BenefitsPro: A seismic shift for the retirement industry: What plan sponsors need to know

Author: Siân Killingsworth / 31 Aug 2020

Ensuring financial security after the events we are facing as a country is going to take the perfect storm of governmental support, institutional changes, and societal shifts.

In an in-depth Q+A with Benefits Pro, Ubiquity founder and CEO Chad Parks shares what lies ahead for the retirement industry, explores how the 2020 election may impact retirement saving, and explores what can be done to help improve the financial futures of all Americans. 

Here are some highlights:

On changes observed in the retirement industry, since COVID-19

“First and foremost, there has been a renewed awareness of why what we do in the retirement space is so important. If we have learned anything from this pandemic, it’s that people are not only drastically underprepared for their future, but they don’t have the necessary savings in place for today. The pandemic truly shined a spotlight on the lack of retirement preparedness throughout the country.

As a response, there has been a big push in the industry toward solving the problem of financial wellness. The retirement industry is like a giant aircraft carrier — it’s usually slow to respond and adjust. Buzzwords like “financial wellness” get talked about often, but very little typically gets done on a larger scale. The pandemic has caused a seismic shift in the industry that will hopefully put us on a new course.”

On the first steps people can take toward financial wellness:

“Set up a simple budget. Start by calculating your mandatory expenses per month. From there, determine the total amount you can afford to save each month. With a dual-savings strategy, you could then split that total monthly savings into two accounts: a short-term savings account or “emergency fund” to cover any unexpected costs or life events (e.g., losing a job, medical expenses, etc.), and a long-term retirement savings plan……This dual-savings strategy allows you to simultaneously prepare for the unexpected while still investing in the future, all without increasing the total amount you save each month.”

On what the landscape looks like for near-retirees

“Early Boomers are arguably the greatest beneficiaries of the retirement system as it was originally designed to work. Most people in this group are already retired and most likely have a pension, are receiving Social Security and have saved a good sum of money on their own. The traditional three-legged stool of retirement — pensions, Social Security and personal savings — is in place for them.

However, the trailing edge of the Boomer generation is far less likely to have all three of these pillars securely in place. Late Boomers are facing a lot of uncertainty surrounding the future of Social Security and a possible reduction in benefits, as discussed above. They also likely don’t have access to a pension and if they do, may soon realize the funds from that account are not as secure as they think. As these near-retirees enter retirement, pension plans will finally experience the full force or “pull” of everyone needing their money at once. Many might be underfunded and unable to pay the full benefit.”