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Retirement Planning > Retirement Investing

Employees Renew Retirement Focus in Q2

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Employees are turning their focus to long-term financial issues like retirement planning as day-to-day financial issues become more manageable, according to Financial Finesse.

The firm found that in the second quarter of 2011, 60% of calls to Financial Finesse’s helpline were about long-term issues and 25% were about retirement planning issues in particular.

Liz Davidson, CEO, Financial Finesse“The biggest thing is they’ve made a lot of improvements to their short-term finances, they’re continuing to reduce their debt, improving the day-to-day money management, building emergency funds,” Liz Davidson, (left), CEO of Financial Finesse, told AdvisorOne. “It’s a common thing when you get past the day-to-day you begin to take your blinders off and look longer term.”

It’s a function of moving from a state of crisis to looking longer term, Davidson says. Now that employees are past the crisis, they’re asking themselves, “Now that I have my financial foundation, what can I do next?”

What employees are finding is that they may not be prepared to retire. Although retirement planning questions are primarily proactive, according to the report, just 14% of callers said they were confident they’d be able to replace at least 80% of their pre-retirement income, in spite of a six-point increase in participation rates.

There are several factors that could be contributing to this disconnect, the report found. First, it may be that employees are simply in the early stages of improving their retirement preparedness. Just one-third of employees report they’ve run retirement projections.

Second, many employees turned away from retirement planning during the recession to focus on basic money management issues. Now that those pressures have been relieved, employees can focus on how unprepared for retirement they are.

Finally, concerns about the economy and stock market have not been erased. Employees have reason to worry about inflation, according to the report, and most have less equity in their home than they expected.

“Retirement planning is a major part of what advisors are working on with their clients, and to have that interest level much higher and that commitment from employees to be saving for the future is very good,” Davidson said. She encourages advisors to take advantage of that higher interest and get information out to their clients that gives them a handle on how much they need to save and what that nest egg translates to at retirement.

“That’s a big thing that consumers are constantly grappling with,” she added. “How much is enough? They need to know how much and what that translates to as income replacement. Help them understand how much they need to save, how much is enough, and what a lump sum translates to on an annual and monthly basis.”

Employees are less stressed overall, likely a result of better cash management. In fact, 14% of employees reported feeling no stress at all. The report pointed out the danger facing employees who are entirely stress-free: “Employees with no stress run the risk of having a false sense of confidence that may cause them to delay or even miss taking action necessary to keep them on track of reaching their financial goals.”

Following retirement planning, budgeting and saving, debt management, and investing were also top priorities for employees in the second quarter. Over half of employees report having an emergency fund, and 71% say they have a handle on cash flow. Eighty-eight percent of employees said they are able to pay their bills on time and 57% report regularly paying off credit card balances in full.

The outlook for employees is positive overall, Financial Finesse reports. Employees are taking fewer hardship withdrawals, and assuming we don’t suffer a second recession, the company expects to see a steady decrease in loan defaults, foreclosures and repossessions.

“We’re still in a dismal economy,” Davidson acknowledges. “If it takes a dramatic turn for the worse, potentially those positive signs we’re seeing could change. Consumers have momentum, and there are a lot of signs that they’re beginning to manage their money differently, and beginning to develop a different mindset around the importance of planning for their future.”

“This is a continued positive sign of what we’ve been seeing last several quarters,” Davidson concluded. “Employees are becoming more proactive. Anything that advisors can do anything they can to support that trend as a community in terms of getting consumers and Americans to understand the importance of saving and planning, because it’s resonating.”


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