Data and Research October 5, 2018

Millennials Need More Investing Confidence

Only 21% of non-investing Millennials and Millennials with only retirement accounts are very or extremely confident about making investment decisions.

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Millennials are uncertain about making investing decisions and show little interest in robo advisers, despite having come of age in a digital world. In fact, they prefer working face to face with a financial professional, according to a research report, “Uncertain Futures: Seven Myths About Millennials and Investing,” from the CFA Institute, in partnership with the FINRA Investor Education Foundation.

“This study dismisses many of the assumptions that are commonly held about Millennials and why many of them are not investing,” says Gerri Walsh, president of the FINRA Investor Education Foundation. “These findings help us better understand the needs and wants of Millennials to further investor education efforts that will engage Millennials in the financial markets.”

The first myth is that Millennials have lofty financial goals. Truth be told, Millennial investors and non-investors expect to retire at the standard age of 65. Non-investing Millennials are focused on surviving month to month. Millennials with taxable accounts have financial goals mirroring Gen Xers and Baby Boomers, such as saving enough to retire when they want and to live comfortably in retirement.

The second myth is that income and debt are key barriers to investing. While those are factors that keep some Millennials from investing, 39% of Millennials without taxable investment accounts say they are also not knowledgeable about investing.

The third myth is that Millennials are overconfident about investing. Only 21% of non-investing Millennials and Millennials with only retirement accounts are very or extremely confident about making investment decisions. For Millennials with taxable accounts, this is true for 47%.

The fourth myth is that Millennials are skeptical of the financial services industry and financial professionals. In fact, 72% of Millennials working with a financial professional are very or extremely satisfied with the service they are receiving. Only 15% of Millennials not working with a financial professional say that it is due to lack of trust.

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Fifthly, it is believed that Millennials think they need a large amount of money in order to be able to work with a financial professional. But, the survey found, 20% think there is no minimum needed, and 60% think they would be able to work with a financial professional if they had $10,000 or less to invest.

The sixth myth is that Millennials gravitate to electronic communication and robo advisers. The truth is that 58% of Millennials prefer to work with a financial professional in person, on par with the 60% of Baby Boomers and 58% of Gen Xers who share that sentiment. Only 16% of Millennials show a strong interest in working with a robo adviser.

Lastly, it is believed that Millennials share the same investing attitudes and behaviors. Urban Millennials are 50% more likely than rural Millennials to own taxable accounts, and 33% of male Millennials are extremely or very confident in their ability to make financial decisions, compared to only 23% of female Millennials. Furthermore, 28% of white Millennials have taxable accounts, compared with 20% of African-American Millennials.

Benefits October 5, 2018

Employees Struggle With Allocating Money to HSAs and Retirement Plans

Even financially adept employees have trouble deciding where to save and how to spend.

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Eighty-two percent of employees see medical costs as their biggest challenge now and in the future, according to the Willis Towers Watson 2018 Health Accounts Employee Attitudes Survey.

Yet only 25% rank contributing to a health savings account (HSA) as a top current financial priority, falling below saving for retirement in a 401(k), paying for essential day-to-day expenses and paying off debt. The survey found the majority of employees (69%) who didn’t enroll in an HSA said they chose not to because they didn’t see the benefit, understand HSAs or take the time to understand them.

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While HSAs can be a high-value option to help employees prepare for health care costs in retirement, most employees use them primarily as spending accounts for immediate health expenses, Willis Towers Watson found. Two-thirds of survey respondents (65%) use their HSA money for current health care needs, large and small, while 8% focus on saving their funds for the future. Because employees regularly use HSAs to pay for current health costs, less than half (45%) have more than $5,000 saved.

Finding the money to contribute

Roughly one-quarter of employees who didn’t enroll in an HSA say they don’t have enough money to contribute to one at this time, while nearly two-thirds of employees who did enroll (63%) say they put aside what they can afford each month. Savings to an HSA may be limited by an employee’s financial position or may be a result of prioritizing contributions to other employer-sponsored benefits. Willis Towers Watson suggests portals integrated with financial planning tools can help employees make strategic decisions about where to best save their money based on their unique financial situation.

Even financially adept employees have trouble deciding where to save and how to spend. For example, only 22% of employees in this group first maximize their 401(k) contributions up to their company’s match before contributing to their HSA—a common strategy recommended by financial experts. Further, only one in four employees contribute to their HSA before their 401(k) plan when they don’t have a matching employer contribution, also a recommended strategy.

In addition, those who opt for medical flexible spending accounts (FSAs) often leave money on the table or scramble to spend the funding before year-end. Although 69% of FSA enrollees reviewed their previous health care expenses to determine their contribution, many employees are still losing money when opting into FSAs. Forty-eight percent said they could have put aside more money; 36% often spend frantically at year-end to use all of the money in their account; and 32% find it hard to spend all of the money in their account by year-end.

Employees value help with HSA decisions

Nearly half (44%) of employees surveyed said they value quality customer service as the most important feature of an account provider, while online tools and mobile apps were ranked second (22%). Willis Towers Watson says these responses suggest employers have a great opportunity to engage employees and enable them to make good “save versus spend” decisions by providing online tools that offer personalization and decision support on the HSA account portal.

They can also help employees better manage HSAs by offering delivery platforms that are integrated with financial wellbeing programs. For example, 61% of employees surveyed look for online tools or mobile apps to help them manage their health savings investment.

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