The survey found Younger employees were found to be using the same asset allocation strategies as their older counterparts, with Gen Y using a similar asset mix (50% stock, 35% bond/annuity and 15% cash) as Gen X and Baby Boomers. When asked to describe their personal plan for retirement, less than a quarter (24%) indicated they had a formal plan in place. Even among Baby Boomers, only 27% said they had a formal plan (see Higher Ed Employees not Preparing Well for Retirement).
Lauren Brouhard, SVP Marketing, Fidelity Investments Tax-Exempt Market, told PLANSPONSOR that trends in survey are not unique to higher ed institutions; there are overall challenges with getting people to focus and set a long-term plan and monitor investments. However, from the survey, a small sample indicated that higher ed employees, especially faculty, are working longer. Often because of their sentimental views of the institution (it is part of their identity) they intend to work well beyond 65, with no plans to ever retire. Employers should engage these employees on the importance of engaging in planning and saving.
In addition, Brouhard notes that higher education institutions tend to offer rich employer funded plans, so employees may not feel an urgency to invest. There is less feeling of personal accountability as seen in other markets.
Brouhard says institutions recognize these challenges and are looking for better ways to engage employees and educate them. Fidelity has seen its clients embracing programs to engage participants.
“It’s about making the right kinds of objective financial help and guidance available. Finding time for employees to sit down one-on-one with an adviser is different for staff members and administrators. Employers should make different resources available, such as face-to-face meetings, phone calls with an adviser and information on the Internet to reach more people.
According to Brouhard, employer advocacy goes a long way. Employers need to have people close by on different campuses available to guide employees, and they should encourage employees to contact providers and advisers.
Brouhard says there was nothing in the survey pointing to why younger generations are investing like older ones, but she think it’s an overall trend of being more conservative following economic downturn, a trend not unique to higher education employees.She suggests employers encourage participants to meet with advisers and do a regular checkup of their retirement accounts. Brouhard reminds sponsors that providers like Fidelity are there as a resource on investment and retirement planning education for sponsors and participants.
A Plan Sponsor Perspective
Following the release of the findings of Fidelity’s survey on retirement planning and saving by higher education employees, Louis Morrell, a former manager of a university endowment for 16 years, said the simple answer to why they are not preparing well for retirement is that most higher education institutions place the primary responsibility for retirement planning in their HR departments, with no involvement by the financial/investment management side of the institution. “Many schools with outstanding investment management operations and sterling performance results have severely underperforming retirement plans,” Morrell says.
Morrell told PLANSPONSOR that this is the result of two key factors: the institutions are unaware of or unconcerned about the situation, and/or their Legal Departments fear exposure to liability if the institution gets involved.
Morrell realized this when, during his tenure, he was asked to oversee the HR operation. Working with a former colleague from the investment office of the university, he developed an education program for employees on investing and saving.
Morrell says sponsors should:
- Make outside investment vendors available to employees, if so requested;
- Make a paid outside consultant available, as an option, to assist the employee who would pay a fee for such services, or provide an outside consultant, to assist the employee, with the institution paying for the service; and
- Get directly involved in the process by providing basic investment information (education) and offer investment options, to be selected by the employee, depending upon his/her risk tolerance and return expectations.
“The basic issue is: are employees prepared and capable of managing their retirement accounts?” Morrell concludes.
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