Resolutions to getting back on track financially a catalyst for positive change

Published on December 27, 2021 in RINewsToday

With the continuing COVID-19 pandemic, we will see a scaled back Times Square celebration where the ball swiftly drops as 15,000 people, in a viewing area that holds around 58,000 revelers, will loudly count down to one at the stroke of midnight. At this time, we traditionally make New Year Resolutions to accomplish in the coming year – to perform acts of kindness, take steps to ensure our financial security, or for self-improvement.

Experts say that making resolutions can help us set goals and provide us with time for reflection as to what is important to us in the coming year. They can serve as catalysts for positive change and increase our self-esteem and sense of accomplishment. Here are the findings of two resolution studies, recently released by Voya Financial, Inc. and Fidelity Investments that may well be good for your physical health and well-being, and financial health.

Many Seek to Re-Focus Their Life Priorities

As we approach 2022, Voya Financial, Inc. released its latest study with findings indicating that nearly one-third (31%) of survey respondents say they are not planning to make any new year’s resolutions in 2022. According to researchers, the results suggest that nearly two years into the COVID-19 pandemic, many Americans might be seeking to re-focus their life’s priorities. 

However, Voya’s latest consumer research survey also revealed that when asked specifically what resolutions individuals do plan to make in 2022, more than half (60%) noted an interest in improving their overall well-being, with 44% noting a focus on physical health and 31% on their mental health.

“For many, it may seem refreshing to see that perhaps many Americans are taking a more holistic view of what’s valuable to them as we approach almost two years of pandemic life, and we understand that the impacts of the pandemic have shifted priorities for many individuals,” said Heather Lavallee, CEO of Wealth Solutions for Voya Financial, in a Dec. 9 statement announcing the study’s findings. “With the much-needed focus on what is most important and valuable, it seems that a good number of Americans are ready to take a pass on the resolution ritual this year. That said, it is reassuring to see that those who are planning to do so are most focused on their physical and mental health,” says Lavallee.

However, surviving the financial impact of the ongoing COVID-19 pandemic has many of the survey recipients say that they are monitoring financial changes that might be occurring in 2022, thus indicating that financial security continues to be a priority resolution. 

Voya’s research shows a large number of individuals are likely or extremely likely to: save more for emergencies (76%); reduce or pay down their overall debt (72%); and save for retirement (72%). The researchers also say that these numbers are even higher for those generations who might have been impacted financially more during the pandemic, with Generation Z (89%) and millennials (83%) noting that they are likely or extremely likely to save more in the coming year. 

“We continue to see interest in making changes to feel more financially secure, which is something we have found consistently since the beginning of the pandemic. But what’s most encouraging is the continued interest in saving for those generations who may have been impacted from job loss or furloughs throughout the pandemic,” added Lavallee. “And we’re seeing this shift to more positive savings behaviors in our own data as well — as more than 60% of Generation Z and millennial workers who changed their savings rates in their workplace retirement plan during the third quarter of 2021, increasing their contribution,” he said.

As individuals continue to begin building back savings and improving their overall financial well-being, many also appear to be seeking support from their employer. When asked about the importance of employer-offered benefits, Voya’s survey revealed that the majority of individuals rank the following benefits as important or extremely important: employer-sponsored retirement savings (82%); flexible work hours (77%); mental health benefits (72%); short-term/long-term disability income insurance (76%); and whole life or term life insurance (69%).

“With these findings in mind, and for those employers who are looking to help their employees as we approach the new year, we recommend considering reminding employees of the benefits and resources that are available to them at the workplace, whether that may be an employee assistance program, a resource for helping with elder or child care, or making the most of their benefits to achieve those more financially focused resolutions,” said Rob Grubka, CEO of Health Solutions for Voya Financial. “The reality is that we often find many individuals don’t recognize how many great resources are available to them — and many without cost — directly from their employer,” he says.

Fidelity Survey’s Take on 2022 Resolutions  

According to Fidelity’s 2022 Financial Resolutions Study released just weeks ago, Americans are feeling a little bit more hopeful about their finances in the upcoming year. More than 62% of Americans feel optimistic about their future, despite the unknowns of the continuing COVID-19 pandemic, and 72% are confident they’ll be in a better financial shape. Sixty-eight percent are considering making a financial resolution for the new year.

