It’s Open Enrollment Season, and the Retirement Industry Should Sign Up for Fintech
By Karen Andres, VP and head long-term saving and retirement at CFSI
Forget the holidays — my favorite time of year is fall. Time for sweaters, the crock pot, pumpkin carving, and college football. But there’s a less obvious reason to love fall: it’s benefits open enrollment season for most American companies, which means that this is the time when the 95 million Americans with workplace access to a qualified retirement savings plan receive emails from their benefits departments, reminding them about the importance of the 401(k) and how they should attend an upcoming retirement education session very soon to take advantage of this generous company benefit.
I would argue that benefits season is the most important moment of the year for Americans to take positive action for their long-term financial health — and now more than ever before because American workers are not financially prepared for their life after work. According to new research from the National Institute for Retirement Security (NIRS), the median retirement savings balance in America is $0. Yes, you read that right. ZERO DOLLARS. Per NIRS’ analysis, 100 million Americans lack any retirement account assets.
There are many reasons for this, most of which are out of the individual workers’ control,, including the disappearance of defined benefit pension plans, the administrative and financial burdens that prevent small businesses from offering qualified savings plans, and the rising cost of life’s big-ticket items, like housing, child care, and health care — just to name a few.
But perhaps the most immediate obstacle facing most would-be 401(k) savers is the rest of their financial life. In our recent CFSI report, Preparing for Tomorrow by Fixing Today: Helping Low- and Moderate Income Workers Thrive in Retirement, we analyzed nationally representative data on low- and moderate income workers over the age of 55, finding that:
- 62 percent of LMI pre-retirees have less than 3 months’ worth of living expenses in emergency savings
- Nearly half of LMI pre-retirees struggle to pay their bills on time and in full.
- The vast majority of pre-retirees, both LMI and non-LMI, have debt, with 34 percent of LMI pre-retirees reporting that their debt is unmanageable
This data and research show that people are struggling to thrive tomorrow in large part because they are trying to survive today. At CFSI, we are actively growing our community of companies in the retirement industry — from asset managers to record keepers to insurers to consultants — who want to take action. We see an opportunity for companies across the defined contribution supply chain to quantitatively assess the financial health of plan participants and non-participants alike, and to offer actionable solutions that help them measurably improve their financial lives. The good news is that this financial health measurement science now exists, such as the CFSI Financial Health Score, and that the fintech world has been hard at work building all manner of innovative, pro-consumer products and tools. Over the last 15 years, CFSI’s has worked to help banking and payments giants better diagnose their customers’ specific needs and to subsequently introduce them to the promising fintech innovators we have met in our Financial Health Network and Financial Solutions Lab (FinLab). The FinLab is currently soliciting applications for it’s fifth cohort, that will be exclusively focused on solutions for the workplace channel. The partnerships and pilots we have seen there from past cohorts give us hope that there is additional impact to have in the retirement industry.
And, as we wind down National Retirement Security Week, there’s another reason for hope: that from the $0 savings statistic, the only place to go is up.
To learn more about CFSI’s research around retirement planning, download the Preparing for Tomorrow by Fixing Today: Helping Low- and Moderate Income Workers Thrive in Retirement report and stay tuned for additional research on retirement coming in early Q1 2019.