Addressing Employees’ Conflicting Financial Priorities

According to research from the Deloitte Center for Financial Services, “Meeting the Retirement Challenge: New Approaches and Solutions for the Financial Services Industry,” most Americans consider retirement their most important financial priority, but 40% of those surveyed said they are unable to save for retirement because of other financial priorities.

Next to retirement, the second most important financial priority—especially among older participants—is saving money to pay health care costs. This is not surprising, considering 70% of those surveyed said they expect their medical expenses to increase during retirement. Respondents said they were also concerned about long-term care expenses.

Plan sponsors and advisers cannot ignore these conflicting financial priorities, Val Srinivas, research leader, banking and securities at Deloitte, told PLANADVISER. “So it’s [about] understanding your own audience and … understanding their concerns,” he said. “The way I feel is it’s minor tweaks and adjustments, not a wholesale change in the way employers communicate with their employees.”

Srinivas suggested employers can provide incentives for employees to attend financial education meetings; for instance, employers could offer free lunch or a monetary reward for attending. In addition, he said plan sponsors and advisers can work to target different audiences and address their specific financial needs—a young employee might be worried about paying off student loans, whereas an older employee might be concerned about health care.

According to Deloitte’s research, younger employees in particular are concerned about other financial issues aside from retirement. As one respondent said, “Right now I have more pressing ways to allocate my money.”

To begin to overcome the conflicting priority barrier, financial services providers should consider offering prospects and current clients holistic approaches and solutions, Deloitte suggests in its research. It likely does little good to pitch retirement products alone to someone who is more concerned for the moment with mortgage or other debt issues, Deloitte added. Srinivas cites retirement calculators as one example, although the industry has begun moving away from the retirement-only calculations. Putnam Investments, for example, recently launched a health cost estimator. (See “PutnamLaunches Health Cost Estimator.”)

Conflicting priorities could be addressed as part of a comprehensive financial plan that at least gets the prospect started on retirement preparation, even if the initial efforts are relatively modest, Deloitte says. By addressing the bigger picture and taking other priorities into account, consumers will likely gain more confidence that they can start planning for retirement at the same time.

For example, concerns about financing health care and long-term care costs could be addressed in conjunction with retirement savings and income planning. Conversations must be focused around real-life financial events in conjunction with retirement, Srinivas concluded.

Deloitte’s research is available here.