Ryan Bailey, head of the Retail Banking Group, Bank of the West, offers tips for plan sponsors to help educate Millennials about the importance of investing.
Data and Research
The International Foundation of Employee Benefit Plans found employers are providing education on a variety of topics, but the top five most common topics covered in employer-sponsored financial education programs include retirement plan benefits, pre-retirement financial planning, budgeting, investment management and retiree health care.
Two-thirds of Americans who work with a financial adviser believe they know how much to spend now and to save for the future.
However, the Center for Retirement Research (CRR) at Boston College found portfolio allocation did account for about one-quarter of the total 16-year underperformance for bottom quartile plans.
In conclusion, IZA says, “the data do not support the idea that presenting optional 401(k) plan information in a simpler, more compact way will improve employees’ retirement planning choices. However, we did find that financial literacy was positively associated with better choices."
In addition, Vanguard found among its book of business a large increase in the number of small businesses offering retirement plans to employees.
They are on track to replace 75% of their income, compared to 64% for Americans overall.
Yet, a significant number are not saving for retirement at all.
Among employers that do not offer a financial wellness program, reasons cited in a survey were: have not thought about it, need more resources to execute, need to focus on other organization priorities, do not perceive any financial benefits, and do not want to get involved in employees’ personal finances.
Mercer suggests smart companies will help employees grow professionally, lead healthier lives and make better financial decisions by leveraging technology to efficiently deliver an enhanced employee experience.
David Brenner, senior vice president and national director of Multiemployer Consulting points out that, “a change to a considerably lower discount rate would expand the current pension crisis from about 10% of multiemployer plans to every multiemployer pension plan.”
In the U.S., pre-retirees think they will need 74% of their income to live comfortably in retirement, but retirees actually receive 58%, a survey finds.
However, a brief released from the Center of Retirement Research shows retirement wealth accumulation is affected by having student loans.
“We continue to see the significant impact plan design and financial wellness programs have on participant behavior, as evidenced by the increase in both participation and deferral rates and decrease in loan usage,” says Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services.
“These findings are a call to action for advisers, employers and policymakers, who have the ability to help gig workers set up retirement savings plans, acquire adequate insurance coverage and develop budgets," says Jamie Kalamarides, president of Prudential Group Insuranc
Four in ten Americans (40%) admit that they have tapped into their savings to pay for something that they really want, but didn’t absolutely need.
On top of this, more than three in four worry Social Security could be extinct by the time they retire.
More than one-third of Gen Xers say they have no money at all saved for retirement, and 29% expect Social Security to be their primary source of retirement income.
Current regulations requiring paper delivery of participant DC plan information can cost investors between $350 to $500 million per year, which can reduce the average account balance by 2.4% over a 40-year work life, the study found.
Half of retirees say they spend less in retirement than they did in their working years.