Teaching Employees Skills and Practices for Retirement Confidence

The majority of Americans are stressed about their financial situations, with three out of four wishing they could get a financial planning do-over, according to a survey by the National Association of Personal Financial Advisors (NAPFA).

In addition, 34% of respondents believe finances will still remain a source of stress in their futures and 22% worry they will not enjoy their senior years due to money issues.

Unfortunately, there are no do-overs in life, but there are ways to help employees feel confidence about their financial futures going forward.

TIAA’s 2019 Lifetime Income Surveys reveals skills and practices that build confidence in the financial future. For example, the ability to plan long-term and invest effectively are key drivers of feeling secure. Those who rate highly their ability to invest effectively are roughly three-times as likely to express confidence in always being financially secure, including throughout retirement.

Long-term planning can also play a role in financial confidence, as those who are able to master this skill are at least twice as likely to feel confident. However, TIAA’s survey found more than 60% of respondents haven’t created a written financial plan for retirement.

Retirement plan sponsors should encourage employees to create a written plan for retirement. A 2017 Wells Fargo/Gallop Investor and Retirement Optimism Index found 43% of those with a written plan are highly confident they are headed towards a comfortable retirement, whereas 23% of those without a written plan feel highly confident.

Good savings habits also build confidence as two-in-five respondents cite saving regularly as a means of boosting financial security. Yet, more than half reported not saving as much as they should have in 2018, including 22% who reported they saved “a lot less” than they should have.

Research from Principal Financial Group shows Super Savers, defined as those saving 90% or more of the IRS maximum or 15% or more of their income for retirement, are highly motivated by wanting to feel financially secure (62%), having a good lifestyle in retirement (57%), being prepared for the unexpected (43%) and wanting to save enough for retirement (42%) and travel in retirement (42%).

Though everyone surveyed fit the definition of a Super Saver, only 24% self-identified as such. Men were much more likely to be confident in their financial future (59%) compared to women (49%) and be confident in financial decision making (52% vs. 40%.).

Plan design features such as automatic enrollment and automatic escalation, as well as education, can help employees save more. However, financial wellness programs also help. Not only can such a program address being prepared for the unexpected, but teaching budgeting skills could help employees free up cash to save. Financial wellness programs that break things down into activities and smaller actionable steps may be the most successful.

TIAA found that Americans believe a financial planner can help. In particular, respondents want guidance on planning for retirement (61%), building greater savings (52%) and paying off their debts (50%). 

Some of the most successful retirement plans offer participants access to financial advisers.

Of those who participate in an employer-sponsored retirement plan, nearly seven-in-ten (69%) cite guaranteed income for life as one of their top two goals for their retirement plan, and almost half (45%) say that guaranteed income for life is their very top goal, according to TIAA. They are more likely to rank guaranteed lifetime income as one of their top two goals than keeping their savings safe regardless of what happens in the market (56%), earning a competitive rate of return on their savings (46%), or saving a specific amount of money (28%). Among the reasons guaranteed lifetime income is strongly valued: three-in-five (60%) say it provides a feeling of financial security and nearly half (46%) assert it makes it easier to save for retirement.

“Employer-sponsored retirement plans that provide guaranteed lifetime income through in-plan annuities give workers saving for retirement a method for insulating themselves from risks, such as the impacts of stock market volatility, longevity risk and even cognitive decline,” says Lori Dickerson Fouché, chief executive officer of TIAA Financial Solutions. “Having monthly income that’s guaranteed for life helps create certainty in people’s ability to fund their necessities and can lessen the impact and stress from unexpected expenses that are beyond their control.”