Technology: Investors Do Better Interacting With People Instead Of Technology

Original post

Many employers have done an excellent job of integrating financial wellness programs with their employees in order for them to improve their overall financial well-being. However, the most significant progress appears to be when investors actually speak with a qualified human being rather than relying on technology. The key, according to an article on the website of Employee Benefit News titled, “Technology Alone Not Enough in Financial Wellness,” is the level of employee engagement.

The article stresses that people who interacted with a certified financial planner five or more times during the year had a much better grasp on their finances, an emergency fund, retirement contributions, and cash flow management when compared to people who only used online tools. Were employees who talked to a real person getting better advice? Were employees who were more worried about their money doing more to understand and solve their problems by actually talking to someone? This was not known, but what was discovered was that technology can only do so much.

For example, if you get on a scale, it’s going to give you a number. The scale won’t tell you what to eat, how many calories you’ll need to burn, or what steps you’ll need to take if something unexpected happens. In terms of a person’s financial well-being, technology overload can occur and he or she will get bombarded with information that’s either not understood or unusable.

Once employers figure out that technology alone is not a viable solution to help employees with their finances, they can shift some of their financial wellness and retirement programs to one-on-one guidance with certified financial planners. Furthermore, they can incorporate education and focused presentations, such as workshops on retirement, student loan repayment, tackling credit card debt, etc., into the mix in order to drive up employee engagement.

The takeaway is that there is no single solution to help employees with their monetary planning and problems. It takes a combination of technology, education, and personal face time to ensure that a company’s workforce is making progress toward their financial goals.

Average worker needs to save 15% to fund retirement

Originally posted July 22, 2014 by Nick Thornton on

A typical household needs to save roughly 15 percent of their income annually to sustain their lifestyle into retirement, according to a brief from the Center for Retirement Research at Boston College.

Generally, workplace retirement savings plans should provide one-third of retirement income, according to the study. For lower income families, defined contribution or defined benefit plans should provide a quarter of all retirement income. Higher income families will need their retirement plans to provide about half of all retirement income.

Middle-income families will require 71 percent of pre-retirement income to maintain living standards after they leave the workforce. About 41 percent of their retirement income is expected to come from social security.

Low-income families need an annual savings rate of 11 percent in order to sustain their lifestyle into retirement, which is lower than middle-income families (15 percent) and high-income families (16 percent).  For lower income families, social security will replace a greater portion of pre-retirement income.

The Center’s National Retirement Risk Index says that half of Americans lack adequate savings to maintain their standard of living into retirement. A “feasible increase” in savings rates by younger workers can greatly affect their retirement wealth.

For those middle-income workers ages 30 to 39 who lack enough savings, a 7 percent increase in annual savings can provide adequate retirement funding. But middle-income workers age 50 to 59 who lack retirement savings would have to increase their annual savings rate by 29 percent, an unlikely expectation, the report adds.

For those older workers behind the curve, a better funding strategy would be “to work longer and cut current and future consumption in order to reduce the required saving rate to a more feasible level.”

Delaying retirement to age 70 greatly reduces the annual savings expectations workers need to meet in order to fund retirement.

A worker who starts saving at age 35 will need a 15 percent annual savings rate in order to retire at age 65. But if the same worker delays retirement until age 70, only a six percent annual savings rate is necessary.

A worker who starts saving at age 45 would need to save 27 percent annually to retire at 65. But by delaying retirement to age 70, the same worker only has to save 10 percent to maintain their standard of living after retirement.

American Workers More Physically than Financially Fit

Originally posted April 22, 2014 by Lisa Barron on

American employees see themselves as more physically fit (57 percent) than financially fit (28 percent), according to new research from the Principal Financial Well-Being Index: American workers.

The vast majority (84 percent), however, also believe that maintaining physical fitness is an investment in their financial future.

Still, nearly half of workers (46 percent) are stressed about their current financial situation. Fifty-one percent of Gen Y workers are stressed about finances compared to 35 percent of baby boomers.  And those working with a financial advisor were less likely (33 percent) to be stressed about their financial future.

"American workers recognize the long-term financial benefits of staying healthy, but financial stress is often a constant pressure that can have a significant impact on their physical health," said Luke Vandermillen, vice president at the Principal Financial Group.

"With spring in full swing, now is a good time for Americans to apply their good fitness habits to their financial lives as well. Mark some time on the calendar for financial spring cleaning."

More than half (52 percent) say they have monitored their spending levels in the past year. Thirty-nine percent created a budget to keep finances in check, up from 28 percent two years ago.

