Younger Americans are more anxious than their older counterparts about their financial plans, despite having plenty of time to take action now, according to a study by LIMRA and Life Happens.
Millennials, or those under the age of 34, show the highest level of concern across all generations for common financial planning issues, including saving for retirement, paying for a child’s education and burdening others with their final expenses, the 2014 Insurance Barometer Study found.
Slightly more than half of younger consumers say they are very or extremely concerned about having sufficient money for a comfortable retirement compared to just 46 percent of consumers between the ages of 35 and 54. Nearly one-third of millennials are concerned about paying for a child’s schooling, compared with 20 percent of those ages 35 to 44 and 26 percent are worried about burdening others with their final expenses, compared with 19 percent of consumers 35 to 44 years old.
Forty-three percent of those under the age of 25 are most concerned about how they will pay for medical expenses in retirement; 38 percent worry about leaving dependents in a difficult situation if they die prematurely; and 36 percent are worried about paying for their children’s educations.
"Having come of age through the recession and facing uncertainty about the future of employer and government protections, millennials are having to take personal financial responsibility to ensure their future plans are secure," said Marvin Feldman, president and CEO of Life Happens. "Life insurance can provide stability and financial peace of mind and yet, while younger Americans recognize its importance, they a lack of basic understanding about it, which may be hindering them from getting the coverage they need."
According to the study, nearly one-third of adults overall (31 percent) believe they would feel the financial impact from the loss of a primary wage earner within one month of their passing. That may be a reason why, consistent with previous years, 65 percent of consumers agree that they personally need life insurance and one in four believe they need more. One third of those surveyed under age 25 (33 percent) and age 25-34 (29 percent) say they need more.
The most commonly cited reason survey respondents provide for not purchasing more is cost. Sixty-three percent said life insurance is too expensive, while 59 percent said they have other financial priorities. This to particularly true among younger consumers, who are generally more likely to qualify for preferred rates because of their age and health status.
When asked the price for a $250,000 level-term life insurance policy for a healthy 30-year- old, the median estimate given by individuals under the age of 25 years was $1,000 — nearly 10 times its actual cost of $150 a year. Nearly one in five consumers in this age group believe the same policy costs more than $3,000.
"Our findings showed an astounding lack of awareness about the true cost of life insurance. Yet, younger consumers are not alone in this misconception. Overall, more than 80 percent of Americans we surveyed overestimate the cost of life insurance and this misconception hasn't changed much in recent years," said Todd Silverhart, corporate vice president, LIMRA Insurance Research. "It is important to continue to educate potential buyers, particularly younger consumers who can often pay less, about the policy options that exist."
LIMRA and Life Happens fielded the survey of 2,047 U.S. adults in January 2014.