I have seen a number of trends with credit unions during my 30+ years of working with IRAs. As a service representative in the mid 1980s, I saw CDs paying 18 percent over 10 years. Members were placing their IRA contributions and rollovers into deposit accounts as part of their investment plan. When the stock market and interest rates both fell dramatically in 2008—the Great Recession—members were sent reeling in an attempt to secure their retirement dollars. The stock market has recovered over the past decade, but interest rates have only begun to do so.
I am hearing with greater frequency today that credit unions are seeking more deposits. One key strategy to gain deposits is IRAs. But many credit unions have not focused beyond minimum maintenance with IRA for some time.
Members Need Assistance
Over the past 10 years as interest rates remained low, credit unions were more able to borrow low cost funds and deposits were not a primary focus. IRAs became something that credit unions were required to service and there was little worry when IRAs were closed. Additionally, credit unions experienced a significant loss of knowledge over the past decade, often requiring other staff to absorb the IRA duties into their routines.
But with rates slowly beginning to rise and with recent volatile activity in the stock market, members again are more actively considering where to place their retirement dollars.
Generational Characteristics for Saving
Baby Boomers – Baby boomers are actively retiring every day, thus slowly becoming a smaller part of the workforce. Some are leaving their primary career to work part-time to supplement their retirement. They are seeking modest growth and preservation of capital.
Baby boomers are also rolling over significant employer-sponsored retirement plan savings (new dollars) into IRAs, and are taking direct control of how they are invested and used. They remember when CD’s offered a valued and safe choice for long-term dollars. And while they are comfortable using the Internet for financial services, boomers are also very willing to visit a branch if the service provides value. This group also is spending time planning on how best to provide for their beneficiaries.
Generation X – Generation Xers (a more quiet generation) are now entering their 50s. Many are sending their children to college or vocational school, and others have completed that phase in their life. This group is becoming more focused on accelerating their retirement plan savings and making up for lost time. A recent study by Allianz Life®, Chasing Retirement Study, found that approximately 50 percent of those approaching retirement are “chasers,” meaning that they may have retirement savings, but are behind on their retirement savings plans. This group is looking for ways to get back on track.
One thing that is seldom referenced in retirement planning advice and online tools today is Traditional and Roth IRA catch-up contributions for individuals age 50 and older—this now comes into play for generation Xers, who are ages 39-53. An IRA owner can add to the maximum regular IRA contribution ($5,500 for 2018 and $6,000 for 2019) an additional $1,000 contribution annually to help them catch up on their savings.
Generation Xers also are willing to conduct online transactions, but because they have been busy raising their families and advancing their careers, many are not aware of this. Providing information and advice to generation Xers can be an important element, especially if it is done proactively.
Lastly, generation Xers likely are dealing with the loss of a parent or grandparent. They will look to their credit unions to provide assistance with beneficiary claims and all the complexities that come with those transactions. It provides bank employees with direct contact to these individuals along with an opportunity to provide information on IRAs as retirement savings tools.
Millennials – Millennials are good savers. They are tech-smart and communicate primarily through messaging. And while not heavily focused on retirement at this age (generally ages 22-37), they have started the saving process through their employer retirement plans. Ascensus® data for year-end 2017 shows millennials with an average retirement balance just over $11,000 in their 401(k) accounts.
This also is the group with the higher number of employment changes. While they appreciate and use the technology solutions offered by the larger financial services firms, millennials prefer the community presence and focus of local firms. They will not visit a branch often, but want to know that one is nearby. Credit unions can become trusted resources for this demographic group by providing straight forward and valued advice on items such as retirement plan rollovers to IRAs (new dollars coming in), and can build a long-term bond with this group.
Finding the right way to reach all of these groups effectively is a key challenge. Making sure you have the expertise available is equally critical.
Marketing – There is no single promotion that will reach each of these generations equally. But credit unions today have the ability to mine their own data and present more targeted marketing to each age group. They also have the ability to deliver a much focused message through email or text, and can invite the reader to review specific website content.
Each generation is seeking a trusted source for financial information. Your website can present content or brief video snippets that review key concepts. Your educational content can also easily include a call to action. The goal is for the user to take that next step.
Expertise – When the recession hit in 2008, many credit unions lost key expertise due to staff reductions and normal retirements (baby boomers). Many organizations relied on that one individual who took care of their IRAs for years. This is something that many credit unions had not planned for, and many didn’t fully understand the effect on their IRA business.
As important as education is for your members , it is as important for your employees. IRAs can be a valuable asset to your organization, but they can also cause negative events if handled incorrectly. To be successful, you’ll need a commitment to spend money to educate your team and be willing to seek outside support from IRA experts.
IRAs are long-term investments for every consumer group. As deposit products become more competitive for every age group, credit unions have the opportunity to provide a valuable service and gain long-term members and deposits.