Recently, an esteemed group of experts in business and finance, economists and education, convened in Washington, D.C. along with our Executive Director Jim Poolman and editors from The Atlantic for a roundtable dinner to talk about the reality of retirement readiness amid America’s workforce.
Our recently released Retirement-Readiness Scores and accompanying data suggests technological, demographic, and economic shifts are contributing to retirement planning becoming a responsibility every employee may have to shoulder. In turn, the galvanizing question of the evening became:
As working-class Americans prepare for a future of work with less job security and fewer benefits, how can they best prepare for retirement?
Great points were made by all attendees, which included representatives from AARP, Home Care Association of America, Bipartisan Policy Center, National Hispanic Council on Aging (NHCOA), U.S. Chamber of Commerce, and more, on how we can approach the changing face of retirement:
- Embrace the ‘Do It Yourself’ Retirement Saving and Planning
The recent shift from employer-sponsored retirement to a “do-it-yourself” endeavor for many was widely discussed by attendees, including Shai Akabas.
“Moving away from an employer-sponsored system, where the employers are responsible for delivering certain benefits, to more of an employer-facilitated system, is probably the direction we’re heading in, as there are so many workers who are not currently covered by the employer-sponsored system.” -Shai Akabas, Director of Economic Policy, Bipartisan Policy Center
In turn, we must empower individuals to take on the ‘do it yourself’ method, as further supported by our recent data that found one in eight American workers are not offered any type of retirement plan from their employer.
Some ways individuals can take action is by using customizable calculators and retirement planning materials to plan ahead, as well as talking to a financial professional. For example, if you are thinking about adding a fixed indexed annuity (FIA) to your portfolio, an insurance agent, who is licensed to sell the product, is a great resource to help you decide what vehicles are right for you.
- Improve Financial Literacy Early On
With our data showing almost one-fifth of all Americans nearing retirement are at the low end of the retirement spectrum, attendees across the board agreed improving an individual’s financial literacy is crucial.
“From AARP’s perspective, when people come to us for education, it’s at 58 or 59, a couple of years before they tap into what is Social Security. It becomes not about what they’re thinking, but rather them trying to catch up for the state of trying to stay warm. They are at the cusp of retirement and that is why they are starting to worry and realize they need to do something about it.” -Jean C. Setzfand, Vice President, Financial Security, AARP
In turn, Setzfand and others felt a good first step to becoming financially literate is taking time to know and understand all retirement plans and options available, and to start early on.
“People are making bad decisions because they are uneducated. I think having programs where they start financial education in high school and having it be state mandated is a good idea…. They [students] are then sharing their experiences with their parents, so not only are the students learning, but so are the parents, which is helping two generations at the same time.” -Rodney Brooks, Retirement Columnist,U.S. News & World Report
Education on retirement vehicles is vital, as our data found nearly 80 percent of pre-retirees say lifetime income is their number one retirement need. To meet this need, pre-retirees should be financially aware of their options to help ensure their golden years are what they dream about. One product that not only guarantees lifetime income, but also provides other benefits, such as peace of mind, no matter what happens in the market, is fixed indexed annuities. However, our study showed only two percent own one.
- Foster a Savings Culture
With not saving early enough the most common mistake and regret among American workers (40 percent), attendee Angela M. Antonelli explained how we should be thinking about retirement security as a three-pillar stool. This stool would have one pillar for national savings, like Social Security, one for occupational savings, and one for general savings. Antonelli goes on to explain how it is our responsibility as a country to ensure pre-retirees should be putting money away in all three categories.
“We need to help people build their stool and build it as early on in their life as possible. Once they’ve built that stool, we need to help educate them on how to effectively make sure the pillars remain strong… and we need to make sure that stool is strong enough to last 100 years.” -Angela M. Antonelli, Executive Director, Center for Retirement Initiatives, Georgetown University
Fixed indexed annuities are one savings option that could fit into your three-pillar stool, as they ensure your earnings will never fall below zero, as well as provide growth potential.
In all, in the changing face of retirement, this dinner provided great insight into how we can begin to move the needle to change the retirement landscape. The story of lack of retirement readiness in America is widely known, so it is our responsibility to not just report on the problem, but address it. You can start by continuing to explore our website to learn more about fixed indexed annuities and retirement planning.