While Asian Americans are more confident and focused about their investments than other retirees and pre-retirees, they do express more concern about making missteps with their retirement savings, according to new research.
Massachusetts Mutual Life Insurance Company’s Asian American Retirement Risk Study finds that Asian American retirees and pre-retirees worry more than other Americans about taking on too much risk (69% vs. 44%) or making poor investment decisions (67% vs. 54%) within 15 years before or after retirement. This concern is even more elevated among Asian American pre-retirees (75%) who are particularly worried about taking on too much investment risk.
“While many Americans focus on being ready to retire, no other ethnic group that we’ve surveyed is as focused on their financial goals as Asian Americans,” said Wonhong Lee, Head of MassMutual’s Diverse Markets. “And these findings are actually aligned with other studies we have conducted in the past, as the key driver for this community is to attain financial security in every key milestone in life, such as paying for their children’s education or retiring in comfort without being a burden to their children.”
Asian American retirees and pre-retirees also apparently believe more so than others that workers approaching retirement should reduce their investments in equities (64% vs. 53%). The group was also found to be more likely to have more conservative investment goals, aiming for their assets to “match the market” (43% vs. 32%) rather than outperforming the market (55% vs. 65%). But despite those views, the study found few differences between Asian Americans and the general population of retirees and pre-retirees with respect to their overall risk tolerance or allocation of retirement assets between equities and fixed-income investments.
Asian Americans also appear to be less likely to have committed “bad plan behaviors” that reduce retirement savings, such as making withdrawals, taking hardship loans or suspending contributions, according to the study. While one out of four American retirees and pre-retirees (25%) report engaging in those behaviors, Asian American respondents were significantly less likely (11%) to say the same.
Investor Involvement
Meanwhile, Asian Americans were found to have a stronger preference to be heavily involved in managing their finances and investments, particularly among retirees. For instance, Asian American retirees were more likely to enjoy managing their own money compared to the general population of retirees (80% vs. 59%).
Compared to retirees overall, Asian American retirees find actively managed mutual funds (71% vs. 44%), customized investments (64% vs. 40%) and target dates funds (47% vs. 29%) less appealing. Moreover, when looking only at Asian Americans, only two out of five retirees (42%) prefer a “set-it-and-forget-it” investment compared to nearly three in four pre-retirees (72%).
The group was also found to be less likely to work with an advisor. A little over one out of three Americans overall are not currently working with an advisor (35%) compared to nearly 7 out of 10 Asian Americans (69%).
Despite their hands-on approach, the study suggests there is room for Asian Americans to learn more about investing, according to Lee. Many are not projecting how many years they will spend in retirement and, consequently, are not planning to meet those demands. The study shows that more than half of Asian Americans (53%) are unclear about the length of their retirement, compared to 36% of Americans overall.
“What MassMutual’s study tells us overall is that Asian Americans are thoughtful, cautious and discriminating with their retirement savings,” Lee said. “Asian Americans want the ability to control their financial destiny by having access to as many options, quality investment choices and sound education as possible.”
Conducted in January 2018 by Greenwald & Associates on behalf of MassMutual, the internet-based study polled 801 retirees who have been retired for 15 years or less and 804 pre-retirees within 15 years of retirement. Pre-retirees were required to have household incomes of at least $40,000 and retired respondents had at least $100,000 in investable assets and participated in household financial decisions. A total of 199 Asian Americans were surveyed.
