A new survey from the National Association of Personal Financial Advisors (NAPFA), the fee-only only advisor organization, says Generation Z and Millennials are feeling unprepared with retirement planning and are turning to social media for advice.
Despite the COVID-19 pandemic spurring increased savings for many, at least a third (34%) of NAPFA’s respondents say that the lack of financial guidance is “inhibiting their ability to prepare for retirement,” with the concern increasing by age:
- Following earlier–and troubling trends–34% of Millenials (those born between 1981 and 1996) are feeling the most unprepared.
- To a lesser degree, 30% of Generation Z (born between 1997 and 2012) feel underprepared.
Alarm bells ring with the survey finding that 39% of Americans under 65 receive their financial advice online or from social media, which can provide instant–but not always accurate–information. More than 60% of the respondents who receive their information online say they have acted on that advice. With one-fourth of Gen Z receiving their financial advice from social media, the most popular site is YouTube, with 63% responding that it is their top choice; 71% of Millennials cite the video sharing service as their go-to for financial planning. The short-form video application TikTok is also gaining interest from Gen Z with 56% citing it as a source of information.
NAPFA’s CEO Geoffrey Brown says the social media trend isn’t necessarily a bad thing.
“It’s great to see people enthusiastic about seeking out financial information and helping others financially succeed. The survey shows that 54% of Generation Z respondents aren’t preparing financially for retirement, so if social media can pique their interest, that’s a good thing,” says Brown.
But he strikes a cautionary tone that it’s “important to note that advice found online isn’t personalized or tailored to individual goals and needs, leading to potentially greater risk-taking, consumer harm, and a piecemeal approach.”
Different generations, different ways of saving
- Approximately 38% of respondents use an employer-sponsored benefit like a 401k; 24% use individual retirement accounts (IRAs); 30% invest in stocks and 19% report investing in cryptocurrencies. IRAs are less popular among younger generations.
- Only 22% of Millennials and 19% of Gen Z respondents claim they have investments in an IRA, while 35% of Baby Boomers and 23% of Gen X claim to have one for their investments. Alternatively, nearly one in eight Millennials and Gen Z are turning to micro-investing apps, such as Stash and Acorns to prepare for retirement.
- Nearly one in six of survey respondents worry that they have “screwed up” their retirement, with over 16% responding that they listened to “unqualified financial advice.”
- One in five do not have a retirement plan and have no idea when they will be able to retire.
- A concerning 57% of Millennials considered starting a side gig to boost their contributions to their retirement savings.
With one in six respondents saying that they are “unsure of how to pick a financial advisor,” this is where the opportunity lies, says NAPFA’s Brown, adding that it’s more important than ever for consumers to work with a professional they can trust to help them navigate their financial future.
“The data shows that people need a partner in financial planning. Americans feel unprepared and lacking guidance, so they’re turning to social media when they should be turning to a professional.”
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
