This is proprietary research conducted by Northwestern Mutual in 2013. Use of this information is intended for reference. Northwestern Mutual's recent proprietary research is available here.
Northwestern Mutual sponsored a study exploring the state of planning in America today that provides unique insights into people’s current attitudes and behaviors toward money, goal setting and priorities. The study surveyed more than 1,500 Americans aged 25 or older. (Conducted 2013)
Financial Planning Obstacles
The study showed that more than six in ten (63%) Americans say their financial planning needs improvement; and that the No. 1 obstacle is not having enough time (24%).
The majority of Americans (69%) say the pace of society makes it harder for them to stick with long-term goals.
- More than one in four (26%) people say they either often or always feel too busy to think about long-term goals.
- Additionally, nearly one in three (31%) say they find the level of immediacy of society today – characterized by 24/7 connectivity and accessibility – to be distracting.
Lack of Financial Plan
The study showed that half of all Americans have no financial plan in place, and when asked to specify what type of planners they are:
- 40% described themselves as “Informal,” meaning they have a general sense of their goals and how to meet them, but no specific plan in place.
- An additional 9% say they are “Non-Planners,” meaning they have neither specific goals nor specific plans of any kind.
- One in three (34%) people describe themselves as “Disciplined,” meaning they know their goals and have a plan in place, but deviate at times because they don’t always stay on top of them.
- Just 16% say they are “Highly Disciplined,” meaning they know their goals, have a plan in place to meet them, and rarely deviate.
Gen Y Shows More Discipline
When it comes to financial planning:
- Gen Y (ages 25-32) may be the most disciplined generation with 24% saying they are “Highly Disciplined” planners. This is a 50% increase over the full-sample average (16%).
- The discrepancy is even greater when comparing Generation Y (ages 25-32) to Baby Boomers (ages 47-66), among which only 14% are “Highly Disciplined.”
Saving & Spending Habits
The study showed that Americans continue to hold their purse strings tight and favor cautious choices with their money. Nearly one in four people (23%) say they’d prefer to be more cautious but feel they have too much catching up to do; and 22% say they’ve dipped into their retirement or savings in the past three years.
When survey respondents were asked what changes they’ve made in the last three years regarding the way they manage their money, the No. 1 answer – reported by 30% of people – was saving more. Additionally, when asked to indicate their preferred approach toward achieving financial goals, the most common response – chosen by 34% – was “slow and steady wins the race.”
23% of Americans say they “would like to be more cautious with their money, but have a lot of catching up to do.” Of those respondents:
- More than half (52%) say it’s because of unexpected expenses.
- 47% claim it’s because of debt.
- 37% report it’s due to a lack of effective planning for the long term.
- 32% are concerned about job security.
The subgroups most likely to say they’d “like to be more cautious, but have a lot of catching up to do” include:
- Generation X (32%)
- Adults with children under 18 (32%)
- People with assets under $25K (35%)
Americans Are Saving More
When it comes to habits of saving:
- Four in 10 (39%) Americans say they plan to save more in the coming 12 months, which is a jump from 33% who said the same in 2010.
- Interestingly, the youngest generations – Generation Y (56%) and Generation X (52%) – are more likely to say they will save more in the next 12 months, while older generations will save the same amount or less (Boomers 33%, Mature 16%).
- Overall, half (51%) of Americans say their approach to the money they have today is “to save and be careful, aim for long-term financial security.”
- Only 14% say, “Spend. Enjoy what has been well earned and live for today.”
Technology and Society
The efficiency that technology affords us is undeniable. Yet around-the-clock connectivity and instant access to information is distracting millions of Americans and is having a deep impact on long-term planning.
Nearly one in three (31%) Americans say they find the immediacy of society today (email, texting, instant messaging, etc.) distracting, and an alarming 69% say the fast pace makes it hard to stick to long-term goals. While that’s a slight decrease from the 74% who said the same in 2011, it’s still a considerable majority.
