In a new report, “Breaking the Millennial Myth,” Natixis Global Asset Management examines the financial goals of Millennials, those born between 1980 and 2000. The oldest, Natixis says, are 37—raising families and buying homes. They are anything but the “slackers” other generations may think of when they hear the word Millennial.
Natixis says that Millennials “are risk-conscious and have retirement in their sights, and when it comes to their finances, they are very much goals-focused.” Sixty-four percent say they have financial goals, and 59% have a financial plan in place to achieve them.
However, some Millennials are too focused on the short term, with 64% saying the time horizon for their investments is five years or less and 87% saying it is less than 10. Natixis says “this likely reflects their current life stage in which anticipated events such as marriage or starting a new family, or significant purchases such as a new car or first home, may be only a few short years away.”
Nonetheless, 66% of Millennials are saving for retirement. But they need help learning about how much they should save, as their average deferral rate is 10.9%, compared to 13.5% for Baby Boomers and 12.1% for Generation X.
Fifty percent of Millennials say they need help understanding financial risk and 46% say they would like help with tax planning. Twenty-eight percent would like guidance on the financial basics of budgeting and managing debt. Surprisingly, the same percentage wants help with estate planning, even though they are only between the ages of 17 and 37.
Only 64% of Millennials feel financially secure, compared to 70% of Boomers. However, 61% of Millennials say they are comfortable taking on some financial risks to boost performance. At the same time, 75% say that if they were forced to choose, they would select safety over investment performance, and 65% say market volatility interferes with their long-term goals.
“In short,” Natixis says, “Millennials may have high hopes for returns on their investments, but in reality, many are not emotionally equipped to take on the added risk needed to pursue long-term return assumptions.”
Asked when they plan to retire, on average, Millennials say at age 61. And they expect to live an average of 24 years in retirement. Sixty percent of Millennials believe Social Security will still be in existence when they retire, whereas 69% of Boomers believe this.
Seventy-three percent of Millennials have tried to figure out how much they will need in retirement, but only 64% explored retirement income options. Fifty-one percent think their children will help them out in retirement.
While 87% of Millennials trust themselves to make financial decisions, nearly as many, 86%, say they trust their financial professional as much as themselves. This trumps their reliance on family members, friends and co-workers (71%) and the financial media (58%).
Natixis says that for all of the belief that Millennials are addicted to their cellphones and social media, only 39% say they trust social networks that cover finance, such as Twitter and Yahoo Finance. However, 44% say they would prefer digital advice to a face-to-face meeting.
When asked about passive investing, 68% understood correctly that these types of funds track the markets, and 60% realize that they charge lower fees. However, 65% incorrectly said that passive investments are less risky than active investments, 66% think that they protect investors on the downside, and 62% think they offer access to the best investment opportunities.
Natixis says that Millennials hold in high regard the concept of socially responsible investing. Eighty percent want to invest in companies that represent their social values, and 75% want their investments to do social good.
“The financial industry would do well to recognize the social focus of these individuals if they are to earn their trust as investors and clients,” Natixis says.
CoreData Research conducted the survey of 8,300 investors around the word in February and March for Natixis. Of the total surveyed, 2,434 were Millennials.
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