Beyond The SmartPath

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Beyond the



Insights from today’s retirees on achieving greater retirement readiness

As a retirement services provider, we are fully engaged in the continued national dialogue around retirement readiness. One of the ways that we can continue to encourage more successful retirement outcomes is to provide participants with some important lessons learned from today’s retirees.

To learn more about retiree perspectives, Pentegra sponsored two studies of retirees to better understand how these individuals view their efforts to prepare for retirement. Following our 2016 Harris Pentegra survey about retirement advice and regrets, we independently interviewed dozens of retirees for additional information designed not only to further illuminate our Harris findings, but also to provide further insight for those who are still currently working and can benefit from the wisdom of others.

As it turns out, there are key concurrent themes among all retirees. From saving more, and starting earlier to paying more attention to investments, our study offers key insights from retirees for younger workers about achieving greater financial security and retirement readiness. ‘Beyond the SmartPathTM’ summarizes these insights to help inspire today’s workers to take action. ‘Beyond the SmartPathTM’ offers fundamental and indispensable advice from retirees on what they might have done differently as they looked back to their working years.

most important and Among the


concurrent themes—

more, start earlier and invest in a more educated manner.

What do retirees have to say? Among retired U.S. adults*, when asked to complete the sentence, “When I look back on what I might have done differently with my retirement savings, I should have...” our top responses all had to do with saving strategies. Nearly two-in-five (39%) say they should have started saving earlier in their working life and 35% say they should have saved more. 29% say they should have paid more attention to preparing for retirement when they were younger.1 Not surprisingly, among those we interviewed, every respondent echoed the plea of the retirement industry and our survey results: Save early and often. Most suggested doing this by getting involved as soon as possible in any retirement savings vehicle offered by their employer – especially a 401(k), if available – and to contribute enough to take full advantage of employer matching contributions. They also universally advocated the truism that it’s never too early – or too late – to start saving for one’s retirement. “The key thing is that the cost of living keeps going up, which makes it difficult to set money aside,” noted one. “But a little something is still better than nothing.” A few retirees even recommended simply saving a few dollars a week or month and putting those funds into everything from a 401(k) plan to an IRA or CD or simply depositing them into a bank account. “Save at least $5 a week,” recommended one retiree. “It doesn’t sound like much, but it can add up.” *Among U.S. adults who are retired and do not have income from a pension. 1Pentegra 2016 Harris Poll on Retiree Perspectives

PLAN TOOLS THAT CAN HELP—THE PENTEGRA PARTICIPANT SMARTHPATH™ The Pentegra Participant SmartPath™ offers simple, yet essential tips for building a strategy that can put participants on the path toward more successful outcomes—and a secure retirement reality.


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Among retired U.S. adults, 94% have advice about retirement to offer those younger than them, particularly stressing the importance of saving. Roughly threein-five recommend those younger than them save earlier in their career (63%) or save more throughout their career (57%). About half say to always contribute enough to qualify for employer matching contributions (51%) or to find small ways to save more (45%). Pentegra 2016 Harris Poll on Retiree Perspectives

Reasons for Retiring Many reports over the past decade have indicated that, in general, people are working longer and deferring their retirement until later in life. According to Gallup’s Annual Economy and Personal Finance survey, conducted April 9-12, 2015, 37 percent of non-retired Americans expected to retire after age 65 – up from 31 percent in 2009 and nearly three times the 1995 figure of 14 percent. However, Pentegra’s interviews revealed that this attitude is not necessarily a new one. While many retired sometime between age 61 and 65, a significant number of our workers did not retire until their late 60s or beyond. Most respondents indicated that they were able to choose when they stopped working. Many of those decisions were made when the person felt they were simply ready to enter their golden years. Others retired when the parameters of their job changed significantly, and/or when they felt they were “aging out” of their profession. Only a handful of respondents continued to work after retiring from their primary job; in most circumstances they have done so for the social aspect or to “have something to do” rather than trying to significantly supplement their income.