Despite the optimism reflected in this survey, respondents noted that inflation (43%), unanticipated expenses (43%) and COVID-19’s impact on the economy (36%) are their top concerns for the upcoming year. 

Like the Voya’s study, the respondents indicated that they are also making resolutions around physical (74%), mental health (61%)  and general well-being (73%) at higher levels than in the past year. The researchers note that this may be the result of achieving success in 2021 with goal-setting, as greater numbers of people report being able to stick to resolutions in 2021 in all areas; notably, 71% of respondents were able to stick with their 2021 financial resolutions, up from 58% in 2020.

“The country has been through a seemingly unrelenting roller coaster over the past two years, so it’s encouraging to see people feeling more hopeful about the coming year and placing a priority on themselves,” said Stacey Watson, senior vice president of Life Event Planning, Fidelity Investments in a Dec. 9 statement announcing the study’s findings. “This study confirms that actions taken at the start of the pandemic – such as budgeting better and replenishing that emergency savings fund – are becoming permanent habits for many,” she said.

What silver linings did American’s experience during the past two years of the ongoing COVID-19 pandemic?  Respondents say they became more thoughtful about savings and spending (42%), followed by “becoming closer to family” (39%) and “becoming stronger as a person” (34%). 

The survey respondents also noted they will be taking a more thoughtful approach to finances next year, taking a more practical view toward creating their financial resolutions. 38% say they are considering more conservative goals, a number that is even higher (46%) among the next generation. The top three financial resolutions, identified by this study were saving more money (43%), paying down debt (41%) and spending less money (31%). 

For those looking to save more in 2022, the objectives are somewhat split—51% plan to save for the long term, while 49% are looking at shorter-term objectives, such as boosting emergency savings or saving for a mortgage. Among the next generation, 62% plan to increase their retirement contribution in the year ahead, at a far higher level than older Americans (34%).

And what do people say they want to do once they’ve paid off the bills and set aside money for the future? By far, Americans are looking to get away if it’s safe to do so, as travel tops the list for where people plan to spend their extra dollars.

Compared to last year’s Financial Resolution Study, however, the latest study suggests stress levels—those things keeping people up at night—have significantly decreased. When stress is present, it involves finding money to save after paying monthly bills, the ability to simply pay bills and saving for retirement, say the researchers. Part of this stress reduction may be attributed to acceptance, as 84% of Americans say after living through the pandemic, they’ve learned to let go of worrying about that which can’t be controlled.

With New Year’s Day just five days away, if you have not done it, it’s time for you to write your resolutions for 2022.  Have a great year…

Study: COVID-19 Changes Way Americans Think About Retirement

Published in RINewsToday on November 23

The raging coronavirus pandemic is changing the fundamental way working adults think, plan and save for their retirement, underscoring the important role Social Security and Medicare play for retirees, according to the 2020 Wells Fargo Retirement study conducted by The Harris Poll in August. The annual research report examines the attitudes and savings of working adults, taking a look this year on the impact of the COVID-19 pandemic on retirees.

For those workers whose jobs were negatively impacted by COVID-19 over the last eight months, the Wells Fargo study found that planning for retirement has become even more challenging, with many survey respondents expressing “pessimism” about their life in retirement – or worried if they can even retire. 

This year’s Harris Poll conducted 4,590 online interviews, from Aug.3-Aug. 24, including 2,660 working Americans age 18-76 whose employment was not impacted by COVID-19, 725 Americans age 18-76 whose employment was impacted by coronavirus pandemic, 200 high net worth American workers age 18-76, and 1,005 retired Americans, surveying attitudes and behaviors around planning their finances, saving, and investing for retirement.

According to the Wells Fargo study’s findings, 58 percent of workers impacted by the pandemic say they now don’t know if they have enough savings for retirement because of COVID-19, compared to 37 percent of all workers. Moreover, among workers impacted by coronavirus, 70 percent say they are worried about running out of money during their retirement while 61 percent say they are much more afraid of life in retirement, and 61 percent note that pandemic took the joy out of looking forward to retirement.

The study, released Oct. 21, found that COVID-19 has driven some workers even further behind in saving for retirement: Working men reported median retirement savings of $120,000, which compares to $60,000 for working women, say the researchers.  Yet for those impacted by COVID-19, men report median retirement savings of $60,000, which compares to $21,000 for women.

