Individually Focused IRA Marketing

By Dennis Zuehlke, Compliance Manager, Ascensus

The April 15 tax filing and IRA contribution deadline is only one month away. Much of the marketing focus this year is on the higher IRA contribution limits. For 2013, the IRA contribution limit is $5,500, up from the previous $5,000 limit.

This is good news for baby boomers socking away money for retirement, but for young millennials just starting out, making a $5,500 IRA contribution may be out of reach, and such a marketing campaign may appear out of touch. Targeting the right message to the right audience is key. Remember, the “I” in IRA stands for individual. IRA marketing efforts focused on the individual—based on their generational demographic—will benefit both your members and your credit union.

Young millennials, members of generation X, and baby boomers are all at different stages in their lives, and just as their lending needs are different, so are their retirement savings needs. And while they share the same generational demographic and retirement savings characteristics, their retirement savings needs are as individual as they are.

For young millennials, many of whom have recently graduated from college and are just getting started in the workforce, saving money for retirement may be the last thing on their minds. Many are saddled with student loan debt and face the prospect of a tough job market. But starting to save in your 20s and 30s means that, even if you save less each year, you can still end up with more money at retirement than someone who starts to save later in life.

Incidence of IRA ownership lags among young millennials. Only 13.9 percent of households headed by young millennials have an IRA, according to the Employee Benefits Research Institute’s analysis of the 2010 Survey of Consumer Finance. So for this group you may want to focus your marketing efforts on helping these members to start saving for retirement. Offer IRA share savings accounts with no minimum balance requirements, and to ensure that these members keep saving, offer IRA funding through payroll deduction and automatic transfers. Consistently saving, even if only small dollar amounts, will put your younger members on the path to a more secure retirement.

Generation X, those born between 1965 and 1979, are well-established in the workforce, but they too have retirement savings challenges. In addition to mortgage and consumer debt, members of generation X will soon face college expenses for their children at the same time that they are saving for their own retirement. Many are participating in a retirement plan at work, but it is likely a 401(k) rather than a defined benefit plan, and they may not be saving enough to ensure a secure retirement. The good news is that these members have a long retirement time horizon and will benefit from many years of tax-deferred IRA growth.

According to data from the Investment Company Institute, Roth IRA ownership is greater among generation X than among any other age group. When it comes to marketing for these individuals, you may want to promote Roth IRAs and the benefits of tax-free withdrawals that Roth IRAs offer. With higher average IRA balances than young millennials, members of generation X are ideal candidates for alternative investments, such as stocks, bonds, and mutual funds. If you are not offering alternative IRA investments, consider expanding your investment offerings, or your members may look elsewhere.

Baby boomers, those born between 1946 and 1964, are starting to retire. Nationwide, more than 10,000 retire every day, and those not already retired will retire in the next 10 to 15 years. Many have missed saving for retirement. And those who have saved have seen their retirement savings decimated by the 2008 financial downturn. Many baby boomers are still making mortgage payments, and with a short retirement savings time horizon, the focus here is on maximizing savings during peak pre-retirement earnings years.

These members will benefit from the new higher contribution limit, as many have the financial resources to make the maximum IRA contribution. Plus, those baby boomers who are age 50 or older have an additional option to maximize their savings: they can make an extra $1,000 IRA catch-up contribution.

The Employee Benefits Research Institute found that IRA ownership is greater among baby boomers than among any other generational demographic. With the baby boomer audience, you may want to steer your marketing efforts toward helping these members maximize their retirement savings through IRAs and workplace retirement plans. If you offer financial planning services, make sure to offer pre- and post-retirement planning services, as effectively managing your savings in retirement is equally as important as accumulating the dollars needed to ensure a secure retirement.

Credit unions focus on meeting their members’ needs each and every day. This IRA season, consider centering your marketing efforts around the needs of your individual member, and both your credit union and your members will reap the benefits.

Dennis Zuehlke is Compliance Manager for Ascensus in Middleton, Wisconsin. Mr. Zuehlke provides clients with technical support on tax-advantaged accounts (including individual retirement accounts, health savings accounts, simplified employee pension plans, and Coverdell education savings accounts), and information reporting and tax withholding issues. Mr. Zuehlke is a frequent national speaker on compliance-related issues and retirement savings trends within the financial services industry.

Mr. Zuehlke attended Marquette University and graduated from the University of Wisconsin. Prior to joining Ascensus, he held a similar position with the Credit Union National Association.

Ascensus delivers a full range of retirement plan services—including plan administration, plan design and maintenance, consulting, web-based tools and content, software solutions, education and training, forms and documents, and technical resources—to more than 9,000 financial organizations nationwide.

Dennis Zuehlke

Dennis Zuehlke

Dennis is Compliance Manager for Ascensus. Mr. Zuehlke provides clients with technical support on tax-advantaged accounts (including individual retirement accounts, health savings accounts, simplified employee pension plans, and Coverdell education ... Web: Details