PLAN TOOLS THAT CAN HELP: THE PENTEGRA DISTRIBUTION PATH How do you transition from the accumulation phase to the decumulation phase and optimize your savings to last a lifetime? The Pentegra Distribution Path™ offers simple, yet essential tips for creating a decumulation strategy to build a lifetime income stream and make a secure retirement a reality.


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Of our respondents, 19% say to continue working for as long as you can or to take a part time job to supplement your retirement income (5%).

Pentegra 2016 Harris Poll on Retiree Perspectives

Generational Attitudes The majority of our respondents were children of the “Children of the Depression” (those born in the 1920’s and 1930’s). As such, many realized the importance of saving money from an early age – although, tellingly, this was done more from necessity and/or observation than direct discussion with their parents or other older family members. When asked if his parents had discussed saving money with him as a child, another interviewee stated, “There was really no concept of saving for retirement in the ‘40s, ‘50s or ‘60s. It was really living week to week then, trying to save a few bucks to buy something you needed rather than taking the long view.” Today a long term view is critical. Our retiree interviews confirm that older generations tended to rely heavily upon pensions along with real estate as their primary retirement assets. However, subsequent generations must actively deal with the shifting retirement savings landscape, which has placed more responsibility on individuals to save for their own retirement. The shift away from working for a single employer for most of one’s career, as well as the general disappearance of company pension plans has intensified this trend. Almost all respondents said they have tried to pass the lessons they instead learned as adults to their own children. This has been made easier by the prevalence of 401(k) plans and expanded financial news coverage in print media, the Internet, and cable television outlets, which weren’t around prior to the late 1980’s.

PLAN TOOLS THAT CAN HELP: FINANCIAL RESOURCE CENTER Pentegra’s Financial Resource Center uses engaging flash animation and in-depth educational content to take participants through the different stages of retirement planning, based on their age and proximity to retirement. These self-motivating interactive modules and tools explain and reinforce important financial concepts in smart, engaging and informative ways.


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Other advice


adults would offer to those younger include relocating to a less expensive area upon

retirement (8%) Pentegra 2016 Harris Poll on Retiree Perspectives

Investing for Retirement Beyond “save early and often”, our retirees generally recommend diversifying one’s retirement savings portfolio, and conducting regular reviews to make any adjustments necessary. Some stated that they relied mostly on their 401(k) plans, IRAs and other vehicles to perform as expected, rather than try to calculate a dollar figure needed to ensure a comfortable retirement. Others took a more active approach, consulting with financial planners and/or educating themselves about investing.

Using Retirement Savings For the most part our respondents say they were never seriously tempted to tap into their retirement savings while they were still working, even when facing college tuition payments. “I was facing a financial Mount Everest and I was wearing sneakers,” says one. “Then I got a job just as [my children] were heading off to college where my income went up substantially, so I was able to pay it all out of my income.” Most others funded their children’s education by relying on student loans, borrowing from home equity credit lines, taking advantage of scholarships, or a combination thereof.

PLAN TOOLS THAT CAN HELP: GUIDANCE/ADVICE PLUS Everyone’s financial situation, time horizon and risk tolerance are different. Our Guidance Plus and Advice Plus investment education and retirement planning tools are designed to help participants define their personal investment strategy and provide objective investment guidance and advice along with a personalized action plan.


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Retired individuals also place importance on investing with 13% saying they should have invested more aggressively and taken the time to learn more about investing. Roughly one-in-five said to work with a professional financial planner (22%), Others recommended purchasing an annuity with a portion of your retirement assets to ensure you don’t run out of savings (10%). Through the Rearview Mirror American Century Investments 2013

Social Insecurity While the demise of Social Security has not occurred – at least so far – none of our retirees had much faith in its ever becoming a significant source of retirement income for themselves; after all, the Social Security Administration reported that for June 2015, the average monthly payment to non-disabled workers was just $1,335 per month. Growing up, and during most of her earning years, a retired interviewee said: “We actually believed we could live on our Social Security. I found out fairly early that you really need to start saving everything you can because you can’t live on Social Security.” “Social Security is not going to last forever and does not support you by itself,” affirmed another. Even during the arguable height of Social Security’s popularity – during its formative years after it was originally established in 1935, partly as a means of helping to support retirees still feeling the effects of the Great Depression – Social Security was never intended to be a salary replacement in retirement. It was created to supplement retirement income. Stated another, “Social Security really isn’t going to be sufficient for future generations. I tell everyone to have a Plan B – most people don’t even have a Plan A.”

