Data and Research July 8, 2015

Gen X Too Comfortable With Credit Card Debt

Both Boomers and Gen X use credit cards liberally, but Gen X is carrying substantially higher balances.
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Baby Boomers, those between the ages of 49 and 67, and Generation X, between the ages of 35 and 48, do not appear to view carrying debt as a stigma, according to Allianz Life Insurance Company of North America’s “Generations Apart” survey. The large balances that they are carrying could put their retirement in jeopardy, Allianz says.

Nearly half (48%) of both generations view credit cards as a survival tool and 43% agree with the statement, “Lots of smart, hardworking people who are careful with spending also have a lot of credit card debt.”

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Gen Xers are carrying more debt than Boomers, the survey found, with members of Gen X having an average mortgage of $144,000, compared to $90,000 for Boomers; $12,000 in student loans, compared to $5,000 for Boomers; and a credit card balance of $8,000, versus $6,000 for Boomers.

Allianz figures that one reason why Gen X may have a higher credit card balance than Boomers is because 76% of Gen Xers got their first credit card between the ages of 18 and 24, compared to 68% of Baby Boomers who did. Additionally, 46% of Gen Xers say they pay only a portion of their credit card balance each month, allowing their credit card balances to revolve, compared to 32% of Boomers who do so.

Allianz says this is probably why 27% of Gen Xers say they are unsure about when they plan to retire or don’t plan to retire at all, compared to 11% of Boomers who share this insecurity. Additionally, nearly one-quarter of Gen Xers (23%) agree with the statement, “You can’t save for retirement until you pay off credit cards.”

“Over the last three decades, there has been a collective shift in how people view debt,” says Katie Libbe, Allianz Life vice president of consumer insights. “It’s now perceived as a normal part of one’s financial experience, and that has fundamentally altered the way people spend and save. If Gen Xers continue to delay saving for retirement until they are completely out of debt, their nest egg is clearly going to suffer.”

Allianz’s “Generations Apart” study echoes earlier findings the company released on Baby Boomers’ and Gen Xers’ views towards retirement. Eighty-four percent of people in these age groups feel that retirement is unrealistic. Sixty-eight percent of Gen Xers believe they will never have enough money to stop working, compared to 43% of Boomers.

Given these findings, it is incumbent on employers to consider financial wellness programs that teach their employees about budgeting, setting financial goals, paying down credit card debt, establishing an emergency fund and saving for retirement.

Products July 8, 2015

Participant Behavior Informs Empower’s New Website

Based on an analysis of participant behaviors, Empower Retirement has built a new website for participants.
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An analysis of participant behavior after using features of Empower Retirement’s participant website reveals factors that drive participants to improve retirement savings behaviors.

Participants who were shown data about the potential monthly cost of health care in retirement increased deferrals by 25%, from an average of 8.02% to 10.06%. Action rates were highest among those closer to retirement, with participants older than 50 taking more action than younger participants. The average age of a participant in the sample group was 41.5.

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Personal data showing a participant how he or she is faring versus others in the same age, gender, and income cohort also spurred action. Participants in the sample who were, on average, deferring 7.27% of their pay toward retirement were found to be inspired to keep up with top peers, by increasing savings to 9.07% (25%). However, peer comparison usage proved especially effective to a slightly younger audience, with the average user taking action younger than 40.

On average, participants increased their deferrals by more than 18% when introduced to specific, personalized information about their retirement preparedness. “I think what has been most motivating is to translate savings into … what income individuals are on track to have in retirement and what can they do to improve that,” Steve Jenks, head of marketing at Empower Retirement in Denver tells PLANSPONSOR.

“Then, different individuals are more motivated by different things,” he adds. “For example, health care expenses in retirement are more motivating to participants older than 45, and Millennials are more motivated by peer comparison.”   

Empower announced it will launch an enhanced responsive design website that uses the analysis for all 7.5 million Empower plan participants.

NEXT: Website design based on behavioral science.

According to Jenks, all the basic elements on its current website for participants have been redesigned and updated based on what the company learned about the drivers of participant behavior. The site also matches the most up-to-date Web conventions, so participants don’t feel they are logging on to a financial services site, but to a consumer website such as for shopping or travel.

The site offers a personalized view of a participant’s financial picture, including factors impacting their ability to save, and provides recommended tasks on which participants can take action.

The site is designed to make use of data from Empower’s recordkeeping system and uses a fully responsive mobile design to accommodate any device a participant chooses to use including a laptop, tablet or smart phone. “We’ve added some functionality for employees to be able to enroll more quickly and added a next-best-steps engine that makes personalized recommendations,” Jenks says.           

Features of the new website include: 

  • Health care cost estimator: Shows data relating to the potential cost of future health care;
  • ‘How Do I Compare?”: Demonstrates how  a participant’s retirement preparedness compares to peers in their age, gender or income cohort;
  • Personalized retirement income goal-setting: Allows participants to customize retirement income goals; and
  • Plan-specific, personalized ‘next steps’: Provides expanded, customized action items on which participants can act.

The site can take into account assets held outside the plan and makes Social Security assumptions in its retirement income calculations. Jenks notes participants can input data about personal savings and other retirement accounts, or, if they are in another retirement plan serviced by Empower, that data will be included.

Jenks says a phased rollout of the new website across Empower’s book of business and new clients starts shortly, and will go through the majority of next year.

Jenks emphasizes the mobile aspect of the new website. “Back in 2010 when the original site was developed, we were definitely in a personal-computer world, but now the dominant way to interact is with tablets and phones, so all functionality is built to be compatible with any device,” he says. “We’ve seen that in enrollment meetings or one-on-one advice sessions, the ability to take action immediately with whatever device participants have in their hand is better than waiting until they get to a computer and log on to the website.”

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