Ever since the onset of the financial crisis and the subsequent adjustments individuals, families and governing bodies have had to make as a result, there has appeared in the soil of the country a widening rift. One that polarizes all aformentioned parties: The attitudes and expectations that the private sector has of the non-for-profit sectors and vice-versa.
Political opportunists and advocates for both segments have seized the opportunity to turn one another into scapegoats and ailments of the current weak economic state: The non-for-profit sectors often casting blame on the private sector for their bottom line, short-sighted and often reckless financial outlook and the private sector deriding the not-for-profit sector as lazy, greedy societal sponges; wiping state federal coffers clean with their generous benefits.
The financial services industry, catering to both demographics, must stay above the current fray. Understanding how the two groups are similar and different is paramount to fostering a healthy retirement environment in the country. With the current trajectory for many not-for-profit employees’ retirement planning continuing its shift from defined benefit (DB) to defined contribution plans (DC) — especially if Orrin Hatch’s Secure Annuities for Employee Retirement Act gains traction — the industry will be catering to both fairly equally.
LIMRA Retirement Research recently surveyed employees from both the private sector and the not-for-profit sectors to gauge their current attitudes on retirement, risk tolerance and confidence about a secure retirement. For the purposes of their research, LIMRA broke down the not-for-profit sectors to encompass the following groups: Those who work in education, nonprofits and public sector employees (government and military).
One of the main differences between the two is evident in their tolerance for investment risk. LIMRA’s survey found that one in 10 not-for-profit employees had no tolerance for investment risk while one-third had only a little tolerance. By contrast, private sector employees were more open to investment risk with 9 percent not willing to accept any and 25 percent willing to accept a little.