Data and Research July 28, 2017

LGBTQ Americans Struggle With Saving for Retirement

Seven in 10 LGBTQ Americans say they are behind on saving for retirement.
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Lesbian, gay, bisexual, transgender, queer or questioning (LGBTQ) middle-income Americans are more likely to feel less financially secure and struggle more with personal financial issues than other Americans, according to research by Massachusetts Mutual Life Insurance Co.

When it comes to retirement, 70% of LGBTQ Americans say they are behind on saving for retirement, compared to 63% of the general population. Those identifying themselves as LGBTQ were more likely to agree that “spending money to enjoy myself now is more important than saving for the future” than other Americans, 36% to 27%, respectively.

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Fifty-four percent of LGBTQs reported they wish their employer provided more education about retirement savings, and 40% said they don’t understand how to save and invest for their situation.

As for general finances, 27% of LGBTQ respondents have at least $5,000 in savings set aside for emergencies, and 44% said an unexpected expense of $5,000 would create at least some, if not significant, discomfort. Both those levels were higher than reported by the general population.

Managing finances is also more of a challenge for the LGBTQ population, with 59% saying they don’t always have enough money every month, compared to 48% of the general population, the study found. Half of LGBTQ workers with lower incomes (less than $45,000) found it difficult to manage their household expenses. Both LGBTQ (54%) and the general population (53%) attributed personal financial issues to high levels of debt.

LGBTQ Americans also expressed concerns about having different financial planning needs than the average household, more difficulty finding financial support and greater interest in financial education. More than half (53%) said they are unsure where to go for financial advice.

“The financial services industry needs to continue to get closer to its customers to better understand their individual needs, as MassMutual’s study of LGBTQ middle Americans plainly shows,” says Wonhong Lee, head of diverse markets with MassMutual. “There are many different types of households and families in America. Both our challenge, and our opportunity, is to better understand how we can help all types of households and families prioritize managing their money, enhance their financial security and reach their financial goals.”

The research polled 500 respondents who identified themselves as LGBTQ as part of a broader study of working Americans ages 25 to 65 who earned annual incomes between $35,000 and $150,000.

Data and Research July 28, 2017

Sponsors Big and Small Strengthening Plans

A change in philosophy is happening quickly and has already materially improved the DC retirement system, according to Catherine Peterson with J.P. Morgan Asset Management.
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Catherine Peterson, managing director and global head of the Insights program at J.P. Morgan Asset Management, recently sat down with PLANSPONSOR for a wide-ranging conversation about developments in the Employee Retirement Income Security Act (ERISA) industry.

She explained her firm just finished a large survey of nearly 1,000 plan sponsors, and among the interesting trends in the data is a clear indication that smaller plans are no longer just following the example set by their larger counterparts. Instead, small plan sponsors are quickly catching up on large plans in terms of implementing the latest best practices.

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“Take the implementation of automatic enrollment; 85% of large plans with assets of $250 million and over use this feature, while 64% of all plans now do so,” Peterson noted. “Seventy-eight percent of all plans have identified a qualified default investment alternative.”  

Contextualizing these numbers, Peterson suggested the stats for the entire plan sponsor population, large and small, “right now are where large plans were just in 2015.” Given there are vastly more small plans than large, this is clear indication that smaller plans are rapidly improving their designs.

“The change in philosophy is really happening quickly and it has already materially improved the DC retirement system for participants on the ground,” she said. “The tide is lifting all plans, and a lot of that has to do with the education component coming from providers and advisers. It is clear that so many plan sponsors are taking the steps they need to take to strengthen their plans.”

Of course there are challenges facing these plans, Peterson warned—in the form of increased litigation risk, tightening fiduciary standards and weaker long-term growth forecasts—but she is encouraged to see such rapid progress occurring anyway.

While they are overall generally quite satisfied with the services they receive, interestingly, only 18% of the plan sponsors J.P. Morgan surveyed suggested their providers are always proactive about communications and delivering new ideas. This is up from 10% in 2013, “but it’s not a great number,” Peterson said. “The same goes for advisers. In 2013, it was 14% who were viewed as proactive about communicating new best practices, and now it is 27%.”

One trend made clear by the survey data: Plan sponsors expect a lot from their providers and advisers. “They want the ability to lift up the hood and see what’s underneath their basic plan performance metrics,” Peterson concluded. “It’s not just about the overall asset allocation for the plan—it’s about zooming down to the participant level and making sure the plan is being used appropriately by real people. Even with the improvements we have seen, there are still too many do-it-myself investors with poor diversification, people holding too much employer stock or too much cash. So it’s very important that we keep this momentum going.”

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