Fiduciary Is Fun!
(a.k.a. I heart taxes)
(a.k.a. I heart taxes)
The technology arms race for the financial attention of individuals and employees has never been greater. Not a day goes by that I do not see another press release or receive an email about how some financial services company is introducing a new website, or new tool, or new behavioral finance gobblegook that will revolutionize the way Americans “save and prepare for their retirement.”
To believe the hype is to believe that the average American is more engaged and prepared than ever before to save confidently on his journey to financial nirvana. Is that how it is?
According to some new research by the National Association of Retirement Plan Participants, an organization that makes “financial information transparent and universally accessible for the 145 million working Americans” we are still a wee bit away from nirvana.
Despite the plethora of new tools offered by financial institutions, it appears that only 11% of people have any generalized level of trust in them. Additionally, despite all these new tools, only 43% of employees are satisfied with the education services provided by their 401k provider and engagement is decreasing across all channels of website usage. Only 18% of employees feel comfortable planning for retirement, and only 33% of them have even tried to reduce debt or make a budget.
What the heck is going on here?! We are living in a golden age of new tools for people and across all mediums the tools are being used less and less resulting in greater financial stress and less confidence. The problem? Technology alone is not the solution.
Technology is part of the answer, but it can never be expected to be the total solution. When I see all these new tools, I concede they are great. But by themselves, they are only a starting point. Financial planning, indeed life, is too complicated to expect people to turn en mass to only electronic tools for answers.
A better solution? Pair these marvelous tools with a competent and skilled financial advisor if you really want to move the needle. The combination of advisor and technology can really deliver some powerful results. Want to learn how? Give me a call to discuss!
The word “Retirement” congers many different thoughts and images. I can tell you that after having spent 25 years working with companies and employees that “retirement” seldom means the same thing to two different people.
And the definition of retirement just keeps getting more jagged as the Baby Boomers reach their senior years. Research from AP-NORC Center shows that the idea of retiring on your own terms and putting your feet up for your remaining days is something that fewer and fewer people do. In fact, if that was ever the reality, it certainly is not prominent today.
A couple of stats from the research to get us started: over 1/3rd of Americans who consider themselves retired did not retire by choice. Most common reason people take early retirement? Health problems or disability. One out of every 3 people stop working not by choice. Find that surprising? I do. 43% of Americans over 50 say that the thought of retirement causes them to be more “anxious” than “excited.” That’s probably not good. And 56% of Americans say they expect to work past 65 with 27% of those saying they never expect to retire.
Now this last statistic may not be all that bad. Many people find purpose and enjoyment to work and working past age 65 is a choice that they welcome, not a need they bear. It’s an option, not a requirement. And that is worth keeping in mind. Rather than being forced to work beyond what your health can bear or what you need to do to provide for living expenses, isn’t it nice to think that your golden years might afford you the chance to continue to stay involved, find purpose and enjoyment without the financial requirement to do so?
What's the lesson here? It is critically important to promote savings, budgeting, and planning as early in one’s career as possible so that when those later years approach, they are not met with anxiety, but rather with hope and excitement of what can be.
If you want to work with an advisor who shares such a vision, please give me a call!
As of 2018, student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. According to Make Lemonade, a consumer finance company, more than 44 million borrowers have student loans and the collective debt is greater than $1.5 Trillion. The average borrower owes $37,172. And, of course, the largest group of borrowers is under age 30.
If you find these stats a little disconcerting, you should. How this debt is impacting our society is being felt in many ways. For those who are shouldering this debt, it means that many of the things they would otherwise be spending money toward must instead be used to pay off their student loans. When you consider that most of the individuals who have this debt are also just starting out in life and need to begin building a life separate from their parents or college, the financial hill they need to climb can be more than intimidating; it can be debilitating.
What’s this have to do with your retirement plan? For one thing, we are seeing more and more young people unable to contribute to their company’s 401k plan as they need to use those dollars for debt payment. At first glance, this might not seem like much of a worry for employers, but when you consider that the delay in participation could last for 5-10 years, the real impact to employees who are now falling behind in retirement savings can be huge. Moreover, think about the increased stresses these borrowers are feeling as a result of just trying to dig themselves out of this financial hole.
Is there something an employer can do? There are several things actually. A financial advisor can work with employees to help them with budgeting and cash flow management. A good advisor can also work with the employer to help craft a way via the retirement plan whereby the employer can still make some “matching contributions” to the plan for those employees who are paying down debt instead of making 401k deferrals. In fact, this idea is gaining so much momentum that legislation is even being proposed in Washington to codify how to do this.
Want to learn more about how to help your employees manage the student loan burden? Give me a call! I work a lot in this space.
We all pay into it. We are all expecting to receive it. But do we all understand it? Apparently not. New research from Nationwide Retirement Institute suggests that many Americans have either false expectations as to what they can expect from Social Security or a false reality of their own retirement.
The research has so much data that I can’t possibly cover it all in this blog, but here are just a couple of the more glaring misconceptions: 70% of pre-retirees (those within 10 years of retirement) believe they will be eligible for full benefits at age 63. Wrong. And 26% believe that even if they do claim benefits early, that the benefits will rise once they reach full retirement age. Wrong.
In fact, there are so many things about Social Security that pre-retirees get wrong, it almost makes you wonder what they get right. They certainly don’t get the amount right. The vast majority believe they will receive $1,805 per month in Social Security benefits, when the actual number is closer to $1,408 per month. That a difference of 28%. That’s a BIG difference. Many people, for some reason, forget that Medicare is not actually free and that premiums are withheld, on a monthly basis, from the Social Security benefit. And it can be a meaningful amount.
Is there some hope? Of course. It appears from the research that only 22% of pre-retirees have a formal written retirement plan, but that if you work with an advisor the likelihood of increasing your Social Security benefits goes up. In fact, 76% of those surveyed say that if their advisor did not, or does not, speak to them about maximizing Social Security benefits, they will switch advisors.
So what should you do? Make sure you have a good advisor who works with you to put a solid plan together for your retirement. Are you looking for such an advisor? Give me a call!