The concept of retirement has undergone a profound transformation in recent years, reshaping the landscape for consumers worldwide. As people are living longer, the traditional retirement age is being redefined, and individuals are faced with new challenges and opportunities in preparing for their golden years. Franklin Madison doesn’t offer investment products, but we know the financial institutions we serve care a lot about helping consumers navigate the changing retirement landscape.
Gaps in Private Retirement Coverage
Access to retirement coverage has evolved significantly, driven by shifts in employment trends and government policies. With the decline of traditional pensions and the rise of gig economy work, many workers no longer have access to employer-sponsored retirement plans. This shift has forced individuals to take on greater responsibility for their own retirement savings.
The Emergence of the “Savings Gap”
The onset of the savings gap is a pressing concern. Many people, especially those without access to employer-sponsored plans, struggle to save enough for retirement. The gap between what individuals are saving and what they need to maintain a comfortable standard of living in retirement is growing wider. According to Coastal Wealth Management, “Just 58% of workers believed they would have enough money to keep up with the rising cost of living in retirement.”
Impact on Different Worker Segments
This savings gap affects different worker segments and demographics in varying ways. For instance, women, who statistically earn less and live longer than men, face unique challenges in saving for retirement. Additionally, minority communities often face historical economic disadvantages that can exacerbate the savings gap. The U.S. Government Accountability Office reported that “high-income households saved 8% of their pay, while low-income households saved 5%. High-income households also typically received more in employer contributions than low-income households.”
Financial Institutions:
Pioneers in Retirement Solutions
Addressing the Needs of an Aging Population
Financial institutions play a critical role in addressing the evolving needs of an aging population. Many have developed innovative solutions that cater to a diverse range of savers, from those just entering the workforce to those nearing retirement. They also offer insurance protection to safeguard future finances.
Leveraging Technology and Education
Technology and education are powerful tools in empowering savers to take control of their financial future. Robust digital platforms can provide easy access to retirement planning tools, investment options, and educational resources.
Targeting the Unbanked:
A New Market Opportunity
Declining Percentage of Unbanked Households
The declining percentage of unbanked households presents a unique market opportunity for financial institutions. In 2021, the number of unbanked households was roughly 5.9 million (4.5%), down from 6.5% in 2017.
Building relationships with unbanked households early on can create loyal customers who may later require more advanced banking services as their financial situation improves.
Financial institutions are gaining previously unbanked consumers by simplifying the account opening process, reducing or eliminating fees, offering microloans and savings incentives, and providing mobile banking technology. To truly address the needs of all demographics, financial institutions must design products and services for a variety of diverse financial goals, risk tolerances, and cultural backgrounds. Offering accessible and inclusive retirement products and insurance protection can be a cornerstone of this approach.
Government Efforts for a Secure Retirement Future
The government’s 2023 plans to aid in savings include requiring auto-enrollment in 401(k) plans, allowing employer contributions for student loan payments, increasing the age for required minimum distributions so consumers can wait longer to start withdrawing if they choose, helping employees access emergency savings, and raising catch-up contribution limits for older workers.
Both government and financial institutions are important to ensure a secure future for all. Through educational initiatives, awareness campaigns, and technological advancements, both parties can bridge gaps in knowledge and access.
How Financial Institutions Can Help
The evolving landscape of retirement planning presents both challenges and opportunities for consumers and financial institutions alike. By recognizing the changing dynamics and actively working to both protect and build wealth by bridging gaps in coverage, the path to a secure retirement future becomes clearer. Through inclusive products, insurance protection, and collaborative efforts, we can pave the way for a more financially resilient and confident retirement landscape.