Financial life stages: How do you compare?
It’s common for Americans of every generation to experience a significant financial setback.
The causes and effects of each generation’s most common setback are different depending on cultural shifts and global events.
Those who take action to respond to setbacks overwhelmingly report they’ve overcome their financial obstacles.
According to the new Ameriprise Ages, Stages & Money study, 9 out of 10 investors with at least $100,000 in investable assets report feeling confident about their financial future.
You may be wondering how Americans can stay so optimistic despite global turmoil, tepid wage growth and a divided political climate. It seems that study respondents remain positive about their financial progress in spite of upheavals along the way: 8 in 10 can list significant setbacks that have negatively impacted their financial journey.
Top financial setback: Job loss
The study, which surveyed more than 3,000 Americans ages 30–79 with at least $100,000 in investable assets, reveals the top financial setback for younger respondents is a job loss or career issue. Market loss is the leading derailer older respondents cited.
The good news is that 6 out of 10 respondents say they’ve fully recovered from these events. The upshot? Financial setbacks are inevitable — and recoverable — during every decade of life. Identifying major hurdles, knowing where you are in your financial life cycle and potential missteps to avoid can help you stay on track toward your goals.
“Investors at various ages and stages of life who are taking action to manage their money feel financially confident despite the obstacles they’ve faced,” says Marcy Keckler, Vice President of Financial Advice Strategy at Ameriprise Financial.
Generational events can shape financial outlook
Coming of age: How you compare
Discover how your own experiences stack up against your peers in the survey.
|Your age today|
|In your 30s||In your 40s||In your 50s||In your 60s or 70s|
|You came of age during...||The housing bubble||9/11||Black Monday||Vietnam and the energy crisis|
|A recent life milestone has been...||Buying your first home||Reaching your peak earning years||Funding a child's education||Retiring, changing health|
|Among your biggest challenges...||Student loan debt||Helping both your kids and your parents||Maximizing your saving and investing to reach investment milestones during key earning years||Rising health care costs|
|Good things to be thinking about include...||Capitalizing on the advantage of time, saving smaller amounts over many years||529 college savings plans||Diversifying assets to provide a buffer against future volatility||Strategic withdrawal strategies to help your income adjust to market changes|
Financial life stages aren’t just about age
Interestingly, age seems to be less of a factor in where people identify themselves in their financial journey. The study defined three life stages Asset Accumulator (wealth builder), Asset Maximizer (power saver) and Asset Sustainer (making money last). Conventional wisdom aside, Accumulators weren’t all in their 30s and Sustainers weren’t all retired. There was statistically significant age variance among the life stages.
How do you compare with others your age? Read on to see which life stage best describes you
You may be an Asset Accumulator if:
- you’re focused on increasing your income,
- while balancing asset accumulation with managing debt.
You may be an Asset Maximizer if:
- you’re ramping up your savings while optimizing existing investments a priority,
- and you have accumulated some assets and are focusing on growing assets in retirement accounts and achieving other long-term goals.
You may be an Asset Sustainer if:
- you’ve achieved retirement,
- and your priorities include determining drawdown strategies and adjusting investments to make your money last.
See how you compare to others in your age group
External events or personal missteps: The impact to your financial journey
Regardless of age, certain decisions have the potential to hinder investors’ financial futures. The most significant missteps reported were dipping into retirement plans and not protecting assets (i.e. not having long-term disability income or long-term care insurance) .
Despite these hiccups along the way, most respondents have recovered from mistakes. With time, the savings gap between what each life stage thinks they’ll need to retire and the actual amount they have decreases: from a $1.3 million gap among Accumulators to an $875,000 gap among Maximizers.
It’s never too late to get back on track
No matter where you are in your financial life cycle, the study shows that it’s never too late to make course corrections or undo missteps along the way. Case in point: Many of the retirees who are currently investing in an employer-sponsored retirement plan reported that they started investing in it later in life
These actions can help keep your finances in check regardless of age:
Set financial goals
- As a first step, define your dreams for the future.
- If you’re married discuss your joint and individual goals, short and long term.
- Prioritize your goals and determine what it will take financially to achieve them.
Develop a financial plan
- Create a plan to help you accumulate assets and identify investments that can help you meet your goals.
- Stay up to date on your investments, know your risk tolerance and how your portfolio should be allocated based on your life stage
- Create a plan for the next 5, 10, 15 years
Live within your means
- Keep track of expenses and outflows, manage your budget to avoid expenses that outweigh your income.
- Pay down debt
Prepare for the unexpected
- Life is full of surprises, so it’s important to prepare for unexpected events. Consider what insurance coverage you will need to protect assets and help your loved ones should something happen to you. Also, be prepared by having a cash reserve.
Obtain professional advice
- A financial professional can help you navigate financial milestones.