Planning and Progress 2014 Study 

 
Northwestern Mutual again explored the state of financial planning in America today to obtain insights into peoples attitudes and behaviors toward money, goal-setting and priorities. The 2014 study surveyed nearly 2,100 American adults 18 or older.

View additional findings

Discipline and Happiness 

Millennials and Finances 

Financial Optimism 

 

 

 

Financial Discipline and Happiness in Retirement

The study showed the more discipline an individual brings to financial planning, the more financially secure he or she feels in the present, and the greater likelihood they’ll be happy in the future.

  • 70% of Highly Disciplined planners feel ‘very financially secure’ vs. 51% of  Disciplined planners, 34% of Informal planners and 17% of non-planners
  • Highly Disciplined planners who are retired are much more likely than non-planners to say that they are ‘happy in retirement’ (91% vs. 63%)

Download Planning and Progress 2014 – Financial Discipline and Happiness in Retirement

Overall Discipline Remains Low

Less than one in five U.S. adults (18%) consider themselves a Highly Disciplined financial planner – i.e., they know their exact goals, have developed specific plans to meet them, and rarely deviate from those plans

  • One-third (36%) consider themselves Disciplined – i.e., they know their exact goals and have developed specific plans to meet them, but those plans can deviate at times because they don’t always stay on top of them
  • Nearly half of adults (46%) are either Informal planners or don’t do any planning at all

Additionally, 60% of all respondents in the study believe their financial planning could use improvement; and the number one roadblock, cited by more than one in four (27%), is lack of time.

Who are the Most Disciplined Financial Planners in America?

Younger adults (18-39) and more senior adults (60+) have something very important in common – they represent the most disciplined financial planners in the U.S. Meanwhile, adults who fall between ages 40-59 are the most financially unprepared and most likely to identify themselves as Informal or non-planners.

The study found:

  • 59% of younger adults (18-39) and 54% of more senior adults (60+) identify themselves as disciplined financial planners, while less than half of adults aged 40-50 believe they are disciplined
  • More than half (51%) of adults aged 40-59 identify themselves as Informal or non-planners, whereas that number drops to 41% in younger adults (18-39) and 46% in senior adults (60+)

Do Young Boomers Have Their Heads in the Sand?

The study found that 60% of the youngest Baby Boomers (50-59) acknowledge the need to improve their savings and investing discipline, yet they have the least appetite for doing so. Why the disconnect?

The study showed for 25% of Americans aged 50-59, the biggest barrier is simply a lack of interest (25%), while 13% cite lack of money.

Additionally, among these young Boomers:

  • 70% don’t use a financial advisor
  • 40% say they take an “informal” approach to financial planning
  • 12% wouldn’t call themselves planners at all – the highest percentage of any age bracket surveyed

 

Millennials Approach to Money Management

It’s not just beards, butchers and bicycles that Generation Y – or “Millennials” – are bringing back.  The youngest adults in America, aged 18-29, are also showing signs that they’re old souls in the way they manage their money.

Download Planning and Progress 2014 - Millennials Approach to Money Management

According to the study, Millennials recognize the importance of saving and investing and tend to be more proactive about planning than their older counterparts.

The study surfaced a range of distinct attitudes and behaviors towards money among Millennials, notably:

  • They’re not swinging for the fences  –  Only 14% say that when it comes to saving and investing, they are aiming high and pursuing as much growth as possible
  • They’re willing to be patient – 30% favor “slow and steady” as their financial planning approach while another  30% would prefer to be more cautious but feel they have a lot of catching up to do
  • They’re the most disciplined generation since their grandparents – In fact, they’re even more disciplined than their grandparents.  Even though they’re just starting out, 62% say they are “highly disciplined” or “disciplined” financial planners, as compared to 54% for adults aged 60+
  • They’re humble – Despite their focus on planning, 68% believe there is room for improvement in how they manage their money

Millennials want help but don’t know where to turn for it

Though they may be ahead of the curve in making financial planning a priority, the large majority of Millennials recognize they can do even better.

  • As noted above, though more than two thirds (68%) say there is room for improvement, the Millennial generation is most likely to say they’re uncertain where to find help (28%)
  • Only one in eight 18-29 year olds (13%) have a financial advisor

To support Millennials on their journey towards financial independence, Northwestern Mutual recently launched http://www.themintgrad.org/, a financial education resource with content and tools designed for the unique needs of this generation.

Financial Optimism in the U.S.

Americans feel slightly better about their financial circumstances today than they did a year ago, yet their optimism is tempered by the need to close a gap in their long-term savings and the continuing effects of the slow-growth economy. Forty-two percent of adults age 25 and older expect their financial situation to improve this year, though one in five say they still have a lot of catching up to do.

Download Planning and Progress 2014 - Financial Optimism in the United States

According to this year’s study, people age 25 and older feel they’re moving – slowly – in the right financial direction:

  • Close to half (47%) feel financially secure, a slight uptick from the 43 percent who felt this way last year.
  • One in four (26%) express feelings of “financial insecurity” today, which is down from the one in three (32%) who said the same a year ago.
  • “Slow and steady” remains the savings and investing strategy most favored by Americans for the third year in a row.

While Americans believe they’re moving in the right direction personally, the study finds that they do not feel the same about the country as a whole. For example: 

  •  Half (49%) of adults 25+ believe the U.S. economy is “stuck in neutral,” and 29% feel it’s “going in reverse.”
  • Only 22% say the economy is “moving forward.”

Are Americans Prepared for Longevity?
The study also revealed some interesting findings when it comes to financial preparedness later in life.

  • One-quarter of adults 25 and older (26%) do not believe they’ll be financially prepared to live to the relatively young age of 75, based on their current financial condition, future prospects and long term plan.
  • One-third (32%) don’t believe they’ll be financially prepared to live to 85. 
  • Nearly 40% don’t believe they’ll be financially prepared to live to 95.
  • One in five (21%) says they are playing “catch up” when it comes to savings and investments. Debt, unexpected expenses and a lack of effective planning are cited most often as the reasons for this.

Planning Beyond the Savings Account
Being financially prepared requires more than just relying on one’s savings. It means having the appropriate solutions in place to navigate your changing needs over the arc of your lifetime.

The 2014 Planning & Progress Study revealed that, while two-thirds (67%) of American adults 25+ have a savings account, the majority of people aren’t planning beyond it.  For example:

  • Only 27% own stocks and only 14% own bonds
  • 23% own mutual funds
  • 14% own real estate
  • 24% own term life insurance, and 23% have permanent life insurance
  • 14% have an annuity
  • 9% have long term care insurance, and 8% have disability insurance
  • 39% have an IRA
  • 6% have a college savings account
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