PLAN TOOLS THAT CAN HELP: BUILDING BLOCKS EDUCATION SERIES Pentegra’s Building Blocks for Retirement education tool is designed to help you promote your plan with attention grabbing, effective messaging. With topics ranging from the advantages of participating to increasing contributions and building an investment strategy, campaign components, including email blasts, posters and multimedia presentations, remind employees of the importance of saving for retirement and how your plan can help.


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Just over a quarter (26%) say to delay taking Social Security benefits for as long as possible. Pentegra 2016 Harris Poll on Retiree Perspectives

Looking at the Workforce of Today … And Tomorrow Nearly every person surveyed said that they believe there are more and better choices available to today’s workers than there were when they began their own careers. Nevertheless, they view with alarm the steady stream of data that finds most Americans’ retirement savings fall well short of adequacy. In a March 2016 report, the Economic Policy Institute reported that the average U.S. family has about $5,000 saved for retirement, and that the median amount of retirement savings for families headed by someone between the ages of 55 and 61 is $17,000. “Americans are optimistic people and they always expect some windfall to come along and save the day,” said one respondent. “Long-term planning is not hard wired into most people’s DNA.”

PLAN TOOLS THAT CAN HELP: TARGETED COMMUNICAITONS Pentegra offers targeted, personalized employee communications that encourage participants to take action to meet specific retirement goals. Each communication focuses on a single retirement planning topic, and makes its point by incorporating personal illustrations and examples based specifically on the participant’s plan and account information.


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The typical working-age American household is far off-track toward accumulating ample savings to maintain their current living standard, and many will be challenged to have the resources to pay for their basic needs in retirement. Nearly 7-in-10 (68%) of workers age 40+ admit they should have started saving earlier for retirement.

National Institute on Retirement Security, “Retirement Security 2015 Roadmap for Policy Makers, Americans’ Views of the Retirement Crisis� March, 2015.

What Did We Learn and How Can Sponsors Help? Plan sponsor decisions matter Defined contribution plans—and 401(k) plans in particular—have undergone a dramatic shift since their creation nearly 30 years ago—evolving from what was once considered a supplementary retirement benefit to become the primary source of retirement income for many people today. Plan sponsors have a growing sense of responsibility for employees’ overall financial wellness. Plan design decisions are the key driver in helping people save successfully. Retirement readiness starts with progressive plan design Ensuring successful participant outcomes begins with progressive plan design that maximizes positive participant behaviors. Certain automatic plan features that better meet the needs of plan participants and plan sponsors can drive successful outcomes for participants and sponsors alike. These features help plan participants set a reasonable level of salary savings, increase their contributions over time, achieve proper investment diversification and make better use of a plan’s investment alternatives. Educate me Beyond plan design, there is nothing more effective when it comes to influencing participant behavior than on-site education. Periodic re-enrollment and education meetings help participants map out a strategy and stick to that strategy to attain their long-term goals. Participants often cannot measure whether they are on track to meet their retirement planning goals without first taking the steps to determine what the goals are. Rethink communication and education programs to help participants think in terms of affordability. Focus on financial wellness and overall budgets and make small lifestyle changes to make saving more affordable and realistic. Use your education meeting as a platform for integrating financial planning tools to help participants do this—in particular, tools that provide guidance and advice.

Pentegra Can Help Our retirement plan education and communication tools are designed to support your efforts. We offer education and communication tools to provide you and your participants with a deeper understanding of how retirement plans can be maximized to provide successful outcomes for everyone.


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Help participants achieve greater retirement readiness with the Pentegra SmartPathTM thought leadership series. For more information, contact us at 800.872.3473 or visit us at Follow our current thinking and join the conversation.

2 Enterprise Drive, Suite 408, Shelton, CT 06484-4694

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