Will boomers and Gen Xers be the new depression-era babies, destined to retain financial habits forged from the trauma experienced by a major market crash?
Even though more than six years have passed since credit markets seized and entire countries teetered on the brink of collapse, a significant number of both Gen Xers and baby boomers say that they’re still reeling from the effects today. According to Generations Apart, a new study from Allianz Life Insurance Company, when asked about the crash, more than two-thirds (67%) of Gen X and boomer respondents said they still feel the impact in how they live, work, save, and spend.
Yet, the effects of the crash have been even more profound for a distinct segment of respondents identified as “post-crash skeptics.” This group appears to suffer from a significant psychological impact on their financial attitudes and behaviors, including lost confidence in financial institutions and a switch to more conservative investments. An overwhelming 93% of post-crash skeptics – which includes a cross-section of Gen Xers and boomers who experienced six or more major effects of the crash – said the 2008 crash still haunts them today. Accordingly, more than nine in 10 (93%) believe that the traditional definition of retirement is now a “romantic fantasy of the past” (versus 84% of the total respondents).
Although a majority of both Gen Xers and boomers (58%) said the crash had fundamentally made them more cautious and altered their thinking about risk and investments, the impact on post-crash skeptics was even greater. A full 83% of post-crash skeptics said the crash made them more cautious in their financial strategy – a fact that may adversely impact their ability to effectively save for retirement.
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%) of this group expressing this opinion versus only 38% of the total respondents. In addition, the crash altered the way post-crash skeptics view the market and their investment strategy. More than two-thirds of post-crash skeptics (67%) said they changed their view of the market to risky (versus 32% of the total respondents) and 43% said they switched to more conservative investing or financial products (versus 22% of the total respondents).
Perhaps more significant was the reported behavioral differences in post-crash skeptics compared to the total group of Gen X and boomer respondents. Half of the post-crash skeptics reported taking on more debt after the crash (compared to 23% of the total respondents) and 41% reported that they or a partner had lost a job – almost three times as many as the total respondents (15%). Of even greater concern, 41% of post-crash skeptics said they’d stopped saving for retirement since the crash – more than three times that of Gen Xers and boomers as a group.
As a likely result of these actions, post-crash skeptics have a much more pessimistic view of their chances for a successful retirement with more than half (52%) saying they don’t believe they’ll have the lifestyle they want in retirement (versus only 39% of the total group).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of 401(k) Specialist and Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.