In my previous blog Don’t Let Happy Holidays Derail Your Happy Retirement, I wrote about the difficulties of saving; specifically, the extent to which people know that they need to save, but are often not acting on that knowledge. The reasons why are varied but it really boils down to choosing between spending now and saving for the future. And as we all know, it’s difficult to look ahead when you can barely make ends meet today. That said, the future is coming faster than most of us are prepared to admit; we can’t continue to put off saving indefinitely. But, how do you get started?
Accenture’s recent research essentially found that employees in the US value their pensions as much as they value their employer provided healthcare coverage. Nearly 80 percent say that pensions benefits are critical in deciding to take a job. Most also believe that starting a pension plan early is critical. The best time to start is between the ages of 21 and 40 according to 71 percent, and four out of ten began planning for retirement in their twenties. So, the good news is that people clearly grasp the criticality of saving and planning for retirement. However, when it comes to the detail of how much they have and how much they’ll need, we see a lot less clarity.
Confidence about having enough money to live on in the future erodes as people get closer to their desired retirement age. Only 11 percent say that they have enough to retire today. The research also shows that for many, optimistic thinking about the future is in sharp contrast to their current reality. We believe this stat points to a clear need for knowledge to help people close the gap between thinking they have enough and certainty they will. In short, pension members are hungry for more information. So, where do they turn to get it? Most individuals rely on their employer or their own research efforts; however, that’s likely not enough. In fact, nearly 84 percent of survey respondents expressed the desire for access to retirement coaching; further, they want that coaching to be available throughout their working life. This is where pension agencies have an opportunity to play a valuable role. As a trusted provider with no vested interest in “selling” them financial assets, the information and support that pension agencies can offer their members is viewed as credible and impartial.
From a fiduciary standpoint, I understand the dilemma posed by providing financial advice, and I’m not suggesting pensions do that. Rather, I’m suggesting pension entities provide some level of support. Help members understand how much they will need, beyond their defined benefit or defined contribution, to retire affordably. Help them assess the size of the gap between where they are today and where they need to be – and what they might do to address any shortfall.
At Accenture, we are working to create a digital “retirement mentor” that aims to provide a complete view of an individual’s financial portfolio – savings, investments, social security earnings, deferred compensation, etc. – all in one place. That “total digital view” will enable members to evaluate what they need against what they have now and set projections for the future. Once they have a plan in place, the tool opens the door to providing “nudges” and making suggestions that can help keep members on the best path to securing the retirement they want.
So, to recap, members want more retirement coaching and they want their pension agency to provide that service. However, when it comes to offering advice, pension providers rightly are concerned about their fiduciary duties. To that end, there’s a lot that agencies can do to provide value without offering specific recommendations about financial products. By acting as a trusted advisor and coaching their members, pension agencies can help them take practical steps towards achieving the retirement they dream of, rather than the one they simply hope to secure.
I’m interested in your reaction. Let me know what you think by adding your comments, thoughts, and suggestions at the bottom of this blog. To learn more, visit www.accenture.com/pension and follow me on LinkedIn and Twitter.