Data and Research February 3, 2016

Millennials Working on Financial Goals, but Not Retirement

The number one reason Millennials invest is to have an emergency/“rainy day” fund, a survey finds.
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The large majority (82%) of Millennials (ages 18 to 34) deposit money toward their investment goals on a regular, scheduled basis throughout the year—far more consistently than their older counterparts, according to financial services firm Scottrade, Inc.’s 2016 American Investor Report.

However, saving for education and home ownership are competing priorities for Millennials when it comes to retirement planning. For example, 60% of Millennials say a mortgage is a top financial priority. And, about one in three Millennials (30%) say educational expenses are the financial priority they feel least prepared to cover and would most delay their retirement plans (34%).

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Generally speaking, Millennials tend to invest for a variety of reasons. The No. 1 reason Millennials invest is to have an emergency/“rainy day” fund (43%). But, when asked how long their current emergency fund would last if they lost their job, most Millennials would be ill-prepared.

Two in three Millennials (65%) say they would make it less than six months (compared with 34% of Gen Xers, 16% of Baby Boomers and 7% of senior citizens). They are also much more likely than other generations to invest so they can afford a new home, a new car or another large purchase.

NEXT: Findings about investors overall

The survey found retirement is the top financial priority for investors. More than two-thirds of investors overall (69%) say saving for retirement is a top priority and the large majority feels well prepared for their golden years (84%). Four in ten Millennials (42%) cite retirement as a financial priority, compared with more than seven in ten of those 35 and older.

When it comes to retirement planning, health care tops a number of lists. Most investors emphasize affording health care costs as a financial priority (54%), but at the same time believe it is one of the major areas where they are least ready to absorb the financial drain (40% are least prepared to cover long-term caregiving, 33% are least prepared for health care expenses). An unplanned illness—and the need to continue health benefits—is the No. 1 reason investors would potentially push back their retirement plans.

Two-thirds of those surveyed use a financial adviser (67%), and six in ten of those discuss their portfolio with their adviser at least twice a year. Retirement is the primary life event to seek professional financial advice, whether it is during retirement (57%), nearing retirement (41%) or just starting to save for retirement (35%).

The 2016 American Investor Report is based on research conducted online among 1,001 U.S. investors.
Investing February 3, 2016

Institutional Investors See First Losing Year Since Financial Crisis

2015 was the first calendar year since 2008 that institutional investors overall had a negative return.
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Institutional assets tracked by the Wilshire Trust Universe Comparison Service (Wilshire TUCS), saw the first negative calendar year since the financial crisis, with a median return of -0.17%.

“Similar to 2013 and 2014, this was a quarter and a year where exposure to U.S. equities trumped most other asset classes. The main exception in performance for 2015 was the U.S. real estate asset class with the Wilshire US RESI gaining 7.64% and 4.81% for the quarter and year, respectively. The Wilshire 5000 Total Market Index was up 6.36% and 0.67% during the fourth quarter and in 2015, respectively, versus the MSCI AC World ex U.S. or international equity’s 3.24% gain for the quarter and -5.66% loss for the year,” says Robert J. Waid, managing director, Wilshire Associates.

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Waid noted that bonds were flat, as the Barclays U.S. Aggregate fell -0.57% for the fourth quarter but held on to a gain of 0.55% for the year.

All plan types had a median return of 2.41% for the quarter, registering a slight bounce off the third quarter’s worst quarter in four years. Taft Hartley Health and Welfare Funds had a median return of 1.54% and Taft Hartley Defined Benefit Plans had a median return of 2.96% for the quarter.

“The spread for 2015 returns was also small, with a low of -0.45% for Foundations and Endowments and a high of 1.37% for large Foundations and Endowments with assets greater than $500 million,” Waid adds.

“Since small plans generally have larger exposure to U.S. Equities than large plans, it is again surprising that large plans outperformed smaller plans for the year,” says Waid. “All plan types with assets greater than $1 billion had median returns of 2.13% and 0.35% for the quarter and year, respectively, compared to plans with assets less than $1 billion with median returns of 2.49% and -0.27%, respectively.”

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