Oct. 07–While the recovery following the Great Recession has for many Americans been painfully slow, a recent study has identified a group of Gen Xers and baby boomers who are still nursing financial and emotional wounds. The setbacks they experienced — which may have included the loss of a home, a job or their retirement savings — may be holding them back even now.
Seven years after an economic crisis generally acknowledged to be the most devastating since the Great Depression, a Minneapolis-based financial services company found 1 in 5 boomers and Gen Xers display attitudes and behaviors crippling their ability to move forward in their financial planning. They may have lost confidence in financial institutions or are only comfortable with conservative investments.
The company named people in this group “post-crash skeptics.”
“There are some people who have a certain DNA where once they experience certain trauma, they have an emotional versus rational response to that trauma,” said Katie Libbe, head of consumer insights for by Allianz Life Insurance Co. of North America, which commissioned the study.
For some, the hits came from all sides.
“They were contributing to their 401(k) plans and doing everything they thought they were supposed to do,” Ms. Libbe said.
Then their lives fell into chaos when the crisis hit around 2008. “Now they are not sure they want to get back into the stock market. This segment is much more cautious in their financial strategy than before. The Great Recession altered the way they think of risk and investing.”
Allianz Life’s study of 2,000 Americans — including 1,000 baby boomers ages 49 to 67 and 1,000 Gen Xers ages 35 to 48 — asked a series of 13 questions about possible experiences from the 2008 market crash, including whether their home or 401(k) went down in value, whether they or a family member lost a job, and whether their savings or retirement planning were affected.
One in 5 experienced six or more of these events, identifying them as post-crash skeptics.
Daniel Dingus, president and chief operating officer at Fragasso Financial Advisors, Downtown, said he and advisers at the firm have worked with people who have not fully overcome their fears of the stock market since the crash of 2008.
“The crash of 2008 left a lot of people paralyzed,” he said. But the market really took off after 2008, and those people who were leery of getting back in may not have participated in the rebound as much as they could have.
“Being too cautious may also negatively impact investors, which is essentially the opposite of being overly confident,” Mr. Dingus said. “With low interest rates on many fixed income securities and the pittance paid on cash investments, it has created a new set of challenges for reaching your financial goals.”
Ms. Libbe said the longer such skeptics stay on the sidelines and refuse to address the challenges, the more difficult it will become to prepare for the future. Before long, a delayed retirement or a reduced lifestyle becomes a stark reality.
“These people will probably work another 10 to 15 years, so they should get back on the horse,” she said.
Financial advisers should also be aware that this group exists and may need special attention. “It’s important for the financial services industry to recognize this group and consider strategies for helping them move past the barriers and bias resulting from 2008,” Ms. Libbe said.
Tim Grant: firstname.lastname@example.org or 412-263-1591.
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