Fifty-seven percent have an emergency fund in place, with those working with a financial profession about 1.5 times more likely to have one.

"It's encouraging to see American workers planning for unforeseen hurdles by giving themselves a financial checkup and setting aside money in an emergency fund," said Vandermillen.

"Despite a few missteps, like using the fund on monthly bills, these positive behaviors show individuals are making strides and taking personal responsibility to improve their short and long-term financial well-being."

The Principal Financial Well-Being Index: American Workers was conducted online among 1,123 employees at small and mid-sized businesses from Feb. 4-12.

Survey Reveals Lack of Confidence about Retirement

Original content from United Benefit Advisors

While a company's workers may differ in age, gender and in a range of other categories, new research suggests they share at least one common attribute -- a lack of confidence about retirement savings.

The youngest and oldest employees have the most confidence about retirement, according to a OneAmerica survey from earlier this year, although those numbers still don't tip to the majority. Out of more than 6,000 respondents, 44 percent of plan participants between ages 20 and 30, and 45 percent of those older than 50, reported being "very confident" or "confident" that they will be able to maintain their current lifestyle in retirement, according to the research reported in Employee Benefit News.

Workers in the middle were even more worried about their retirement prospects, with only 37 percent of 30- to 40-year-olds and 35 percent of 40- to 50-year olds expressing that level of confidence.

An information gap may be partly to blame for the retirement jitters. More than half of Generations X and Y workers say they have little or no knowledge about investments and retirement options, according to a recent LIMRA study.

"There's a lot of attention on the baby boomers (78 million workers), but there are nearly 116 million Americans ages 20 to 47, and as an industry we need to help these Americans plan and save for retirement," Cecilia Shiner, senior analyst with LIMRA Retirement Research, told PLANSPONSOR.

Research also reveals a gender gap when it comes to retirement confidence. A separate PLANSPONSOR report on the OneAmerica survey noted that 44 percent of men said they were "very confident" or "confident" about their retirement status, while only 33 percent of women said the same.

Employers that offer retirement and financial benefits need to pay close attention to some of these "at-risk" groups within their workforce and provide resources to help them better plan for the future, experts suggest.

"These findings help underscore how important it is for plan sponsors to understand where the gaps are in perception, education and confidence in order to target different groups of employees with important messages that help them prepare for retirement," Marsha Whitehead, vice president of marketing communications for the retirement division of OneAmerica, told PLANSPONSOR.

6 solutions to the retirement crisis

Originally posted by Paula Aven Gladych on

Chad Parks, president and CEO of The Online 401(k), wants to find a solution to the retirement crisis in America. He and some colleagues drove cross-country last year interviewing people from all walks of life about their retirement savings and their ability to retire. They put their findings into a film called, “The Looming Retirement Crisis in America.”

After doing his research, Parks believes there are six major obstacles to retirement in America, but the good news is that there are also solutions.

(By the way, if his solutions seem a bit obvious to you, it’s because you’re in the business and have been paying attention. And if that’s the case, Parks’ list could only help you make your case with prospects).


According to Parks, people need to save at work but to do that, they need an employer that offers a retirement plan. More than 40 million workers cannot save at work because they don’t have access to any sort of plan.

The solution? Mandated retirement savings plans, like auto IRAs, USA Retirement Accounts, 401(k)s and others.


Getting people to actually save money can be difficult. Some individuals won’t save for retirement even if they have access to a work-based plan.

The solution? Automatic enrollment. Features like this, added to an existing 401(k), have been shown to improve participation rates because the number of people who opt out of plans after being automatically enrolled is very small.

Saving enough

Many people don’t save enough for retirement and, even if they do save, they never increase the amount they save over their lifetime. A lot of workers save 3 percent their entire working lives, which isn’t enough to provide lifetime income in retirement.

The solution? Automatic escalation. Plans that offer this feature have had great success in building employee account balances. Every year, automatically, these plans increase employees’ deferrals into their retirement savings plan by at least 1 percent. The goal is to have everyone save between 10 and 15 percent of their pay in retirement savings over time.

Investing appropriately

Workers need to invest their money appropriately for their age, their ability to take on risk and with  current market conditions in mind, according to Parks.

The solution? Cost-effective professional advice. Studies have shown that workers who confer with a financial professional save and invest more appropriately for their own situation than those who don’t work with an advisor.


Accumulation of money is not the only goal, according to Parks. It also is important to adjust a person’s savings as their life changes.

The solution? Regular annual checkups. Plan participants should revisit their accounts at least once a year to make sure they are in the right investments and not taking on more risk than they can handle.

