Majority Lack a Financial Plan While a Third Don’t Have an Accurate View of Their Finances
MILWAUKEE, Sept. 20, 2016 /PRNewswire/ — New data from Northwestern Mutual’s 2016 Northwestern Mutual Planning & Progress Study indicate that Americans are feeling financially vulnerable and it likely starts with the absence of a comprehensive perspective on their finances.
The findings revealed that one third of Americans (32%) do not feel they have a clear and accurate view of their whole financial picture, spanning both current obligations and future needs. This may be a factor as to why only one in five (20%) feel “very confident” that they will be able to achieve their financial goals.
“It’s much easier to navigate the path to financial security with your eyes wide open to all the realities you are facing,” said Dave Simbro, senior vice president, life and annuity products. “Like with any other situation, when you are uninformed it makes the process more challenging and intimidating.”
Disconnect between words and deeds leaving Americans exposed
Most Americans are acutely aware of the importance of deliberate, sustained planning. When asked which they found more valuable, an overwhelming majority (89%) opted for “a feeling of comfort from knowing I am financially secure for the long-term” over “cash in hand today” while two in three acknowledged that their financial planning needs improvement.
Despite their appreciation for the role that planning plays, people are not necessarily putting theory into practice:
- Only 40% are confident their financial plan can withstand market cycles, which is concerning considering that the majority (76%) increasingly expect there to be financial crises over time – (up from 67% in 2015)
- Fewer than 4 in 10 (37%) define a financial plan as a strategy to “…allow me to live comfortably when I get older or retire” with some saying it simply means sticking to a budget or living within one’s means
- 35% haven’t talked to anyone about retirement
Moreover, while six in 10 (60%) said that integrated solutions designed to both grow and protect their assets are most important to achieving financial security, only a small fraction of Americans own any financial products beyond a basic savings account:
- Investments (including stocks, bonds, mutual funds, IRAs, ETFs) – 45%
- Permanent life insurance – 27%
- Term life insurance – 26%
- Annuity – 16%
“Deepening awareness of their options is essential to helping Americans feel less vulnerable and more secure,” continued Simbro. “For example, many don’t realize that permanent life insurance is the proverbial utility knife of financial solutions because it can be used to tackle a variety of financial objectives over the arc of their lifetime – from building a business and funding college to supplementing retirement income.”
