We may never tire of discussing lessons from the Great Recession, which hit two groups especially hard: teens who saw parents lose a home or job, and boomers who saw their savings depleted at precisely the wrong moment in life.
The kids’ scars are mostly emotional. Financially, they had little to lose; indeed they stand to benefit from the more frugal approach to living that the recession has inspired in many. It’s a different story for boomers who are newly retired or rapidly nearing that stage of life. They saw their assets shrink just as they needed them to grow and they may have had to sell at depressed prices, ensuring they’d miss the rebound. Compounding their financial loss, interest rates are so low that boomers (and elders) are now finding it difficult to secure a decent monthly income stream.
This experience goes a long ways toward explaining boomers’ new priorities. By a margin of 7 to 1, adults past the age of 45 say their focus today is on peace of mind — not wealth accumulation, according to a new retirement study from Merrill Lynch and Age Wave.
Long gone is the prerecession attitude of taking risks and building the biggest portfolio possible. Today’s new retirees and preretirees crave the peace of mind that comes from having enough money safely tucked away to provide a sufficient and dependable income stream. In the survey, guaranteed income and protecting assets were four times more important than achieving high-risk returns.
This is why sales of fixed annuities are exploding and guaranteed lifetime income products are the new subject du jour. Today’s retirees don’t need a stockpile to count so much as predictable income so that they can spend time with family and on experiences and pursue new, if modest, passions.
“Having more money can buttress peace of mind,” David Tyrie, head of personal wealth and retirement for Bank of America Merrill Lynch, says in an e-mail. “But there are other important variables as well, including family well-being, health, and having fulfilling goals and purpose. A growing focus on achieving peace of mind causes people to think about what really matters in life.”
Among the things that matter, according to the survey, are social connections and family. Preretirees tend to believe the thing they’ll miss most when they quit work is their earned income. But the survey found that what retirees miss most is their connection with co-workers.
“Planning ahead to fill the void of friendships and connections can help make the retirement experience more fulfilling,” says Tyrie. He suggests taking the time to join clubs and other groups, network online, and get reacquainted with neighbors and old friends.
Another legacy from the Great Recession appears to be parents’ willingness to financially support their grown children and grandkids. This is especially true of well-situated retirees, who are twice as likely to help with money. But even those on a budget say they are willing to sacrifice some comforts and, say, downsize their house or car to help a grown child struggling with money issues. In the survey, 52% of parents said they expected to provide ongoing support to their adult children; 35% expected to help the grandkids.
“We believe there is a postrecession mind-set,” Tyrie says. “People realize that living beyond their means is not wise and that stock market and home prices don’t always go up.” None of this is terribly surprising. But four years after the recession ended, evidence of our new values is still trickling in.