Mobile Usage Is Up
Two-thirds (66%) of Americans say the immediacy of having electronic devices is efficient both in the short term and long term, while one-third (34%) say it’s efficient only in the near term. Given those efficiencies, it’s no surprise that usage is up.
- More than one in three (36%) people say their usage of electronic/mobile devices (smartphones, cell phones, tablets, etc.) has increased over the past year.
- That number is even higher for Gen Y (43%), men (39%), and parents (43% with kids under 18; 41% with kids over 18).
The Most Distracted Americans
Interestingly, older generations seem to be struggling more than their younger peers when it comes to balancing the pace of today’s society with focusing on long-term goals; but younger people report higher levels of distraction overall:
- A majority of Boomers (74%) and Matures (75%) say the pace of society makes it harder for them to stick with long-term goals, whereas only 61% of Gen Y and 63% of Gen X say the same.
- 35% of Gen Y and 36% of Gen X say that the immediacy of society today is distracting, whereas only 30% of Boomers and 24% of Matures say the same.
Best Financial Decisions
When it comes to managing money, the large majority of Americans today are not looking for shortcuts or get-rich-quick strategies.
Three-quarters of people prioritize long-term planning over short-term performance, and one-third say “slow and steady wins the race” best describes their approach to future financial goals.
The Best Financial Decisions in Life
The priority on long-term planning comes across loud and clear when looking at what Americans consider the most important financial decisions in life.
People aged 55+ believe the best financial decisions they ever made include:
- Saving early (40%)
- Paying off a mortgage (40%)
- Bought real estate at a good price (29%)
- Invested heavily in my 401(k) (27%)
- Made sure my family is protected (22%)
People aged 25-54 believe the best decisions they will have to make in coming years will be:
- Starting to save early (53%)
- Making sure my family is protected (52%)
- Relying heavily on my 401(k) (25%)
- Buying real estate at a good price (20%)
Retirement and Longevity
Just over half (56%) of Americans say they’re financially prepared to live to the age of 75, yet 10% expect to work into their 80s, according to Northwestern Mutual’s 2013 Planning & Progress study.
On average, pre-retirees say they will retire at age 68, even though the mean age of retirement among those already retired is 59.
Looking closer at the breakouts, it’s clear the number of Americans expecting to retire young is very small, while the number expecting to work into their 70s and 80s is considerable. Specifically:
- 6% expect to retire before the age of 60.
- 52% expect to retire in their 60s.
- 32% expect to retire in their 70s.
- 10% expect to retire in their 80s.
Meanwhile, when Americans were asked about their financial preparedness based on their current situation, future prospects and long-term plans:
- 56% said they’re prepared to live to the age of 75;
- 44% said they’re prepared to live to the age of 85; and
- 35% said they’re prepared to live to the age of 95.
Yet, there’s a 50 percent chance that a 65-year-old man today will live beyond age 87 and that a 65-year-old woman will live beyond age 90. If they’re married, there’s a 50 percent chance that one of them will live beyond age 94. (Annuity 2000 table)
In other findings, half (51%) of Americans say they are less financially secure than they thought they’d be at this point in their lives. Overall, just over four in ten (43%) Americans currently feel financially secure, while one in three (32%) do not feel financially secure, and the remaining quarter falls in the middle, not feeling strongly secure or insecure.
The study defined “financial security” as “a feeling of confidence that you will achieve the financial goals you have for yourself or your family through the actions you are currently taking."
The Least Financially Secure Americans
Within the study, several subgroups emerge as being among the least financially secure in America.
Sixty-two percent of single Americans say they’re less secure than they thought they’d be by now, compared to 43% of married people who say the same.
Those with children under 18 are less financially secure now (56%) compared to where they thought they’d be, whereas those with older children (49%) or no children (49%) feel slightly more secure.
Gen Y (59%) and Gen X (63%) are less secure now than they thought they’d be, but the Mature Generation (36%) is more likely to say they are just where they thought they’d be or are more secure than they thought they’d be.
