Wouldn’t it be great if there was a retirement-industry equivalent of Smokey the Bear? Someone always ready to tell pre-retirees, “Only YOU can protect your financial future!” and encourage workers to begin saving for retirement—and whatever else the future might hold? Unfortunately, there is no retirement-industry equivalent of Smokey. But financial advisors can have the same effect on pre-retirees that the fire-preventing bear has on America’s youth, and it starts with encouraging better behaviors.
The news was alarming; at year-end 2017, U.S. household debt rose to $13.15 trillion – an all-time high. The recent study showed that rising debt comes with a price – less money in your wallet, as well as a burden on your emotional and physical well-being. What’s even more alarming, perhaps, is that nearly four in five full-time American workers report living paycheck-to-paycheck. With rising health care and secondary education costs, it can be tough to find extra money in the budget to allocate towards saving for retirement. But most Americans don’t want to work forever, so saving for a financially-secure retirement should become a top priority.
If you’re anything like us, you have a love-hate relationship with your alarm clock. While we appreciate that it helps us get the day started so we can earn a paycheck, our appreciation only slightly outweighs our desire to smash it with a hammer each and every morning. But as owners of these bittersweet little machines, we do yield a great power over them…the snooze button. With nothing more than a push of a button, we’re able to forget about our morning tasks in favor of 10 more minutes of rest, which will surely make today that much better.
Unfortunately, saving money for retirement is also seemingly suffering from a snooze button, especially among younger generations
In today’s retirement landscape, financial education is a hot topic—and for good reason. Financial education is necessary to foster responsible fiscal decisions, healthy savings habits, and overall retirement readiness among today’s consumers. And as a financial advisor, you understand this more than anyone. Yet, despite its crucial importance, American workers seem reluctant to approach the intimidating topic of financial literacy.
Here it comes—another informational resource that’s going to needlessly recite all of the negative savings statistics of Americans, bemoan the selection of certain types of funds, and ultimately, use a bunch of industry jargon in an effort to sound more qualified to industry insiders. Creating that type of resource wouldn’t be worth your time. Or ours.
It’s time to change the conversation from the standard industry noise – evolving fiduciary standards, state-mandated retirement plans, and a stock market that’s constantly changing – to discussing fundamental changes that plan providers and those saving money need to make in order to actually have a shot at getting the retirement they want.
Social Security is arguably one of the most important programs to retired workers in the country – and for good reason. Social Security payouts account for more than half of all income earned by roughly 6 out of 10 retirees – despite the fact that the program was never designed to replace the majority of pre-retirement income. Balancing personal savings with Social Security benefits is paramount to realizing a financially secure, stress-free retirement. And what’s one of the biggest variables when it comes to making your retirement nest egg last? Life expectancy.
If you thought that the Americans who are most concerned about retirement planning are the workers who are closest to reaching retirement age, you’re in for a surprise. Roughly 10,000 Baby Boomers reached full retirement age today (congrats, Baby Boomers – you made it!), and roughly 10,000 Baby Boomers will continue to turn 65 every day for the next 11-ish years. But they aren’t the generation that has the most anxiety about reaching retirement. Not by a long shot.
Enter Generation X.
Today’s upcoming retirees face many demands on their personal finances, and they’re often torn in numerous directions. They may be gearing up to help their kids fund college or perhaps trying to get that mortgage paid off before reaching the years of retirement bliss. Whatever the case may be, it’s important for financial advisors to keep clients on track when it comes to saving for their future.
A recent study by the Betterment for Business uncovered confusion, fiduciary responsibility, fees, and education as ongoing issues surrounding retirement savings and retirement savings accounts. And while this may be an accurate assessment, it’s certainly not a new revelation for anyone close to the market or industry. The article goes on to discuss how digital resources could be a potential fix to all of these concerns, yet they don’t reference any human interaction. But why would a plan sponsor want to run something as human-centric as a retirement plan using non-human “robo advisors?”
