People helping people save for retirement the credit union way
For nearly 70 years, International Credit Union Day has been celebrated on the third Thursday of October as a way to reflect on the movement’s history and celebrate its achievements. The credit union philosophy of people helping people has helped many credit union members achieve their financial goals, including saving for a secure retirement.
Americans often cite saving for retirement, paying down debt, and getting their finances in order as their top financial goals, but many are falling short of their retirement savings goals. Most baby boomers have little or no retirement savings, according to a recent U.S. Government Accountability Office (GAO) report, and the U.S. Department of Labor (DOL) reported that in 2012, 30 percent of private industry workers with access to a defined contribution plan at their workplace did not contribute to the plan.
Credit unions often use their International Credit Union Day celebrations to remind members that the benefits of credit union membership—lower fees, higher rates on deposits, and lower rates on loans—help them achieve their financial goals. This year, credit unions can remind members that saving for retirement should be one of their top financial goals, and that their credit union offers tailored solutions to help members meet their goals.
Understanding member needs is important in helping members to meet their retirement savings goals. Younger workers starting out in the workforce have very different needs than older workers approaching retirement. A recent survey by the Transamerica Center for Retirement Studies—the 16th Annual Transamerica Retirement Survey of Workers—found that the expectations and preparations of American workers vary greatly by age. Following are some of the survey’s key findings.
Today’s workers who are in their 20s are voracious savers. Sixty-seven percent are already saving for retirement and they started saving earlier (median age 22) than their parents and grandparents. These same workers are also struggling to pay off student loans and credit card debt, with a sizeable percentage stating that paying off these debts is their greatest financial priority.
Workers in their 30’s are also strong savers. Seventy-six percent are saving for retirement through their workplace retirement plan, and of those participating, 30 percent are contributing more than 10 percent of their pay. More than half of these workers believe that they are saving enough to ensure a secure retirement.
Forty-something workers are feeling the lingering effects of the 2008 economic downturn, with one in four workers stating that they have not yet begun to recover or may never recover from the economic downturn. Eighty-two percent of these workers who are offered a workplace retirement plan participate in the plan, but one in four participants has taken a plan loan or early withdrawal. Twenty-six percent of workers in their 40s cite saving for retirement as their greatest financial priority, with 22 percent state that paying down credit card and other consumer debt is their greatest financial priority.
Workers in their 50s are starting to realize that they face a very different retirement landscape than their parents faced. Thirty-seven percent state that saving for retirement is their greatest financial priority. Eighty-three percent of these workers who are offered a workplace retirement plan participate in the plan, with 31 percent contributing more than 10 percent of pay, and 61 percent also saving for retirement outside of workplace plans.
Workers in their 60s have long ago given up on the concept of early retirement. Eighty-two percent of these workers either plan to or already are working past age 65—or do not plan to retire. More than half cite either health benefits or the need for income as reasons they plan to continue to work after they retire. These workers have a median amount of $172,000 saved in all household retirement accounts, but 47 percent expect Social Security to be their primary source of retirement income.
Credit unions can use the Transamerica survey’s findings to help them tailor their retirement savings solutions to the needs of specific member demographic groups. The DOL has indicated that putting money into an IRA is one of the top 10 ways to prepare for retirement. Credit unions can offer IRA solutions that help members become better prepared for retirement.
Credit unions can attract younger members with low-minimum balance requirement IRAs that offer funding via payroll deduction. Workers in their 40s who are financially stressed can benefit from member education about the high cost of taking loans against retirement plan assets. And, if they have already taken plan loans, they can learn the steps to take to help rebuild their retirement savings in a Traditional or Roth IRA. Older workers can benefit from member education that focuses on the benefits of catch-up contributions and consolidating IRAs for purposes of meeting the minimum distribution requirements.
While there are striking differences in the retirement expectations and preparations of workers by age, nearly every demographic group cites paying off debt and saving for retirement as top financial goals. Credit unions can help members achieve both of these financial goals. Now that is an International Credit Union Day message that will resonate with all credit union members.
