8% target date funds
- 14%/5% commodities
"Since Millennials have a longer savings horizon until reaching
retirement, one would expect them to hold a greater allocation to
equities compared to Baby Boomers," he said. "Younger investors
have the luxury of time, and therefore can afford higher equity
exposure to grow their portfolios."
INNOVATION DRAWS INVESTOR INTEREST
The majority of investors reported they would be early adopters
of innovative retirement investment strategies that:
- Had the potential for greater growth in positive markets
(86%)
- Provided protection when markets go down (83%)
- Had the potential to provide greater diversification
(81%).
Investors showed their practical sides when asked what they
would do if they were given a lump sum windfall of $100,000. Their top three picks were:
- Save it for retirement (49%)
- Use it for short-term investments (38%)
- Pay off debts other than a mortgage (32%)
Just 22% said they would go on vacation, and 18% said they would
buy a car.
About the 2018 Legg Mason Global Investment Survey
The
sixth annual Legg Mason Global Investment Survey was conducted by
Research Plus Ltd. among 1,000 U.S. investors who plan to invest a
minimum of $50,000 over the next 12
months. Fieldwork was conducted via an online survey between July 26 and August 24, 2018. To learn
more about the survey findings, go to
https://www.leggmason.com/global/campaigns/gis-2018.html.
About Legg Mason
Guided
by a mission of Investing to Improve Lives,TM
Legg Mason helps investors globally
achieve better financial outcomes by expanding choice across
investment strategies, vehicles and investor access through
independent investment managers with diverse expertise in equity,
fixed income, alternative and liquidity investments.
Legg Mason's assets under management
are $755 billion as of September 30, 2018. To learn more, visit our
website, our newsroom, or follow us on LinkedIn, Twitter, or
Facebook.
*Due to rounding, asset allocation percentages might not equal
100%.
**Diversification and asset allocation strategies do not assure a
profit or protect against market loss.
©2018 Legg Mason Investor Services, LLC, member FINRA, SIPC.
Legg Mason Investor Services, LLC is a subsidiary of Legg Mason, Inc.
All investing involves risk. Any information, statement or
opinion set forth herein is general in nature, is not directed to
or based on the financial situation or needs of any particular
investor, and does not constitute, and should not be construed as,
investment advice, forecast of future events, a guarantee of future
results, or a recommendation with respect to any particular
security or investment strategy or type of retirement account.
Investors seeking financial advice regarding the appropriateness of
investing in any securities or investment strategies should consult
their financial professional.
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SOURCE Legg Mason, Inc.