Retirement/decumulation/lifetime income

Many investors continue to invest in riskier options well into the years when they should be scaling back on the risk and preserving their savings. They also don’t know how to prudently “decumulate” their money and haven’t explored lifetime income options.

The solution? According to industry experts, many retirement plans don’t advise individuals to annuitize even if it would be in their best interest to do so. Instead, they handle longevity risk by setting a higher age for the end of the planning period. Seeking advice about annuitization can help individuals decide whether purchasing an annuity for guaranteed lifetime income is a good option for them.


Hottest retirement plan improvement in 2013?


By Robert C. Lawton

Many employer plan sponsors are expressing a high level of interest in adding Roth 401(k) in-plan conversions as an option to their 401(k) plans in 2013. The recently passed Taxpayer Relief Act of 2012 made it possible for retirement plan participants to convert existing 401(k) plan balances to Roth 401(k) balances, whether or not the participant is distribution eligible.

The benefits? All contributions and earnings that have been in the plan five years after the Roth clock starts are distributable tax free (assuming they are distributed due to an eligible event).

The cost? It is necessary to pay taxes on any 401(k) balances converted into Roth 401(k) balances in the year of conversion.

The logic of executing a Roth 401(k) in-plan conversion lies in a belief that tax rates are low now and will be higher in the future. If a participant believes that is true, it may make sense to pay taxes now on retirement plan balances.

Younger individuals just starting their careers may find this option valuable. Imagine building a nest egg over a 40-year career and having your entire 401(k) account balance available tax-free at your retirement! This option may also appeal to higher balance, older individuals who may be involved in tax planning, or individuals who are looking for additional taxable income in a particular year (e.g.: due to the realization of a loss).

There appears to be no downside associated with adding this option to a 401(k) plan. It will not cost anything additional to administer each year and is a nice option to have available for employees to elect.

Want to engage in retirement planning? Watch your words


By Margarida Correia

If you want to engage investors in the retirement planning process, avoid talking about “financial planning” or worse, “retirement income.” Both elicit very negative responses from investors, Timothy Noonan, managing director of Capital Market Insights at Russell Investments, said at a media roundtable this month.

When investors hear “retirement income,” they think they’re about to be sold an insurance product and are reminded of their private retirement “sins,” such as not saving enough or robbing their 401(k)s, he said. And the mention of financial planning is likely to make most investors yawn. The topic is boring and technical, according to a two-year study of major markets in the United States, Canada and the U.K, commissioned by Russell.

HR/benefits professionals should talk instead about “lifestyle design,” a concept that appeals to investors. “If you want a get a disengaged person to re-engage, maybe you should try talking to them about what you can do to help them design a lifestyle that’s sustainable,” Noonan said.

Russell Investments has taken the research to heart, naming its recently launched retirement planning tool the Retirement Lifestyle Solution and the tool’s main software component Retirement Lifestyle Planner. The new tool is based on the concept of adaptive investing, a style of investing that investors are responsive to, according to the two-year study.

Investors see adaptive investing as a middle ground between the investing style extremes of changing asset allocations frequently and not changing them at all. More importantly, it incorporates “asset-liability matching,” which is central in getting “individual investors to engage meaningfully on preparing for their retirement and getting income from their retirement portfolios,” Noonan says.

“Fundamentally, adaptive investing is managing your portfolio and building an asset allocation that is connected to the spending it has to support,” says Rod Greenshields, consulting director of Russell Investments’ private client consulting group.

One of the major roadblocks to getting investors to think about and plan for retirement is their inability to visualize themselves in the future. By matching their assets to their liabilities in the future, the tool helps investors overcome this visualization difficulty, according to Noonan.


Retirement reform a likely target for Obama's second term

By Andy Stonehouse

If you think that the retirement industry suddenly fell off the radar with the end of the first round of fiscal cliff fixes, think again - substantial reform, courtesy of the second-term Obama administration, is likely on the way.

That's the belief of Marcia Wagner, a prominent ERISA attorney serving as keynote at this year's sixth annual Profit-Driven Strategies in the DCIO Market, organized by Financial Research Associates - held this week in Wagner's base of operations, Boston.

Wagner contends that the allure of taxes deferred by America's retirement plans continues to be too strong to politicians - some $70 billion a year, and as much as $361 million over a four-year period - meaning that tangible reform efforts are certainly a possibility.

And with today's news of the retirement of Sen. Tom Harkin, chairman of the Senate pensions and education committee, Wagner says she suspects a harder push on his part to gain support for his own proposal creating a nationalized retirement system, an Americanized rendition of plans found in Western European nations.

