Data & Research May 5, 2015

Nurses' Savings Still Need Critical Care

Nurses need financial guidance, Fidelity finds in a study, and when they use advice or education offered by their employers, about a third take a specific action, mostly to boost plan contributions.
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Fidelity’s “Financial Checkup on Nurse’s Retirement Readiness” finds a range of financial behaviors among professional nurses, some positive, and some that may mean this population needs more guidance. Nurses’ total savings rates are up and they are currently saving 12%. The study also finds that 31% of nurses increased their contribution amount to a workplace retirement plan in the last year.

Recognized as one of the nation’s most demanding professions, nursing means long work shifts, ongoing regulatory changes and the need for a constant focus while making critical decisions regarding the health of patients. In such a challenging work environment, personal matters are often sacrificed or take a back seat, with finances serving as a perfect example.

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The less attention paid to something, the less confident someone will be, in most cases. According to Fidelity’s study, more than half the nurses surveyed (56%) say they lack confidence in making financial decisions—and four in 10 (41%) attribute this to the fact they don’t have enough time to focus on them. 

While an overwhelming majority of nurses—92%—say they want to learn more about financial planning, this struggle for time continues to be a challenge with implications for retirement readiness.

The good news: despite their lack of financial confidence, many nurses are taking positive steps with their money, the study says. For instance, 84% are actively saving for the future. Fidelity’s analysis of its own data examining the retirement savings behaviors of more than 38,000 nurses supports this, showing nurses are diligent savers with a total savings rate (employer plus employee contribution to a workplace savings plan) of 12%—close to matching Fidelity’s suggested 15%.

The workplace can be an easy entry point for many nurses to learn more about financial planning, as most retirement savings plan providers offer free retirement guidance. Surprisingly, this accessible resource is not commonly used—62% of nurses who have access to retirement guidance at work don’t take advantage. Again, the biggest obstacle is time, with one-third (33%) citing a lack of time as a barrier.

“Health care employees work in a unique environment, with long work shifts and heavy demands on their schedules,” observes Alexandra Taussig, senior vice president, Fidelity Investments.

Next: Most nurses who don’t use workplace guidance would, under certain circumstances.

Increased Accessibility

Retirement guidance in the workplace may be underutilized, but the study also finds that 85% of those who don’t take advantage of it would be motivated to do so if they were given options that enhanced accessibility. For example, four in 10 (41%) of these nurses would be motivated to participate if their employer provided a class during work hours or had experts available to walk them through retirement plan options—either in person or on the phone.

Guidance leads to action, Fidelity finds, and adjusting workplace guidance to match employee needs can be a powerful way to help nurses better understand their financial plan and encourage them to get engaged. Fidelity finds that 35% of nurses take action after receiving guidance. Of those nurses, 69% increased their retirement savings contribution within 90 days of completing a guidance interaction by phone, in person or online.

Another benefit of guidance, the report notes, is that it can help nurses understand the consequences of taking a loan from their retirement savings account. This finding could be especially important, since Fidelity finds that 19% of nurses currently have an outstanding loan against their retirement savings account—up from 14% in 2012.

 Additional findings:

  • 50% of nurses worry about not having enough money to last through their retirement;
  • 67% say they could use more knowledge to help them make smart financial decisions; and
  • 68% are at least a little confused about navigating their financial path for the future.

The online survey was conducted by Kelton between October 6 and October 30 among 356 nurses (designations are: Registered Nurse, Advanced Registered Nurse, Licensed Practical Nurse, Nursing Management, Certified Registered Nurse, Certified  Nurse Anesthetist), ages 18 and older who are employed or retired and have a qualifying retirement plan (401(k), 401(a), 403(b), 457, 457 (b), or 457(f)). Fidelity and Kelton are not affiliated.

More information about the Financial Checkup on Nurse’s Retirement Readiness is on Fidelity’s website. 

Products May 4, 2015

Natixis Introduces Retirement Spending Accounts

A product released by Natixis Global Asset Management addresses individual investors’ worries about the costs associated with living longer.
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The Natixis ASG Retirement Spending Accounts have the ability to invest retirees’ assets with the goal of providing an annual income to fund short- and long-term expenses. The accounts start with a conservative asset allocation, then increase to riskier assets including equities and alternatives for a period of time, and eventually decrease risk as investors shift toward plan finalization.

An investor is most susceptible to sequence-of-return risks early in retirement, explains Edward Farrington, executive vice president of retirement at Natixis, in a discussion of the research that went into the product’s design.  This is the period when the allocation of higher-risk assets is low to help limit volatility when initiating withdrawals. A major market correction at the beginning of retirement could deplete a large percentage of the retirees’ savings, he says. In pursuing potential returns and to help protect against risks, the allocation to risk assets rises during mid-retirement, then declines again late in retirement to preserve capital and prepare for transferring assets to a beneficiary.

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Seeking to generate a steady cash flow, the accounts will use an Adaptive Retirement Income Glidepath and a risk management strategy. The cash flow will be calculated at either a 4% or 5% withdrawal rate, with an annual inflation adjustment, and the account will remain liquid to provide flexibility throughout the investors’ lifetime.

Retirement continues to be the top investment priority for individual investors, Farrington comments. “Our new Retirement Spending Accounts provide a contemporary approach to the age-old retirement challenge, how to match funding to current and future expenses, that considers market volatility, longevity risk, taxes and other potential financial challenges associated with retirement,” he says.

Alpha Simplex Group will determine the portfolios’ strategic and tactical asset allocation, while trading, withdrawal strategy and tax management will be led by Managed Portfolio Advisors, both Natixis affiliates. The portfolios will include mutual funds and exchange traded funds, and the accounts are designed for investors who started retirement in or around the years 2000, 2005, 2010 or 2015. The minimum investment is $100,000 and they will be sold through registered financial advisers. The Retirement Spending Accounts will be available in mid-May. 

“Life changes dramatically for clients entering retirement, and their investment strategy should change with them. With so many variables, it makes sense to work closely with your investment and tax advisers. They can help identify the opportunities and create a plan to optimize your spendable income,” Farrington concludes.

More information on the Retirement Spending Accounts and “A New Chapter, A New Approach. Rewriting the Rules of Retirement Income,” a white paper on retirement income, are available at the Natixis website.

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