Retirement Savings Recommendations Colorado Secure Savings Plan Board
Retirement Savings Recommendations Colorado Secure Savings Plan Board
Six Takeaways 2
Segmenting Colorado Populatio n Youth Not Currently Saving Retire d Currently Saving Conceptual Drawing – Not to Scale Retirement Savings Research 3
Conclusion 1: Make savings processes available, simple, automated, and back of mind. Workplace savings programs are seen very positively. > National data shows a massive effect on savings. > Qualitative research shows positive reception from the public. > Experts strongly agree that workplace plans are a great tool. > (Caveat: we haven’t heard from employers yet. ) Recommendation: Maximize employee access to workplace savings plans > Attractive features: � Simple enrollment � Simple investment choices � Auto-escalation Caveat: It won’t help everyone, which means others may still need different education or training > Approximately 24 percent of Colorado’s Age 16 -64 population is not in the work force. > Approximately 70 percent of workers in our survey report that they already have access > (Doing some math) – (100 -24)*(100 -70) = new tool for 23 percent of the adult population Retirement Savings Research 4
Segmenting Disproportionately helps lower wage and younger workers Colorado Populatio n Not Currently Saving Youth Retire d Workplac e plans Currently Saving Conceptual Drawing – Not to Scale Retirement Savings Research 5
Conclusion 2: Get People to Think About Retirement Savings The characteristics of saving for retirement promote procrastination. > It’s often a long way away. > Traditional planning numbers seem unattainable if you don’t think exponentially. > A lot of people are behind/haven’t started. > It seems complex to many people, or at least intimidating > It calls for deferred gratification. > There are other valid ways to spend money with immediate impacts. > As a result, there’s a lot of anxiety about retirement savings, and people naturally avoid areas of anxiety. Retirement Savings Research 6
Conclusion 2: Get People to Think About Retirement Savings Alongside the introduction of new programs for retirement, we need to increase visibility and thinking about retirement savings to get people over the initial hurdle of starting. > “A small gift from yourself now becomes a big gift to your future self. ” > “It’s never too early and it’s never too late. ” > Positive and affirming – people put this off in part because they’re anxious about it. > Financial socialization can help in the long run. Recommendation: Broad messaging campaign to discuss the benefits of retirement savings, regardless of age or amount saved > Small and simple steps required to start. > Charts and graphs are effective Recommendation: Support development of financial socialization among youth Retirement Savings Research 7
Segmenting Disproportionately helps lower income and younger households Colorado Populatio n Youth Socialization Trainin g Workplac e plans General Awarenes s Not Currently Saving Retire d Currently Saving Conceptual Drawing – Not to Scale Retirement Savings Research 8
Conclusion 3: Give people a known neutral source of learning People don’t know where to go for learning and help > Embarrassment that they don’t know enough to get help > Embarrassment that they don’t have enough money to warrant help > Suspicion of the motivations of paid planners (fiduciaries versus salespeople) Recommendation: Offer pro bono retirement planning based on income eligibility > Online tutorials as a low-cost approach > Pro bono planners as a more personalized approach Retirement Savings Research 9
Segmenting Broad appeal other than higher income households/workers Colorado Populatio n Youth Socialization Trainin g General Awarenes s Workplac Neutral e plans Learning Source Not Currently Saving Retire d Currently Saving Conceptual Drawing – Not to Scale Retirement Savings Research 10
Conclusion 4: Coloradans need help thinking about “investing” versus “saving” for retirement. People may be too conservative with their retirement savings > Confusion about volatility versus risk > Belief that they should be conservative on retirement savings > Don’t understand different types of investment vehicles > Gen Z may be more vulnerable to this, having grown up during the Great Recession Recommendation: Broad campaign to understand financial investments > Presented to the public as part of Recommendation 3 > Disseminate message that investing properly gives you more money in retirement without putting more money in. Recommendation: Use appropriate investing in workplace plans > Target date or similar funds. > Early investing goes into a secure account Retirement Savings Research 11
Segmenting Broad appeal Colorado Populatio n Youth Socialization Trainin g General Awarenes s Workplac Neutral e plans Learning Source Not Currently Saving Retire d Optimize Savings Currently Saving Conceptual Drawing – Not to Scale Retirement Savings Research 12
Conclusion 5: Coloradans are generally interested in receiving information via employers We generally found that workers would like to leverage their employers to learn more about retirement savings. > Currently the fourth-most used resource (after friends and family, online research, and professional advisors. > Over 40 percent of Coloradans in the research survey indicated an interest in investment optimization training, financial planning, personalized planning, and training on types of investments through their employer. > Interest is higher among young people and may represent shifting tides of employee/employer relationships. Recommendation: Include resources to help companies provide training in workplace plans > Spread word to employers of resources developed in Recommendation 3. Retirement Savings Research 13
Segmenting Broad appeal, perhaps more to companies that haven’t had plans in the past Colorado Populatio n Youth Socialization Trainin g General Awarenes s Workplac Neutral e plans Learning Source Employer Support Not Currently Saving Retire d Optimize Savings Currently Saving Conceptual Drawing – Not to Scale Retirement Savings Research 14
Conclusion 6: Combine efforts with other programs to serve low-income Coloradans Many Coloradans do not earn enough to overcome the cost of living in Colorado, which makes saving and long-term planning difficult. > Experts agreed that for the population living below the subsistence line, promoting retirement savings is not effective, and can in fact be counterproductive if it places an additional stress or worry on a population that is already stressed about finances. Recommendation: Broad campaign to understand financial investments > Continue emphasis on other programs to improve standard of living. > Include education about the SAVER tax credits in Recommendations 1 and 3. > Recognize that messages creating urgency or anxiety may be counterproductive with this segment. Retirement Savings Research 15
Segmenting Indirect tie to retirement savings. Colorado Populatio n Youth Socialization Trainin g General Awarenes s Workplac Neutral e plans Learning Source Employer Support Not Currently Support anti. Saving poverty programs Retire d Optimize Savings Currently Saving Conceptual Drawing – Not to Scale Retirement Savings Research 16
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