What the Statistics Say About How 55+ Investors Think About Wealth

As we get older, our perspectives on wealth change. Hopefully, we’ve added more wealth to our portfolio—but even greater success as we age has a tremendous impact on our investment psyche. But what are those impacts, and how can we quantify them? We looked at several statistics related to 55+-year-old investors to find out what they’re thinking about wealth—and how those attitudes change over time.

Investors Who Receive Regular Advice Tend to Keep Less in Cash

During COVID-19, one of the temptations for even older investors was to get conservative—far too conservative. Everyone knows that one way investors shy away from the markets is by moving that money to cash. But do we really know why this happens?

One reason, according to a study by Vanguard, was that investors (the study sample had a median age of 64) tend to move more money into cash when they’re not using an advisor. Vanguard specifically looked at their PAS, a goals-based hybrid recommendation service they offer. These are the results they found: 

• In the six months before service adoption, people with the median age of 64 tended to keep around 16% of their portfolio in cash, on average. Otherwise, they held 26% bonds and 58% equities. 
• Six months after the adoption of the advice, the portfolios looked drastically different. Investors took their money off the sidelines and were happier to engage more conservative, low-risk investments. The portfolio structure changed to 60% equity, 39% bond, and only 1% cash. 

What does this say about older investors and how they think about wealth, given the median age of the sample in the study? When they detach from useful financial advice, they tend to get conservative—and give up returns in the meantime. Keep in mind that this sample group looked at self-directed investors, who tend to be much more independent, with 40% or so calling themselves aggressive “risk-takers.” As the studies show, an investor’s self-perception—even at that age—can be far off from the reality of their portfolio, and it’s worth showing that to them. 

Too Much Confidence Can Be a Bad Thing 

In the above example, Vanguard found that even a high majority of “aggressive risk-takers” weren’t nearly as confident as they believed. Even amongst older investors, confidence is a matter of self-perception that doesn’t always appear in the reality of their portfolio. 

It’s worth noting that for many investors, their “overconfidence” in making their own decisions actually gets in their way. Another Vanguard study, in their behavioral guide, saw that the more investors made their own trades, the less their returns actually were. And they were able to quantify this: 

• For investors with a mean monthly turnover of 0.19%, constituting the 20% least active traders in the sample, their average annual portfolio return was 18.5%. 
• For investors who tended to trade more, with a mean monthly turnover of 21.49%, constituting the 20% more active traders in the sample? The average annual portfolio return was only 11.4%. 

In these two studies from Vanguard, we see some interesting patterns among investors. Those who believe in their abilities to self-direct and make trades are often working against their own goals, getting less in returns, and keeping more cash on the sideline. For any investment firm that wants to point to tangible benefits to receiving guidance and advice, these statistics create direct evidence that steady, solid advice tends to be better in the long run. 

Scientists Point to Behaviors that Correlate with Success in Retirement—And They’re Not All Expected 

When scientists looked for behaviors that correlate with success in retirement, some of the behaviors weren’t surprising. For example, a “conscientious” person is someone who’s thoughtful and methodical in the way they put together their life, and one would expect investments to be no different. 

But scientists also found that agreeableness was positively correlated with retirement success. Agreeableness might not be something that most people associate with retirement success. But it’s a positive trait that could lead to emotional stability, which in turn has a positive impact on the ability of investors to weather storms. 

More Investors Use Guesswork for Retirement Than You Might Imagine 

We like to think of retirement investors as sophisticated, dedicated, and earnest about the way they go about retirement investing. But that’s not always the case. According to Fool.com, about 46% of American retirement investors are just guessing. When conducting a survey, statistics found that only about 12% of respondents had ever even used a retirement calculator.  

This points to a certain worry about getting involved with retirement investing. Why is it so hard for investors to get started, or to face the realities of what they might need in their later years? Many investors, by the time they hit 55+, may have money saved, but they also might have done the bare minimum amount of work to get that money saved. They might not have an adequate plan, which means the next step for them will be finding an adviser who can give them certainty and guidance. 

Baby Boomers Aren’t Confident in Their Investments 

A survey by the Insured Retirement Institute found that most baby boomers aren’t confident in their retirement accomplishments thus far, with 68% wishing they’d saved more. 67% wish they would have started earlier. And more than half of boomers thought that they would need social security benefits to make it through retirement.  

Keep in mind that this is just a survey about how baby boomers feel—not necessarily about how their actual financial situation is playing out. It’s possible that some investors may actually be well-prepared for retirement, but their perceptions are skewed. Clearly, even those who make investments for retirement need some degree of assurance that what they’re doing is the right choice. And failing that, they need confidence that the next steps they take are the correct ones. 

An Emotion Few Talk About: FOLE 

FOLE, or the “fear of losing everything,” is a very real emotion that investors have to deal with. This is especially true of investors who have hit 55 and older and have a lot more to lose. This is in contrast to FOMO, or “fear of missing out,” and many investors 55 and older have to find a balance between the two. 

According to Kiplinger, “While investors do not want to be left out, a more powerful emotion comes from the fear that they will lose all of their investment. When market volatility causes large swings in the stock market, people can become unnerved, causing them to sideline their investments to avoid a big sell-off or stock market crash.” 

It’s important to note that “fear of missing out” and “fear of losing everything,” or FOMO and FOLE, can happen at opposite ends of the investment spectrum, but they can also exist simultaneously. Someone with a lot of money in the stock market can have FOLE but can also feel the pressure of FOMO when they see other people they know cashing in on the latest trend. There’s no easy cure, but it’s something for investment professionals to be aware of. 

The News Cycle: An Underrated Variable 

Kiplinger also pointed out the impact of the 24-hour news cycle. People around 55 make up the greatest rates of those who watch cable news channels. According to Kiplinger, this news cycle may be responsible for increased market volatility. As everyone looks to the latest news, it can have a disproportionate effect on their psychology. This, in turn, can lead to people looking to make big moves in the markets. Because people aged about 55 tend to watch cable news programs more—and typically have more money to move in the market—it means that this is a particularly large impact for people of this age.  

Investor Psychology After 55: Conclusions 

It’s hard to make sweeping statements about any age demographic. Every individual investor is going to be unique. But there are trends that reveal the pressure and fears that many of these individuals may be dealing with—and understanding these is only beneficial for wealth advisers. 

• Fear of losing is a major motivator. Wealth at the age of 55 and beyond is no longer about where it’s going, but also about how far it’s come. Investors are often risk-averse and worried about losing their life’s work. 
• Investors have more to move. Investors age 55 and older tend to have more substantial amounts of wealth, including higher net worth. Any movement they make as a group can have a dramatic impact on the market, which feeds a cyclical effect on psychology. 
• Even advanced investors need assurance. It’s tempting to think of people with more life experience as having things “figured out.” But even experienced investors need reassurance and confidence that what they’re doing is right. 

Understanding these key points will help any wealth adviser navigate their relationships with 55+-year-old investors. Know the concerns, know the fears, and it’s possible to have dialogue that moves the discussion forward.