Optimism and the American Dream
Eight out of ten (79%) Americans believe “the American Dream” is alive, and three quarters (73%) are optimistic, saying they generally see the world as “Glass Half Full” vs. 27% who see it as “Glass Half Empty.” These are the latest findings from Northwestern Mutual’s 2013 Planning & Progress Study.
However, digging into these findings reveals some deep-seated skepticism.
The study showed:
- Only 9% say the American Dream is as good as – if not better than – it was a generation ago;
- 36% say it is alive but people’s priorities and ambitions are different, and that it is defined more by happiness, health and balance in life;
- 34% say it is alive, but opportunities are not as good as they were a generation ago; and
- 21% say it no longer exists.
Looking ahead, attainability of the American Dream is seen, for the most part, as diminishing, with only 7 in 10 believing that the American Dream will be alive for their children and grandchildren.
Among Americans 25 and older:
- 36% say it will be alive, but the opportunities won’t be as good;
- 3% say it will be the same this generation to the next;
- <22% say it will be alive, and the opportunities will be just as good – if not better – than they are now.
Does Optimism Come with Age?
You might assume that it is the young who are our most idealistic, and that pessimism sets in with age. Not so, according to the study. The most optimistic (seeing the glass half full) Americans are those aged 67 and older (Matures), among which 79% are optimists. Meanwhile, among the least optimistic Americans are those aged 25-32 (Gen Y), where one in three (33%) is a pessimist.
While those age 67 and older (Matures) are more optimistic, they are also more likely to be skeptical about the American Dream. One-third of Matures believe the American Dream no longer exists (31%), and four in ten believe the American Dream will no longer exist for their children or grandchildren (37%).
In earlier findings from the study, Gen Y stood out for its financial planning, with 24% considering themselves highly disciplined, compared to 16% for Gen X, 14% for Baby Boomers, and 15% for Matures.
The latest research from Northwestern Mutual’s 2013 Planning & Progress Study revealed attitudinal and behavioral discrepancies between how men and women are planning for their financial futures – and why they’re falling behind on financial goals.
According to the study, one in four Americans say they’d like to be more cautious with their money, but feel they have a lot of catching up to do.
When comparing men and women, the study showed:
- Men are more likely to say they’re “Disciplined” financial planners (37% vs. 31%) but also that their financial planning needs improvement (66% vs. 59%).
- Women are more inclined to take immediate action to spend less – 44% plan to cut spending in the next 12 months vs. 34% of men.
- Men are twice as likely to say they’ve fallen behind due to market losses on investments and admit they’ve suffered declines in their retirement savings over the last three years (25% vs. 9%).
- Women are less likely to say they’re comfortable with the risks associated with growth strategies when investing for the future (10% vs. 16%).
An analysis of why Americans feel they’ve fallen behind uncovers additional differences. The study found:
- Women are more likely to cite unexpected expenses (60% vs. 43% of men) and debt (54% vs. 40%) as reasons for wanting to catch up. These were also top responses from men.
- Men attribute a lack of effective planning for the long term as the #2 reason for falling behind (42% vs. 32%).
Hindsight Is 20/20: Save Early, Save Often
When people 55 and older were asked about the best financial decisions they’ve ever made, men and women agree that saving money in one form or another is key. The differences lie in how they did it:
- Men were more likely to say the best decision they made was to invest heavily in their 401(k)s (35% vs. 21%) and twice as likely to say investing the majority of their savings in the stock market (17% vs. 8%).
- Women’s top tactics were to start saving early, paying off their mortgage, buying real estate at a good price and to buy products with guarantees, like insurance and annuities.
Across all age groups, men are more likely than women to say they make decisions on their own (75% vs. 64%), while women are more likely than men to get financial planning advice from family (28% vs. 20%).
Men Feel More Financially Secure
Despite men’s greater comfort with risk and higher probability of having suffered market losses, they still feel more financially secure than women. Study results showed:
- 47% of men feel financially secure right now, compared with just 40% of women.
- One third of women surveyed do not currently feel financially secure.
- Only 53% of women are financially prepared to live to age 75, compared to 60% of men.
- 32% of women say have the financial resources to live to age 95, compared with 38% of men.