America’s Baby Boomers have now been receiving Social Security benefits for nearly 15 years, and subsequent generations — Generation X, Millennials and Generation Z — continue the steady march toward retirement.
While no two individuals are alike and generalizations don’t always apply, one thing all three generations after the Baby Boomers share is a growing awareness of the increasing need to plan, save and invest for retirement.
Even among the most disciplined savers, headwinds and outright threats to retirement security are constant: regulatory changes, rising income taxes, insufficient participation rates, inadequate deferral rates, cybercrime, scams … the list goes on.
If your direct contribution qualified plan includes shares in company stock, you’ll want to create opportunities to talk to older and/or long-term participants about tax strategies as their eligibility for distribution approaches.
Why? Because plan sponsors and advisors can play a key role in helping those employees get access to a greater proportion of those assets’ value as retirement income.
In a recent study, nearly two thirds of U.S. adults agreed that their financial planning could use some improvement, yet only a little over a third reported working with a financial professional.1 Getting employees on board and contributing to a retirement plan is already an important step toward improving their future financial security, but sponsors and financial professionals can do more to help participants better understand and anticipate their income needs in retirement.
As a financial professional, you’re well versed in the lingo and jargon of the industry. Terms like “fiduciary” or “pension risk transfer” may roll off your tongue with ease. You’ve also gained a full understanding of the importance of taking action ahead of retirement to ensure comfortable living. Those you advise or guide through defined contribution plans, however, may not be nearly as versed as you.
Target-date funds, or TDFs, can have a powerful influence on plan participants’ retirement savings by simplifying investment decision-making. And when TDFs are carefully selected to match with plan participant characteristics and behaviors, they have the potential to help more participants achieve greater retirement security.
That’s why TDFs are a popular choice for a qualified default investment alternative (QDIA) for 401(k) and other defined contribution plans.
In general, customization is important, and the reason is quite simple: Not everyone is living the same life. All kinds of products can benefit from customization, and that includes retirement plans and other financial products and services. Managed accounts represent an ideal way for retirement plan participants to access more personalized service, with customization as a major focal point.
As the American middle class in particular continues to lose confidence in their ability to enjoy a fulfilling retirement, they may be eager for new opportunities to set themselves up for financial success. Managed accounts could provide plan sponsors with an appealing option.
We previously covered a few of the ways women often approach investing differently from their male counterparts. Now, we’re not making claims about “the female investor,” or suggesting innate differences between men and women that cause these divergences —rather, many women’s life circumstances may engender greater risk aversion.
Lower overall earnings, more time spent out of the workforce to care for family members and longer life expectancies may all add up to amplify the sense of risk to women’s retirement savings. That can lead to much more conservative investing and, potentially, missed opportunities.
Where do people turn for trusted financial advice? How are they feeling about their retirement prospects? Research seems to indicate that a lot of people aren’t seeking financial guidance or feeling very confident about a comfortable retirement.
According to the Northwestern Mutual 2022 Planning & Progress Study, 62% of U.S. adults say their financial planning needs improvement, but just 35% work with a financial professional.1 That same survey found that 58% of adults who don’t work with a financial professional are somewhat or very anxious about their finances.1
