Retirement scores helping younger generations prepare for their future
More than half of all Americans are not currently saving enough for retirement to cover their basic living expenses. A study recently done by Fidelity highlights this troubling fact and offers some insight into other factors that are preventing people from planning for their futures.
What is a retirement readiness score?
Put simply, your retirement score is a numeric representation of how healthy your retirement savings plans are and how financially “ready” you are to ret
ire. Sure mentally you may be thinking about the beach and a coconut flavored cocktail, but if your financial house isn’t in order that beach may become a sandbox on the balcony of your 2nd floor apartment come retirement age.
There are now systems available that allow you to input key factors that it uses to calculate what your retirement expenses will look like based on your current lifestyle and then how prepared you will be to financially support this lifestyle based on current retirement savings plans.
One major challenge to consider when using these tools is that they can only estimate. Users input information and the system is only as good as the information it’s given. Thus accuracy is important. Another consideration is that cost of living will fluctuate and you can’t plan for unforeseen events that may impact your finances like health care costs, loss of job or market fluctuations.
While there are no retirement crystal balls, the system begins to paint a picture for users of the calculator about what retirement might look like.
The retirement score is seen by many in the industry as a step towards the bigger picture of financial wellness for individuals. There is talk within the industry to move towards a more holistic approach in retirement messaging that focuses on that larger issue of financial wellness, but retirement readiness is certainly a big piece of that puzzle.
What’s in a score?
One of these tools gives you a score by using a simple 6 question format making it more inviting to consumers because it’s not a lengthy or complicated process. They don’t have to drag out all their paperwork or do any heavy lifting for that matter, just answer some straightforward questions about themselves. Questions include:
- What is your age?
- What is your annual income?
- How much have you saved so far?
- How much do you save each month?
- How will your standard of living change when you retire?
- How would you describe your investment style?
It’s important to note that this concept is a new way of looking at retirement. For years, reports and figures accessed by and shown to individuals planning for their retirement merely offered a cumulative number. While these numbers were an accurate reflection of that individual’s savings, the method for delivery didn’t offer streamlined understanding of what those dollars translated to in a real world sense. $100,000 seems like a lot of money, but if that has to last someone through their entire retirement, it’s not actually a large sum at all.
The Department of Labor is actually working to change retirement reporting requirements in order to forego some of this confusion and offer individuals a true apples to apples comparison of their retirement savings based on a monthly income format which is in line with what most people are accustom to.
Most of this information is widely understood by those in the financial industry. What is being discussed within industry circles now is who this messaging resonates with and how to communicate this information to them in order to start the conversation and get them ready for retirement.
Who does this resonate with?
The new format for retirement readiness scoring resonates with a number of age groups and is an easy to understand format that allows for open dialog with customers. The format has shown strong gains and support particularly with Millennials and Gen X. While these may not initially be seen as highly sought after demographics for retirement messaging, they are keenly aware of the need for retirement as they have seen the effects the demise of pensions has had on their parents and grandparents. They are also generally aware of the issues surrounding Social Security.
The other marked benefit with these groups is that because they still have years of earning to do. By working with them now, savings can be accrued without painful changes to their current living status and expectations.
How can you target your messaging to this group?
While research indicates these groups are open to discussing their retirement readiness, it can be difficult to know how best to approach them about the subject.
Studies have shown that Generation X and Millennials respond positively to email campaigns for this type of information.
In addition, utilization of social media to convey this message is a natural fit based on the demographics we’re discussing. Utilizing these options and directing them to pages specifically set up for them will help to convert them faster. These pages should be equipped to allow visitors to calculate their score and then take direct action such as learning more or being connected to an agent.
These pages can also be useful in tracking additional touch points the audience uses and for use as a leads source for further conversations.
Most people don’t wake up in the morning concerned with their ability to support themselves when they retire. This is even more true for younger Americans who feel that time is on their side. The truth is that in order to be fully prepared for retirement from a financial perspective, individuals need to start saving as soon as they enter the workforce.
Retirement plan providers, plan sponsors and advisors have a tough challenge communicating effectively with participants who need convincing that retirement saving begins now.
O’Neil Digital Solutions can consume plan and participant data, normalize the data, and develop scoring methodologies for retirement readiness. O’Neil can deploy participant specific messaging campaigns through its CMS system, to influence participant behavior. This can work to nudge the participant to take action through an Omni-channel preference based communication strategy. Leveraging existing communications such as statements to deliver the messaging, and driving them to areas within the participant web-site.
If you’d like to talk more about how O’Neil’s solutions can help you communicate with your current and potential clients, we’re here! Contact Benjamin Acquario at 305-434-2560 or Steve Kipp at 515-360-6451 from our Financial Solutions team to discuss how we can help you.