Even before recent market reversals, Americans believed their financial difficulties would last for a long time, according to a new study funded by Northwestern Mutual. The nation's sober attitude toward its financial future may reflect long-term shifts toward more conservative investment and retirement goals.
[See Annuity Buyers Seek Safety, Risk Guarantees.]
"The prevailing consensus is that steady and slow will win the race," Greg Oberland, a company executive vice president, said in a prepared statement. "People have recalibrated their personal risk-reward meters, and are putting much greater value on achieving stable growth over longer timelines."
Northwestern Mutual highlighted six "resounding" financial realities that emerged from its study:
1) Squeezing dollars is the new norm. Three-fourths of Americans favor investments that are safe, steady, and secure, and which are geared to their long-term needs. Investment guarantees and lower risk were also favored by large majorities.
2) We're not out of the woods yet. Nearly two-thirds of people said they experienced significant financial challenges during the past 18 months and they have adopted new priorities based on a defensive view of future conditions.
3) The tortoise will win the race, not the hare. Among people who do have financial plans for the future (that includes you, right?), 75 percent have extended the time frames for realizing their financial goals, and more than 80 percent of those 35 and older have done so.
4) Saving is better than spending. Looked at in terms of percentage changes, savings rates will continue to increase more than consumer spending. In this respect, individual Americans are behaving exactly like corporations, which have amassed their largest cash holdings in recent times. Uncertainty breeds caution.
[See Retired Workers Will Be Wooed to Return.]
5) Even young people get it. Younger people have shifted toward saving more to a greater degree than people nearing retirement. Of course, part of the reason for this may be that they feel they have no choice, as the older generation will plow through Social Security reserves and leave nothing behind.
6) Women are more conservative then men. By margins of 10 to 15 percentage points depending on the question, women seek more safety and security from investments, as well as guaranteed returns and lower risk.
The study, called Financial Realities: Changing Timeframes, was conducted by Harris Interactive in online surveys of more than 1,000 adults in March and April.
[See The 100 Best Mutual Funds for the Long Term.]