In broad strokes, boomers have spent much of their lives embracing risk. This generation was one of the most entrepreneurial, allowing many to accumulate substantial wealth. But they may be losing their risk appetite at a critical stage on that journey—the years just before they retire—with two thirds of boomers investing less than they did prior to the 2008 downturn, according to a TD Investor Sentiment Survey
For half of them, the problem is simple; they have less money to invest—massive bear markets tend to have that affect. But 27% said they were investing less because they were discouraged by market volatility—another common side effect of bear markets.
Another 24% said they had more important things to do with their money than invest for their retirement, citing deleveraging and the obligations of the sandwich generation.
“It’s not surprising that many Canadians nearing retirement are focusing on other financial obligations such as paying down debt, taking care of elderly parents and paying for their children’s expenses including education,” says Carrie Russell, senior vice-president with TD Canada Trust.
She points out, however, that the best tactic might be to continue retirement savings contributions, even if at a lower amount.
The volatility issue has really hit boomer confidence. For those who have reduced the amount they are investing, 65% said they would be more comfortable with products that offer a guaranteed return. On a similar note, half said they wanted a minimal risk of losing their initial investment, while a third wanted “a good track record.”
These are understandable desires, but somewhat incompatible with the desire for “low or no fee” products that 38% said they were looking for.
TD’s recommendation on how boomers should get back into the market is remarkably similar to the advice usually given to young investors: determine your risk tolerance; find a low minimum purchase investment; and set up a PAC.
When asked what they would do with an extra $1,000, the largest group (37%) said they would place it in an investment with a guaranteed return, while 31% would invest in a product with a track record of good returns.
One in five said they would select an investment with low or no fees, and 15% would opt for one that is professionally managed.
The TD Investor Sentiment Survey results were collected through an online survey by Environics Research Group from May 18 – 25, 2011. A total of 1,000 surveys were completed by investors aged 45-64.