“With individual investors now largely responsible for saving and funding their own retirement, disruptive events and economic downturns can have an outsized impact on their outlook,” said Nate Miles, head of Retirement for Wells Fargo Asset Management in a statement releasing the findings of this study. “Our study shows that even for the most disciplined savers, working Americans are not saving enough for retirement. The good news is that for many of today’s workers, there is still time to save and prepare,” he says.

Taking a Close Look on Retirement Savings

The Wells Fargo study also found that women and younger generations are falling behind, too. Women are less sure if they will be able to save enough for retirement, and appear to be in a more precarious financial situation than men. The study findings indicate that almost half of working women (51 percent) say they are saving enough for retirement, or that they are confident they will have enough savings to live comfortably in retirement (51 percent). Those impacted by COVID-19 have saved less than half for retirement than men and are much more pessimistic about their financial lives. In addition, women impacted by COVID-19 are less likely to have access to an employer-sponsored retirement savings plan (59 percent), and are less likely to participate (77 percent).

According to the researchers, Generation Z workers (born between 1997 to 2012) started saving at an earlier age and are participating in employer-based savings programs at a greater rate than other generations, they are nonetheless worried about their future. Fifty-two percent of Generation Z workers say they don’t know if they’ll be able to save enough to retire because of COVID-19, 50 percent say they are much more afraid of life in retirement due to COVID-19, and 52 percent say the pandemic took the joy out of looking forward to retirement.

Remaining Optimistic

“The study found incredible optimism and resiliency among American workers and retirees, which is remarkable in the current [pandemic] environment,” said Kim Ta, head of Client Service and Advice for Wells Fargo Advisors. “As an industry, we must help more investors make a plan for their future so that optimism becomes a reality in retirement,” she said.

The Wells Fargo study findings showed that despite a challenging economy, many American workers and retirees remain optimistic about their current life, their future. Seventy nine percent of the workers say they are very or somewhat satisfied with their current life, in control of their financial life (79 percent), are able to pay their monthly bills (95 percent).  Eight six percent say they are still able to manage their finances.

The study’s findings indicate that 69 percent of workers and 73 percent of retirees feel in control and/or happy about their financial situation. Ninety two percent of the workers and 91 precent of retirees say they can positively affect their financial situation, and 90 percent of workers and 88 percent of retirees say they can positively affect how their debt situation progresses.

The researchers noted that 83 percent of workers say they could pay for a financial emergency of $1,000 without having to borrow money from friends or family. However, the respondents acknowledged they could improve their financial planning. Slightly more than half — 54 percent of workers and 50 percent of retirees — say they a detailed financial plan, and just 27 percent of workers and 29 percent of retirees have a financial advisor.

The study’s findings indicated that most respondents acknowledged that they could improve their financial planning. Slightly more than half — 54 percent of workers and 50 percent of retirees note they have a detailed financial plan, and just 27 percent of workers and 29 percent of retirees have a financial advisor.

Social Security and Medicare Key to Retiree’s Financial Security

The Wells Fargo study noted that despite an increasing shift to a self-funded retirement, in the midst of the pandemic, nearly all workers and retirees believe that Social Security and Medicare play or will play a significant role in their retirement.  According to the study, 71 percent of workers, 81 percent of those negatively impacted by COVID-19, and 85 percent of retirees say that COVID-19 reinforced how important Social Security and Medicare will be for their retirement. Sixty seven percent of workers say they have no idea what out-of-pocket healthcare costs will be in retirement, say the researchers.

The researchers say that workers expect that Social Security will make up approximately one-third of their monthly budget (30 percent median) in retirement. And even those high-net workers believe that Social Security and Medicare factor significantly into their retirement plans, expecting that the retirement program will cover 20 percent (median) of their monthly expenses.

The majority of the study’s respondents expressed concerns that the programs will not be available when they need them and worry that the government won’t protect them.  Specifically, 76 percent of workers are concerned Social Security will be raided to pay down government debt and 72 percent of workers are afraid that Social Security won’t be available when they retire.

The Wells Fargo study also found that 90 percent of workers would feel betrayed if the money they paid into Social Security is lost and not available when they retire and that 45 percent of workers are optimistic that Congress will make changes to secure the future of Social Security.