The Impact of Money on Mental Health
Renato Mastrogiovanni
Chief Revenue Officer @HealthView | New Business Development
May is Mental Health Awareness Month, and as recognition around this topic evolves, one trend is becoming clear: younger generations, particularly Millennials, are increasingly worried about money. According to a recent study, a majority of those born between 1981 and 1996 say that their finances make them feel depressed and keep them up at night. This may come as little surprise given the history of this generation, who largely came of age during the Great Recession, are saddled with higher student loan debt than preceding generations, and do not have the reliability of pensions as they look towards retirement. ?
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The latter point is exasperated by impending solvency issues within the Social Security program, as highlighted by a report from the Social Security Trustees on May 6th that indicated the retirement benefit trust fund is only projected to deliver full benefits until 2033 – a full decade before even the oldest Millennial will be eligible for benefits. With diminished benefits anticipated for younger generations, that leaves Social Security and pensions (two-thirds?of the “Three-Legged Stool” of retirement income) worse-positioned for Millennials than their parents’ or grandparents' generations.
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A Fortune article titled “Millennials are so worried about their finances that they’re falling into a depression” bluntly summarizes that this generation’s disproportional impact of COVID-19 related job loss and growing up during times of “global and financial turmoil” have led to immense worry over money. As Millennials take up a larger share of the workforce, the portion of employees who are confident in being able to retire with the lifestyle they desire is half of what it was in 2021.
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So while contingency planning around diminished Social Security benefits isn’t something that Baby Boomers had to consider, it should not necessarily be seen entirely as a negative for members of the Millennial generation. The ultimate solution to Social Security’s solvency issues is yet to be determined, but proper planning can position these future retirees to maximize their benefits while being prepared for the most likely scenario.
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Financial professionals can leverage this area of concern as an opportunity to engage with Millennials – a generation that is accumulating assets and largely recognizes the value of working with a financial professional.
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As outlined in HealthView’s whitepaper, Social Security Benefits: How Much Should Millennials Expect?, one of the potential resolutions to the program’s solvency concerns is increasing the Full Retirement Age (FRA), which would reduce the monthly amount one can collect based on their chosen claim age. And while future-value benefit losses from these anticipated changes may be substantial, investment solutions to negate their impact are not unreasonable – a 35-year-old earning $100,000/year could make a one-time investment of $54,000, increase their retirement savings by $2,500 annually ($48.08 per week), or utilize a combination of upfront and longer-term savings strategies to generate the income they would lose if that policy change came to fruition.
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Read our white paper here: https://hvsfinancial.com/wp-content/uploads/2022/06/SocialSecurityMillennials.pdf
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Under this path, a Millennial will be fully prepared to offset the impact of adding one year to Full Retirement Age in the event that this policy change occurs and is better positioned to meet retirement income needs if another solution is implemented, including the potential increase to Full Retirement Age, which based on historical precedent may be the most likely outcome.
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Social Security is far from the only financial challenge facing Millennials, but it is among the most important. Likewise, money isn’t the only topic that leads to mental health challenges, but it ranks higher than common worries such as physical health and social life. Financial professionals can address this concern with tailored solutions unique to the Millennial generation, and help improve their wealth, and their mental health.
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Given the average age of Americans who work with a financial professional, the Millennial generation poses a significant opportunity for advisors to grow their business and reach new clients. Strategies to approach Millennial investors include maintaining a strong online presence, engaging on social media, and being privy to that generation’s top-of-mind challenges, including student loans, digital assets, and financial literacy.
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Donald Moine, Ph.D., Organizational Psychologist. Rapid Growth Strategies for Financial Advisors, Insurance Agents and Company Founders. Expert Witness. Executive Coach. International Consultant. Speaker. Author.
9 个月Excellent article Renato Mastrogiovanni. If we raised the Social Security contribution limit to the first $1 million of income, SS could be funded for a much longer period of time and younger people would not have nearly as much anxiety about this.