A new retirement is taking shape

First, let’s understand the new landscape

Retirement goals and financial needs for the new retirement generation are changing:

• Retirement age and life expectancy: Longer lifespans mean savings will need to last longer — and many in these generations aren’t sure they’ll have enough. Expenses like health care and housing are making it vital to supplement future savings as much as possible.

  

• A savings gap has created additional challenges: Gen X accounts for just 26.1% of the nation’s wealth, while baby boomers own over half (51.6%), highlighting a significant disparity.³ Higher levels of debt can exacerbate this gap, creating a difficult challenge for saving. Student loans are particularly burdensome on these generations.⁴ Plus, these generations have a greater dependence on 401(k)s, IRAs and personal investments.⁵ Compared to the pensions of the boomers’ heyday, these retirement accounts put the onus on the participant to know where and how to invest dollars.
• Shift in investment style: There is appetite for risk and investing. Even though these generations experienced significant economic disruptions, they are less risk averse than older generations.⁶ They rely more on digital tools, robo-advice and digital sources for education, which helps open their curiosity. Sustainable investing is also popular, offering a way to align their investment strategies with their values and life perspectives.⁶
• Lifestyle and goals: There is an increased focus on an active and purposeful retirement, such as travel, second careers or working part-time to stay engaged. Many are reimagining retirement as an opportunity to explore passions, volunteer or continue contributing to society in meaningful ways. This shift reflects a desire for fulfillment and personal growth.

Key tactics to adapt to the evolving landscape

Because these generations can make retirement more personal, it’s important to help ensure their planning aligns with their unique lifestyle goals.⁷

Focus on client personalization

Help encourage clients to consider their lifestyle and long-term goals in retirement planning. Showing clients you understand their unique journeys can help build trust. Listen closely to their concerns and provide reassurance through proactive communication. You may also consider tools like personalized projections, scenario planning, video and interactive resources to help clients visualize their retirement and gain a solid footing.

Discuss effective saving strategies and ways to maximize savings potential

It’s important to understand each client’s current financial situation. Determining a client’s retirement readiness can help identify a savings gap that may have a lasting impact. Consider retirement account contribution opportunities,⁸ particularly for clients nearing retirement. Annuities, with guaranteed income, can play a pivotal role in expanding savings, particularly given longer life expectancies. Many from younger generations may choose to work beyond traditional retirement age to compensate for savings shortfalls. Discuss options like catch-up contributions and Health Savings Account (HSA) contributions, which can offer tax advantages and additional growth opportunities.

Discuss managing market volatility and investment risk

Discuss approaches to managing market fluctuations by locking in gains during market highs and protecting assets when markets dip. This approach can be particularly beneficial for those concerned about volatility. Walk clients through sustainable options and explore strategies for helping shield a portion of their retirement savings from market downturns with, for example, the guaranteed income of a fixed indexed annuity.