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 was a contributing editor to 401(k) Specialist. Lynn currently is a contributing writer for ALM Media, LLC and is also self employed as a communications consultant.
Lynn is 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.