Helping savers balance the demands of today with the promise of tomorrow
by Sharon ScanlonMs. Scanlon is senior vice president, head of customer-experience for retirement with Lincoln Financial. Visit www.lfg.com.
Retirement savers participating in their employer-sponsored plans are feeling more confident and more optimistic than they have in the past five years.
But this confidence may be misplaced, as the majority of participants acknowledge that they are not saving as much as they think they need to in order to be on track with their retirement savings, according to the 2017 Lincoln Retirement Power® Participant Survey.
Retirement is one of many financial priorities
Retirement, looming far in the future for many, is fighting for a share of wallet among consumers with obligations that need to be addressed today. Of those surveyed, 38percent of participants who are saving less than they believe they need to are not saving more because other, more urgent goals get in the way. The younger savers are, the bigger the challenge. A fifth of all participants under the age of 40 have seven or more competing financial priorities, and more than half of these participants have at least five competing priorities.
Many participants are focused on debt. Fifty-eight percent of participants have debt beyond a mortgage or a car loan, with half of all consumers carrying credit card debt and a quarter dealing with student loan debt.
Student loan debt is especially impactful, with six out of ten participants with student loans reporting that they save less because of those loans. This is even more prevalent among Millennials – 43 percent of younger Millennials (those 21-29) and 37% of older Millennials (those 30-38) are burdened with student loan debt.
While debt in itself is a roadblock, mortgages, loans and credit card debt aren’t the only financial concerns participants have. Approximately half of participants have three or more savings goals other than retirement. Fifty-nine percent of those participants are saving for travel or a vacation, and 57 percent are focused on saving for an emergency and/or future healthcare expenses.
Connect with participants when they are ready to take action
Although competing priorities are getting in the way of actually saving as much as they’d like for retirement, participants are generally taking the time to educate themselves about their finances. Three-quarters of participants researched at least one financial topic in the past year, and more than a quarter researched eight or more different topics. Choosing the right investments and how to know if they’re on track with savings were at the top of the list of most commonly researched topics, followed by how to budget.
The majority of participants look to their plan provider or employer for information about financial topics, while financial professionals are another important source of information. Because these groups are valued sources of information, each has the potential to help drive positive retirement outcomes for savers.
One way to help participants is by connecting with them when they’re motivated to make a change – especially around the time of a major life event, such as starting a new job, getting married or starting a family. There’s no lack of major life events happening for younger Millennials – the group that is also dealing with an average of 5 competing financial priorities in addition to saving for retirement. Nearly two-thirds of younger millennials have had a major life event occur in the past year.
But it’s also important to connect to participants at the time and place that they’re ready to take action. For plan providers, having a mobile-optimized website that makes it easy to increase contribution rates is critical, because 23 percent of people who increased their deferral rate said they were motivated by retirement income projections, and another 20 percent said they were motivated by retirement savings calculators.
Technology is important, but technology alone isn’t the answer. Among participants who had the opportunity to meet with someone one-on-one, 74% increased their deferral rates, compared to only 32% who did not attend a meeting.
A Personal Difference
The Retirement Power® Survey shows that advisors have the opportunity to make a difference for participants, through the personalized service and guidance they are able to provide. Participants who work with a financial professional and consult him or her for the majority of their retirement saving and investment decisions are more than twice as likely to be confident about accumulating enough money to retire when they want to, converting that savings to income and maintain the lifestyle they want in retirement.
However, only 38 percent of participants who work with a financial professional discuss the majority of their decisions about how much to contribute to their retirement savings at work, and how to invest it. This presents an opportunity for advisors to discuss retirement with their clients, providing an additional level of service that’s proven to make a difference.
Through personalized service and technology that makes it simple to take action, it is be possible to help those participants save as much as they believe they need to be on track. ◊
About the Lincoln Retirement Power® Participant Study
The 2017 Lincoln Retirement Power® Participant Study is based on a national survey of 2,509 full-time workers ages 21 to 70 who have been contributing to their current employer’s defined contribution retirement plan for at least one year — with data weighted by demographics to mirror the total population. Established in 2010, Retirement Power is a platform for research and viewpoints on central issues related to retirement planning. The program seeks to identify forward-thinking ways to help plan sponsors, advisors, intermediaries and participants. As part of the program, Lincoln sponsors both proprietary and third party research with an emphasis on what drives better retirement outcomes.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations.