Through the past few years retirement planning has come to mean many things to different people. Whether it is crossing off those bucket list items, building for inheritance, or preparing for future health care needs, it all takes a prudent approach to investing to last the (increasingly longer) remainder of one’s lifetime.
No matter who you are and the personal needs that you have, the state of retirement planning in 2019 is being influenced by:
- Longer life spans, and the impact on healthcare spending
- Effects of increasing personal debt
- Holistic approaches to financial planning
The interconnectivity of these macro trends means that retirement planning is optimized when it starts earlier, lasts longer and is assessed in conjunction with broader financial planning. As Baby Boomers continue to enter retirement while younger generations accelerate retirement savings, the impact of these trends will only increase in the future.
Live long…and save!
The good news is that on global scale people are certainly living longer, thanks to strengthened communities and advancements in medicine. Recent research indicates that between 2017 and 2014 global life expectancy will increase an average of 4.4 years.[1] At the same time – living longer requires greater funds and increased pressure on building the right savings plan.
With the loss of pension programs and a general decline of defined benefits plans, the onus falls on employees to ensure that they are prepared for retirement. Given this gradual, yet steady, shift of responsibility to employees, the government has become involved in creating legislation to help build the support systems for employees. The reintroduced Retirement Enhancement and Savings Act (RESA) bill is designed to increase access to retirement accounts among small businesses by making it easier to join open multiple employer plans (MEPs). The legislative steps taken are to ensure that businesses have the right support to offer employees flexible retirement plans that allow them to be fully prepared.[2]
With the focus on successful retirement outcomes, HSAs have become one of the most in demand investment tools that serve a dual benefit – addressing immediate healthcare savings and creating an investment account that feeds into retirement savings. According to recent industry research by America’s Health Insurance Plans (AHIP), enrollments in health savings accounts coupled with high-deductible health plans (HSA-HDHP) increased by nearly 400% over a decade, from 4.5 million in 2007 to 21.8 million in 2017.[3] Education of both health and savings benefits are imperative for participants to plan accordingly and prepare for the future.
Retirement Reimagined Thanks to Student Loan Debt
For many Americans, and for Millennials in particular, retirement is a myth – like the Lock Ness monster – nobody has really seen it, but it would be cool if it exists. And why does retirement seem so far out of reach? Three words – student loan debt. With student loan debt ballooning in recent years, young Americans graduating and entering the workforce are often more concerned with immediate need rather than planning for the far-off future. Americans owe over $1.56 trillion in student loan debt, spread out among about 45 million borrowers.[4] This amounts to a massive bill that comes at a time when recent college students are looking to enter the workforce.
This level of mounting debt has a major impact on retirement planning for younger generations. Research conducted by the National Institute on Retirement Security found that two-thirds (66.2%) of working Millennials have nothing saved for retirement. The fact is chilling but becomes even more disturbing given the fact that Millennials are expected to live longer that the Baby Boomers and Gen X cohorts that precede them, reaching 89+ years on average.[5]
So rather than retirement planning being a clear cut, black and white process, there is increasingly more to consider and juggle with the growing complexity of personal finances.
Financial Wellness Programs Come into Focus
Building off the complexities of finances, financial wellness programs offer a sound, defined process to help ensure than participants are on track to meet goals. In past years ‘financial wellness’ was the buzz phrase of the industry but remained somewhat fuzzy in terms of what it really is. Moving into 2019, these financial wellness programs are becoming much more refined and taking a full, holistic approach to planning financial health.
And as part of this holistic view, this means incorporating financial wellness technology into retirement plan advising. In some ways, financial wellness programs can present a strong foundation for a successful retirement in a country where financial literacy is desperately needed. Nearly 40% of U.S. adults would not have enough money in a month to cover an unexpected car or home repair, medical bill or legal expense, according to a 2017 report from the Global Financial Literacy Excellence Center.[6] Given this illustrated gap of financial literacy, it is no surprise that retirement seems so out of reach. Education offers the opportunity for everyone to start on an equal playing field and make the choices that are accessible and impactful for their life styles.
Addressing Change in Retirement
Americans have a lot on their plate when it comes to retirement planning. How? When? Where do I even start? And successful retirement outcomes can be further supported by financial firms that step up to the plate and offer the right education and resources that consider participants’ modern issues and present this in a digestible and meaningful way. We have certainly seen inroads being made and look toward a brighter retirement in the future!
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[1] “Study: Global Lifespan to Increase by 2040.” U.S. News. October 16,2018.
[2] “Retirement Enhancement and Savings Act Reintroduced.” Plan Sponsor. February 7,2019.
[3] “HSAs have gotten 400% more popular in the last decade. Insurers say the law hasn’t kept up.” Advisory Board. April 18, 2018.
[4] “Consumer Credit. G. 19.” Federal Reserve. February 7, 2019.
[5] “Millennials and Retirement: Already Falling Short.” National Institute on Retirement Security. February 2018.
[6] “Financial literacy: An epic fail in America.” Investment News. March 2, 2019