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The Covid-19 pandemic has affected business and consumers alike. When it first emerged, no one knew then how long the lockdowns would last and what the job market would be like when all was said and done.
Despite the uncertainty, many people (surprisingly) haven’t stopped adding to their retirement accounts. According to a study published by JPMorgan in July 2021, four in five professional consumers said they didn’t change their plan contributions at all, and nine in ten said they “tend to stay the course” in volatile markets.
“It was gratifying to see that while the Covid-19 pandemic disrupted financial markets, job trends and spending patterns, attendees remained largely resilient to sticking to their savings plan,” said Meghan Jacobson, Head of US Insights at JPMorgan Asset Management .
Consumers did not give up:
Although Covid-19 has thrown a huge blow into the work of budgets and austerity plans everywhere, 80% of people haven’t stopped contributing to their retirement plan in 2020.
Changed views on retirement
Just because people contributed to their plans during the pandemic doesn’t mean they weren’t worried. Retirement planning firm Retirement Living said it spoke to its customers and found that many felt significantly less prepared for retirement after the pandemic compared to before.
One result of feeling less prepared is that people want to incorporate more automation into their retirement plans. JPMorgan’s survey found that nearly two-thirds (62%) of respondents want a simple push button for retirement, up from 55% in 2016.
The population JPMorgan reached for its study included 1,281 participants in defined contribution plans, all of whom had to be over the age of 18 and were employed full-time with a for-profit organization. Additionally, they must have contributed to a 401 (k) plan the previous year.
Bank of America conducted its own study in August 2021 and found that 25% of Hispanic Millennials were likely to deposit less or nothing into retirement accounts during the pandemic (compared to 15% of non-Hispanic Millennials). While this research reflects a different sample base, the much lower number from the JPMorgan survey is noticeable.
( dig deeper: How Financial Institutions Can Improve Banking For Hispanic Millennials)
Looking ahead, people want to learn to save more for retirement. Across the generations, it’s not just baby boomers and Gen X who are looking for more insight into how much they need to put aside for retirement – Gen Z and Millennials are also looking. Almost seven in ten Gen Z’ers say saving up for retirement is a top priority, according to a study by the Center of Generational Kinetics. Additionally, Bank of America found that 35% of Hispanic millennials want to learn more about saving for retirement.
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Where do people need more help?
Traditionally, people turn to an investment firm when they have difficulty planning their retirement. However, Devon Delfino, a freelance journalist who writes for Lending Tree’s Magnify Money database, says 42% of Americans think professional financial advisors are only for the rich.
Instead, they do it alone or turn to non-professional sources. Three-quarters of people already manage their own finances, according to a 2019 study by CNBC and Acorns. And the Employee Benefit Research Institute found in March 2021 that 35% of people turn to friends or family for advice on retirement planning, and an equal percentage do their own research. Another four in ten workers say they don’t know who to turn to.
But banks and credit unions that don’t specialize in retirement advice can also help their clients plan retirement by helping them set up retirement accounts – regardless of whether employers contribute to a 401 (K).
( dig deeper: What Consumers Really Expect From Their Banking Providers)
Financial institutions can also help address these concerns JPMorgan says people experience the following issues:
You fear that you have not saved enough:
Even after putting some money aside, people still have concerns. According to a study by JPMorgan, three-quarters of participants know they should put more aside for retirement (at least 10% of income).
When it comes to money, people will always be concerned that there isn’t enough to get around. Covid-19 only made it worse.
“The pandemic has highlighted the need to be prepared for the unexpected, with emergency savings accounts being prioritized by participants, especially among younger people,” said Alexandra Nobile, expert on retirement insights at JP Morgan.
Do not know when to retire:
Arguably one of the best ways to help people start a retirement plan is to figure out when to retire. About a quarter of respondents (24%) say they plan to retire at 64 or younger, while 57% say it will likely be at 65 or older. Whether the estimates are realistic or not, nearly a quarter (24%) say they have no idea what age to predict.
This is a key goal that needs to be achieved with customers as it determines how much money they need to put aside each month. If they don’t know, however, banks and credit unions can at least help people set an appropriate schedule (with room for emergency situations).
People don’t know how much to save:
Just as they don’t know when to expect retirement, people also have very little to no idea how much cash they should have in their retirement accounts. The vast majority of people fear that, according to JPMorgan estimates, they will run out of money when they retire. Even among those who have set up a retirement plan, most are still unsure of how much credit they will actually have when they retire.
It’s also difficult for people to gauge how much their employers will contribute to their pension funds, although three-quarters of people agree that employers should have some or major responsibility for helping workers save, the JPMorgan report said .
The best a financial institution can do in this case is to help people prepare for retirement, with or without the help of their employer. For example, banks and credit unions can create a simple savings plan with customers based on a specific schedule and give them pointers and milestones along the way.
( Continue reading: Obsession with younger people kills financial marketers’ chances)
You want automatic registrations:
JPMorgan reports that people’s positive and neutral views on auto-registration rose to 89% over the past year. Additionally, 97% of those who are already automatically enrolled on plans say they were happy, which reflects the ‘do it for me’ button that people want.
“The overarching theme of this year’s research is that participants want more help with investments, contributions and income after retirement,” said Jacobson of JPMorgan. “Employers and consultants should feel able to offer features such as auto-enrollment and re-enrollment in funds with target dates to put participants on a safer retirement path.”
In the long term, financial institutions can encourage their customers to sign up for automatic annuity plans to address concerns about insufficient premiums.
More than anything, says Jeff Smith, content manager at Retirement Living The financial brand, banks and credit unions should be honest and transparent with people.
“Individuals worry about their future and are looking for finance professionals they can trust and who can help them create a diversified financial plan,” added Smith.
People are already planning the majority of their financial lives on their own. Many of them often want just a little more help from their financial institutions, which can be as simple as setting up automatic contributions to a retirement plan.