March 2024 Newsletter

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Generational Influences and Behavioral Finance

Understanding generational attitudes toward investing and the cognitive biases that can lead participants astray is key to helping employees of all ages improve their financial wellness and prepare for a secure and successful retirement.

Baby Boomers may be inclined to drop cognitive anchors based on early information that cements their opinions. Unfortunately, when anchoring reference points are arbitrary or uninformed, Boomers may find themselves overconfident in financial decisions that fail to serve them over the long term. And if these decisions lead them to take on excessive risk, the results could be disastrous as they approach retirement. Financial professionals can help Boomers avoid the anchoring bias and take a more objective approach to investing by using financial wellness assessment data to direct them toward individualized financial wellness resources to improve financial decision-making.

Generation X
Independent and self-reliant, this cohort came into adulthood as the first generation with a world (wide web) of information at their fingertips. However, Gen Xers may allow current events or recent experiences to have an outsized influence on their financial decisions and reinforce established perceptions — this is known as the recency bias. They may, for example, be tempted to make impulsive investing decisions during or immediately following volatile markets, without fully considering whether current conditions are likely to be short-term. The recency bias can also lead some Gen X-ers to take on bigger risks in bull markets, believing that recent gains will likely persist indefinitely. In this instance, financial professionals can help such individuals step back and take a broader historical view of markets, examine economic fundamentals, reassess personal risk tolerance and review investment goals.

FOMO — or fear of missing out — can be top of mind for some millennials. And this can translate into a herding bias when it comes to their investments and the risk of jumping off a financial cliff by following the herd chasing the latest speculative investment trend. Financial professionals can help millennials fight FOMO by encouraging them to focus on investing fundamentals and creating a financial decision-making process that promotes long-term strategic thinking and prudent investing behaviors.

Gen Z
Gen Z values the control that knowledge and information gives them, having literally grown up knowing how to search for it online. As a result, they may be less reliant on more conventional learning settings and modalities. They came of age during a period of economic turmoil and (somewhat surprisingly) often value the stability of a traditional job over freelancing. And these young adults already recognize the importance of regular saving and investing. Time will tell whether this pragmatic and analytical tendency will turn out to be an asset for their financial decision-making over the long term. In the meantime, financial professionals can help Gen Z-ers take advantage of the benefits of investing early — and hopefully they’ll be less susceptible to retirement challenges in the future.

Bottom Line
Even though there are generational components to behavioral finance, every employee is unique in their beliefs, attitudes and goals. An individualized assessment platform helps financial professionals tailor solutions to all employee needs, no matter their age or level of investment experience.


The Graying of the American Workforce

The Silver Tsunami is headed ashore, as “Peak 65” is expected to usher in an average of 11,000 retirement age Americans daily through the end of 2024 — the highest ever recorded. And a lot of them plan to keep working. Pew Charitable Trusts reports that 62% of workers 65 and older are engaged in full-time employment versus 47% in 1987 — and the expansion of seniors’ participation in the job market is projected to continue. The Bureau of Labor Statistics projects that more than one in five older adults will be in the labor force by 2032. For organizations, this demographic shift presents a unique opportunity to leverage the wealth of experience offered by senior professionals.

Modern Elders
Today’s older workers are generally healthier and more educated than those of previous generations. And with fewer having pensions to provide stable income during their golden years, many are motivated to stay in the workplace longer to delay receiving Social Security payments until they reach full retirement age. Employers can gain a tactical advantage by supporting these often highly experienced workers seeking post-retirement “bridge jobs.”

Older employees can help retain the type of institutional knowledge that can boost productivity and help maintain corporate culture by passing down critical skills and company-specific knowledge that might otherwise be lost. This knowledge transfer is essential for continuity and can save significant resources in training and development. Senior workers can also be highly valuable as mentors to younger coworkers and help boost morale by providing a sense of history and tradition.

Boomer Benefits: Adapting Rewards for a Mature Workforce
Organizations may be able to reap the myriad benefits older workers offer without having to pay a premium to retain them. They may be willing to accept reduced pay for perks like flexible or hybrid work options, phased retirement programs, job retraining into more age-friendly positions, expanded health benefits and HSAs to help cover medical expenses in retirement. However, it’s important that the unique needs of senior workers also be addressed when constructing a comprehensive benefits package.