Wagner says that in an era where "the power of inertia" helps guide an otherwise shell-shocked and financially confused participant public, the most likely change will probably be an Obama-led move to mandatory, automatic IRAs for most American workers.

Under that slightly revolutionary plan, companies with at least 10 employees would be required to establish a deferral rate of 3 percent into IRA plans (a post-tax Roth IRA would be the default but pre-tax traditional IRAs would be available as a second choice). Workers as young as 18 would be included in the plan.

"People tend to associate this idea with a left-wing, Democratic policy, but it's actually a joint product from think tanks that goes back to John McCain's run for president," Wagner noted.

She also concedes that the changes would not only be burdensome and present a challenge to the private sector, but could also be deemed unconstitutional - as well as a further intrusion by government, in the eyes of many Americans.

In the meantime, as U.S. workers continue to look for ways to more simply and safely invest for their retirement, Wagner says that a recent spate of class-action suits have also opened up the floodgates for the possibility of participants litigating their way into other retirement world changes - requiring plan sponsors to be especially cautious when considering how to protect and grow their investments.

Plan sponsors, she admits, are caught between a rock and a hard place: they want to render useful advice to participants, but their advisors who receive variable fees also want to avoid being caught up in prohibited transactions. A move to computerized planning models, she suggests, could offer a slight level of fiduciary safety.

Wagner says the industry also needs to begin to deal with the growing requirements for decumulation planning, with changes including the use of deferred annuities, better methods of rollover to DB plans and even some relief of RMD rules as likely topics in the coming years.


Fiscal Cliff Averted

Legislators pulled the nation away from the so-called "fiscal cliff" and inked a budget deal on the first day of the New Year. As part of the agreement, Congress opted to remove the 2 percent payroll tax cut. The removal of the cut means that 77 percent of U.S. households will see higher taxes this year, according to the Tax Policy Center. In addition, the deal expands unemployment benefits. Lawmakers also voted to continue the tax-favored status of educational assistance and mass-transit expenses.

Financial Wellness Training Makes Good Cents
by Chris Kilbourne

January is National Financial Wellness Month, which presents a good opportunity to start your training year off with a "soft" yet important wellness session on finances. Why? Personal financial problems can be a huge distraction for your employees and could cause them to lose focus on the job and take unsafe actions. Today's Advisor gives you solid information for training on financial wellness.

Celebrating a new year is a good time for employees to take a new look at their finances. Encourage employees this year to approach their financial health with the same wellness attitude they bring to their physical health.

For example, start your training sessions by giving employees this holistic list of what financial wellness looks like:

  • Living within your means
  • Managing debt successfully
  • Saving for the future
  • Investing wisely
  • Having a cushion in case of emergencies
  • Avoiding financial problems

Based on this list, ask employees if their finances are in good shape. Explain to them that just as physical wellness combines healthful eating with regular exercise, financial wellness combines asset acquisition with debt management.

Asset examples include:

  • Cash and bank accounts
  • 401(k) and IRAs
  • Investments
  • Personal property, including homes, cars, boats, and jewelry


Debt examples include:

  • Mortgage
  • Credit card debt
  • Car loans
  • Other loans
  • Outstanding bills

Reiterate that just as employees take several steps to achieve physical wellness, they need to take several actions to achieve financial wellness. One action is to take stock of their financial wellness action plan. Give them the Finance Checkup in the next section.

Finance Checkup

Ask employees if they are taking all the right steps to get into good financial shape. Give them this checklist to do their own personal financial checkup. Do they:

  • Have a budget for monthly spending?
  • Stick to your budget?
  • Take steps to control spending if you’re overextended?
  • Save every year?
  • Take full advantage of your 401(k)?
  • Understand investment options?
  • Invest wisely, considering the risks?
  • Know what kind of investor you are—conservative, moderate, or aggressive?
  • Choose credit cards wisely, and use them carefully?
  • Pay credit card and other bills on time?
  • Pay off as much of credit card balances as you can each month?
  • Know your credit score?
  • Know how to improve your credit score?
  • Check your credit report annually?
  • Think carefully before you take out loans?
  • Read the fine print on loan contracts, and understand interest charges?
  • Take prompt action when you experience financial problems?
  • Consult a reputable financial counselor if you need help?
  • Handle major life events successfully from a financial point of view?

Why It Matters

  • According to a CareerBuilder® survey, around three-quarters of working Americans live from paycheck to paycheck.
  • Another study from the American Psychological Association showed that financial problems are the number one cause of chronic stress and lead to as much as 25% of American employees missing work because of stress-related issues.
  • These workers can miss up to 16 days a year.