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The Many Flavors of Retirement Savers: Improving Readiness

Practice Management

Editor’s note: This the fourth in a four-part series. The original appears in its entirety as the cover story of the Winter 2023 edition of Plan Consultant magazine. The digital edition of the Winter issue is available here. However, access to Plan Consultant is restricted to ASPPA members, so you’ll need to be logged in. The first part of this series appears here; the second part appears here; the third part appears here

There are a wide range of ways that employers and plan professionals can help meet the unique needs of particular groups in being better financially prepared for retirement.

Action steps. EBRI Panelists had a wide range of suggestions on actions that could help employees to prepare for a more financially secure retirement. 

Stephen Rubino, Senior Vice President, Head of Workplace Innovation, Edelman Financial Engines, identified three things that can help employees who are approaching retirement and more actively preparing for it: 

1. Comprehensive and personalized income planning. 
2. Support from a trusted advice professional. 
3. Leveraging a 401(k) investment lineup and payout flexibility. 

Rubino and Demi Hannon, Senior Director, Global Financial Benefits and Well Being, Boeing had additional suggestions: 

  • Remember the importance of financial health. 
  • Start instruction about the importance of finances and financial health early — in schools.  
  • Make sure that employees have, and are using, the right plan design. 
  • Have personalized plans for employees. 
  • Enhance and modernize the digital experience.
  • Remember those closer to retirement. 

Assist underrepresented employees and populations. An Urban Institute report warns that retirement security is projected to be “especially precarious” for early Millennials of color, those with little education and limited lifetime earnings, and those who are not married. 

An expert panel at the 2022 NTSA Summit stressed the importance of keeping the backgrounds of the audience being reached in mind and approaching clients with understanding. “As you work with your clients, you have to understand their backgrounds and where they came from,” said Mahes Prasad, Private Wealth Advisor Managing Director, US Bank. 

NTSA panelist Philip Kim, CRES, Divisional Vice President, Signature Wealth Concepts, noted that part of the explanation for the poor savings rate of minorities and immigrants may be that they are reluctant to trust strangers with their hard-earned money, which would include reluctance to trust financial planners and managers. “Understanding this helps you serve the underserved,” said fellow panelist Fred Makonnen, Division Vice President, Equitable Advisors, who added, “Communicating what financial services are to underserved communities will improve the situation.”

In “Improving Retirement Readiness for Underrepresented Groups,” Alight suggests six steps that can help plan sponsors increase savings for historically under-represented groups. 

1. Embed financial wellbeing principles within retirement plan design. 
2. Consider diversity, equity, and inclusion (DE&I) in the investment selection process. 
3. Have a diverse savings communication strategy. 
4. Provide benefit equity in the retirement plan. 
5. Align retirement plan design with DE&I research. 
6. Facilitate financial stability during employment changes. 

Enhance investment savvy. The Principal Financial Group has found that many workers are uncomfortable making their own investment decisions and are looking for help. They also found a correlation between the availability of financial resources and professional advice and investor confidence, and they conclude that investment education could be key. 

Address stress. Allianz and the Financial Planning Association call for better appreciation of clients’ financial anxiety Further, 2021 research by the MQ Research Consortium and the Kansas State University Personal Financial Planning Program suggests that training financial planners about recognizing and managing client financial anxiety could help them facilitate productive meetings, and that planners should consider reevaluating how they get to know and understand their clients.

T. Rowe Price’s findings suggest that employers and retirement professionals may consider targeting their efforts to reduce employees’ stress. Specifically, they found that 65% of employees who are entering or who are in the middle of their working years (30–49 years old are stressed about retirement savings, while 50% of younger employees are.

A Note of Hope

Despite the many challenges unique to particular generations and groups, there is room for hope. For instance, Hannon is optimistic about younger generations, and reported that at Boeing they are seeing newer employees not wasting any time and “making their investment choices and saving right away.”

“As with any generation, every individual will have a different vision for their ideal retirement, but the key for everyone is to start saving and investing early,” advises Rob Williams, Schwab’s managing director of financial planning, retirement income and wealth management, in his remarks concerning the Schwab study.