With over 2,500 rules enforced by the Social Security Administration and as many as 81 different potential strategies for collecting Social Security benefits, it’s no wonder pre-retirees and retirees alike often feel overwhelmed and confused when it comes time to claim benefits. What it comes down to, however, is that there are no one-size-fits-all solutions for collecting Social Security, and those of us without a basic understanding of how Social Security works are more likely to make uninformed decisions—which can lead to poor claiming strategies and overall reduced benefits.
If you’re a full-time American employee who feels the burden of financial stress or lives paycheck to paycheck, you’re not alone. Roughly 78 percent of full-time American workers say they live paycheck to paycheck, and that number has only gone up in recent years. Worrying you won’t have enough money to pay for unexpected expenses is stressful enough as it is, but how do you manage to save money for retirement while still providing for yourself in the now?
Suddenly finding yourself with a large chunk of money at your disposal sounds like a dream come true for many people, but receiving an inheritance without a plan for what to do with the funds can cause quite the pickle for young people. Many times, inheritances are viewed as a short-term financial gain that can be spent on frivolous items – never meant to last in the long-term. But if we’ve learned anything in our time in the financial industry, it’s that what lasts one week for some can last years for another.
The results from recent studies surrounding retirement readiness are in, and they don’t look good. More than 1 in 4 U.S. adults don’t save any portion of their household’s annual income for retirement; taking a cue from this statistic, and understanding that everyone benefits from making savings a priority, these states are proactively investing in the economic futures of their citizenry by introducing laws that provide state-run retirement savings initiatives.
By the time many people have reached their 40s, they’ve already experienced the highs (and perhaps the lows) of personal finance. They may have some money in the bank, own a house, be saving for their child’s college tuition – and hopefully, they’ve also been contributing to a retirement plan. With so much to gain, and so much to lose, financial mistakes made in a client’s 40s may have a much more devastating effect than the same mistake made twenty years earlier. And as a financial advisor, you have the unique ability to offer advice and education that may prevent seasoned workers from making common financial mistakes. You just have to start the conversation.
Humans feel stress on a daily basis. It’s a part of life, but that doesn’t mean it needs to creep into the workplace. Outside stress can cause a serious lack of focus among affected employees, and one of the biggest stressors is money. In fact, nearly one in three employees reports that personal financial issues have been a distraction at work. And one of the biggest financial concerns among employees is not being able to retire when they want.
Listen up, Millennials. If you have student loan debt, this one’s for you. Forbes recently reported that the average American household with student debt owes about $49,000. Yikes. With all of that college debt looming large, it’s no wonder Millennials have delayed traditional timeframes for buying houses and starting families. But it may also affect how – and when – Millennials begin saving for retirement. Should Millennials focus on paying back student loans as fast as possible, or should they allocate more dollars per paycheck to begin funding retirement? What makes the most sense?
There’s no escaping it – technology is everywhere you look. From the mini-computer you call a phone to the touchscreen on your new car’s dashboard, everything in our lives is becoming “smart.” And the financial industry is no different. Tablets and smart phones are changing the conversation and are helping retirement plan participants become educated in new ways that they never could have ten years ago. And it goes far beyond checking account balances on the go.
Hey Millennials – raise your hand if you’ve started a retirement savings account. If you have, you’re not alone. A recent study reported that when Millennials, characterized as being born between 1979 and 2000, were offered a 401(k) retirement savings plan through their employer, there was a 72 percent participation rate . Congratulations! As a group, you started saving around the age of 22, more than a decade earlier than your Baby Boomer parents and five years sooner than your Gen X cousins. And these four tips will help you stay on top of the whole savings thing even more.
There’s been a lot of talk recently about how many American workers lack access to an employer-sponsored retirement plan, and the statistics are alarming. According to the Employee Benefits Research Institute, only about three in ten small businesses have retirement savings plans available to employees. The problem here is obvious—so the government is stepping in.
There’s never a bad time to audit your retirement savings account and make sure there are no major discrepancies between the amount of time you’d like to be retired and the amount of time you can afford to be retired. Maybe you weren’t as vigilant about saving for your retirement as you should have been early on or maybe you recently decided to raise your savings goals. Whatever the reason, if you’re over the age of 50 and are further from being retirement ready than you’d like to be, catch-up contributions can help.