Gun Shy Investors Need to Get Over It


The baby boomer generation is no stranger to the financial crisis that began in 2008 and the fallout that included government bailouts, the collapse of banks like Lehman Brothers and the mortgage crisis that filled the pages of our financial newspapers.

More than six years have passed and nearly 70 percent of both Gen Xers and baby boomers say that they’re still reeling from the effects today, according to Generations ApartSM* – a new study from Allianz Life Insurance Company of North America. While understandable, avoiding financial planning will do more harm than good. and Katie Libbe, vice president of Consumer Insights for Allianz Life, discussed the study and why it makes sense for gun shy investors to get back in the game.

Boomer:  What is meant by “post-crash skeptics” and how can they best deal with their loss of confidence in financial institutions?

Libbe:  As part of the study participants were asked a series of 13 questions about possible experiences from the 2008 market crash, including whether their home or 401(k) went down in value, whether they or a family member lost a job, and whether their savings and/or retirement planning were affected. We categorized anyone who experienced six or more of these effects as a post-crash skeptic. The shocking thing is that one in five (20 percent) of all respondents fell into this group.

One of the most poignant effects reported by the post-crash skeptics was a loss of confidence in financial institutions, with more than three-quarters (77 percent) of this group expressing this opinion versus only 38 percent of the total respondents. This is definitely concerning because, in order to make it through retirements that are now lasting 30 years or longer, most people will need to work with financial institutions to build their assets and prepare for the future. Although investing in retirement can be daunting, the longer people refuse to address the challenges, the more difficult it will become to ensure they have adequate income for retirement – and their lifestyle will ultimately suffer.

Boomer:  How are boomers and Gen Xers handling debt and their comfort with debt?

Libbe:  Our study found that living with debt has become a way of life for each generation and the stigma of owing money is gradually disappearing. Case-in-point is how both boomers and Gen Xers view credit card debt. According to the study, nearly half (48 percent) of both generations agree that credit cards now function as a survival tool and 43 percent agree that “lots of smart, hardworking people who are careful with spending also have a lot of credit card debt.” Maintaining a high credit card balance is now the norm for many, which is unfortunate as it significantly limits the ability to save for the future. Comfort with debt is a dangerous trend that these generations need to reverse in order to gain more confidence about achieving a successful retirement.

Boomer:  Boomers and Gen Xers agree there is a retirement crisis, but are they responding differently?

Libbe:  Although boomers and Gen Xers admitted to getting “bogged down with uncertainty when planning for retirement” and believing it is “useless to plan for retirement when everything is so uncertain,” both generations are surprisingly relaxed about planning for their financial futures. More than half of each generation agreed with the statement “when it comes to retirement, I just have this feeling that everything’s going to work out.” Yet, this feeling of hopelessness was even greater among Gen Xers – a larger percentage of Gen X respondents think they will “just figure it (retirement) out when I get there” (46 percent versus 36 percent of boomers). This disconnect between planning and expectations from both generations is troubling and a clear indication that they need more resources and support from the financial services industry to help them reframe their retirement goals to be more realistic and achievable.

Boomer:  Based on the study, is traditional retirement realistic for baby boomers?

Libbe:  While a traditional retirement spent doing what you want is certainly possible for boomers who have saved diligently and planned for their retirement income needs, the prospect of days spent playing golf or lounging on the beach seems impossible for the majority of boomers. In fact, more than 80 percent of boomers in the study said they now believe the traditional definition of retirement is now a “romantic fantasy.”

The good news is that a successful retirement is still possible if boomers take a more active role today. For boomers still 10-15 years out from retirement, they should focus on hitting their savings maximums (a good rule of thumb is 15 percent) within their 401(k) and other retirement accounts. For those less than 10 years from starting retirement, they should start looking into how they will turn savings into retirement income and consider protecting a portion of their nest egg through guaranteed income products. Boomers who are 65+ and would like to retire soon should focus on asset allocation to ensure their retirement portfolio is age/risk appropriate, and also determine how taxes and Social Security fit into their overall retirement plan.

*The conversation was edited for length and clarity.