Generation X/Y investors are feeling more optimistic, but baby boomers are feeling the strain of the economy as they approach retirement, according to a recent Investment Sentiment Survey by MFS Investment Management.
Forty-two percent of Gen X/Y investors reported they have increased the amount they contributed to their retirement plans in the past 12 months, a 12% increase over last year's survey. Additionally, 51% said they have increased their contributions to non-retirement accounts.
Among Gen X/Y investors, 36% said they are willing to take on more risk, and 55% agree that their portfolios need a sizable portion of international investments to be effective.
Furthermore, the number of Gen X/Yrs who said they will never feel comfortable investing in the stock market dropped from 61% to 53%. That said, less than half of those surveyed indicated they are comfortable with the market, and 22% of respondents said their top investment goal was to not lose money.
Despite retirement being a long way off for this group, 61% of Gen X/Yrs feel they will not be able to retire when they thought they would, and 45% say they are overwhelmed by all the different investment choices available. However, such sentiment also means there's a greater need for financial advice, with 42% indicating their need has increased over the past year.
"The data suggest that the financial services industry needs to re-think its approach to younger investors," says William Finnegan, MFS' senior managing director of retail marketing. "Let's put aside demographic labels that appear to color our impression and consider how to approach potential investors in their 30s and 40s who clearly need our help."
Unlike younger investors who have time on their side, Baby Boomers said market-related strains were affecting their retirement. Boomers reported having much lower home equity than younger investors, and said the 2008/09 economic downturn had a negative effect on them personally.
Fifty-nine percent said they are concerned about being able to retire when they planned to, and 50% reported their standard of living expectations for retirement have been lowered. Boomers also indicated they were less likely to take risk versus last year.
Boomers seemed evenly split on their primary investing goals--34% said they want to grow assets and increase portfolio value as much as possible, while 33% said they want to protect principal and not lose money.
Thirteen percent of boomers reported having $1 million or more in median household investable assets. Their average retirement was within 10 years.
"Boomers appear to be in a bind, knowing they need to save more for a retirement that is not far off, but they have a protective mindset driving their investing approach," Finnegan says. "In light of this sentiment, advisors should discuss with their clients both the risks associated with investing too aggressively or too conservatively as they approach retirement."