Systematic withdrawal plans can help retirement-age employees better manage cash flow. And expanding traditional financial wellness programming enables organizations to enhance the stability and job satisfaction of older workers while capitalizing on the vast reservoir of knowledge and experience they offer. Benefits could include longevity planning and other resources that address the specific life-stage concerns of seniors, such as estate planning, health care directives and long-term care funding.

Applying a thoughtful approach to senior talent can result in higher retention rates, lower recruitment costs and a more resilient and diverse organizational culture that both values — and benefits from — the contributions of its most experienced workers.


Helping Young Americans Save for Retirement Act

Senator Bill Cassidy (R-LA), the Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, and Senator Tim Kaine (D-VA), a member of that committee, introduced the Helping Young Americans Save for Retirement Act.

Sponsors of 401(k) plans would have to permit employees as young as 18 to make contributions under the bill. However, their involvement would be restricted to the following:

Not relevant to employees who work part-time: The long-term part-time regulation would not take effect until age 21, and it permits an employee to participate if they had two years of part-time service totaling at least 500 hours annually. The idea would prohibit certain individuals from participating, such as college summer interns who are younger than 21.

Nondiscrimination and rules prohibiting heavy lifting: These participants under the age of 21 may be excluded by their employers or sponsors from nondiscrimination testing, such as 401(k) ADP and ACP testing, and from consideration under the Top-Heavy rules.

Not taken into account when calculating the audit requirement under the 5500 rules: Plans sponsors with 100 or more members are required to file audited financials together with Form 5500/annual report. Employees who participate just because the bill proposes under-21 participation would not be considered for the purposes of that provision until five years after they initially join the plan.

These changes would be effective beginning in 2026.

While this proposal is unlikely to be passed as a standalone bill, it is likely to be under consideration in the next round of broad-based, bi-partisan retirement policy legislation.

7 Tips to Prepare You for Retirement


A secure and happy retirement requires careful planning and is a well-constructed process. Starting now will give you plenty of time to make the strategic changes and improvements that will bring your retirement goals closer to reality. Here are seven things you should know to strengthen your retirement strategy.

1.  What will you do? Establish definite objectives and plan for a retirement that will last for at least 20 years. Satisfied retirees generally set goals for themselves that include both monetary stability and personal fulfillment. Ensure your aspirations align with a financial strategy that supports these goals.

2.  Will you work? The current trend of working beyond retirement requires a realistic evaluation of the opportunities that are accessible. Determine whether doing the kind of work that best suits your interests and abilities will make it easier for you to transition into your post-career goals.

3.  Where will you live? Choosing where to live will also be a factor that affects your decisions. If being near family is a priority, then proximity will be a crucial element in where you decide to settle down. A good location is also crucial for anyone thinking about working after retirement to reach possible career goals.

4.  How much will you get from Social Security? Get a personalized estimate at to maximize the power of knowledge about your Social Security (SS) benefits. To optimize these benefits, be aware that SS payments vary depending on your enrollment age and discuss coordination techniques with your spouse (if applicable).

5.  How much additional money will you need? Once you know what you can expect from SS, you need to determine if that and your other assets are enough to pay your monthly bills.

6.  Do you have health insurance? As you approach the age of 65, eligibility for Medicare grows nearer. However, securing supplemental insurance remains essential. Those retiring before this age must explore alternative coverage options through private insurance or state health insurance exchanges.

7.  Have you stress-tested your finances? Stress-test your financial situation to be ready for life’s unexpected obstacles. Have an emergency fund on hand to handle unforeseen costs, such as house repairs, car replacements, or unanticipated health problems, to ensure your financial stability in times of difficulty.

Planning ahead and being proactive are essential for starting a safe and fulfilling retirement. By paying close attention to these seven factors, you could set yourself up for a retirement that fulfills your goals in terms of both finances and personal fulfillment. Make plans now so that your retirement may be a pleasant and fulfilled chapter of your life.

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