Talking about the shift to lifetime financial security at the Milken Conference

We’re in the middle of a significant moment for our country. This year, more Americans will turn 65 than ever before. Yet, as many workers approach the transition to retirement and life without a paycheck, we’re seeing tremendous shifts in Americans’ attitudes and behaviors about retirement.

Workers are feeling the impacts from inflation and high interest rates, and it’s affecting the retirement confidence. Many are concerned about the steadiness and certainty of their income during retirement, and they’re turning to financial providers for guidance.

The financial services industry has excelled at simplifying how workers save and invest for retirement. But for all the progress we’ve made, there’s still work to do. Our new responsibility is to help facilitate a shift in mindset from building wealth for retirement to achieving lifetime financial security, including a consistent stream of income guaranteed for life. We need to give American savers the tools and guidance to make that happen.

Making a dignified retirement more possible

Recently, I had the opportunity to attend the Milken Institute’s 2024 Global Conference and participate in a panel discussion with other financial industry leaders on changes impacting the retirement landscape and the implications for financial professionals in the years ahead.

From left to right: Thasunda Brown Duckett, President and CEO, TIAA; John Carter, President and COO, Nationwide Financial;

Will Fuller, President and CEO, Transamerica; Penny Pennington, Managing Partner, Edward Jones;

Jennifer Ablan, Editor-in-Chief, Pensions & Investments

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For most people, the American dream includes a successful career that allows for saving, followed by an independent, dignified retirement. Among retirees in earlier generations, the golden years were just that, thanks in part to the security of a pension that guaranteed them income for life.

Unfortunately, a lot has changed since then. When the Boomers entered the workforce in the 1970s and 1980s, as much as 60% of private sector companies offered their employees pensions. That number has decreased to just 4% of private sector employers today¹.

As a result, many American workers now see the traditional retirement age of 65 as outdated, especially by many closest to retirement.  A recent Nationwide Retirement Institute® survey found that 69% of pre-retiree investors (ages 55-56) think the standard retirement age of 65 doesn’t apply to them².

In addition, 45% of Americans between the ages of 55-64 have nothing saved for retirement². As access to pensions has declined, individuals increasingly bear the responsibility for planning for their own financial future. But they don’t have to do that all on their own. Working with a financial professional goes a long way toward helping people get on track toward a secure retirement. Around one-third of individuals currently have a relationship with a financial professional², so there’s more opportunity to help other find the financial guidance they need.

Making retirement income more automatic

Employers are recognizing that their employees want and need help in all aspects of retirement planning. The need starts with saving and investing, but it must also carry over to the challenge of turning accumulated savings into financial security.

At last year’s Milken Global Conference, we had the opportunity to lay the groundwork for the shift in focus to lifetime financial security, talking about protected retirement income as an important part of that shift. From what we’ve learned as an industry about automating retirement plan enrollment and investing, the key to fostering better retirement security is to make it available and automatic for all workers.

We know it’s very difficult to get workers to take action. Inertia can be a powerful force given all of the other financial stresses people and families deal with every day. Yet, automatic features have proven their worth in making a difference in retirement preparation.

Here’s an example from one of the large state government retirement systems we work with. They lobbied successfully to introduce auto-enroll features for state employees in 2019 and have since seen tremendous results:

• 14,000 new participants have been added to the plan since the launch of auto-enroll.
• The participation rate is at 94%.
• Participants are automatically enrolled at the plan minimum of $15/pay,
• The average employee deferral is well above the minimum.
• These new participants have saved roughly $11 million for retirement.

Nationwide has long been an advocate for simplifying how American workers save for retirement. As a company, we’ve supported automatic features in retirement plans to increase participant enrollment and contribution levels. We’ve also provided education on target-date funds as a way to automate investing for millions of investors, helping them manage risk and keep them on course to their financial goals. These solutions have a long enough track record now that the industry overall recognizes their importance to workers.

Can automated retirement income have the same impact? We believe so. The SECURE Act legislation made it easier for employers to offer in-plan protected retirement solutions, which provide income security similar to a pension within qualified defined contribution retirement plans. And for some of the plan sponsors we support, we’re starting to make protected retirement income solutions automatic through our new Dynamic Default feature.

Together, we can solve the retirement challenge

To help more Americans achieve lifetime financial security, it’s going to take a collective effort on the part of our industry, leaders, employers, and financial professionals. Ten years ago, I never would have imagined partnering and collaborating with organizations that traditionally would have been competitors. But we’ve seen how collaboration between industry and political leaders can be impactful with the passage of the SECURE Act.

Here are ways I see each of us can participate in this effort:

Our industry: The best financial services firms pride themselves on innovation. Many are beginning to offer new retirement income solutions or partnering with providers like Nationwide to deliver these solutions. But it’s incumbent on all of us to make these products more accessible and portable for workers.

Our leaders: Recent SECURE Act legislation is proof that bipartisan cooperation is possible, but we can’t stop there. There are several pieces of meaningful legislation currently under consideration in Congress and more good ideas on the table that can effectively address the retirement income challenge.

Employers: Employers should embrace employee education and opportunities created by SECURE Act legislation to make saving more automatic for more people with features like auto enrollment, auto increase—and even automatic retirement income options.

Financial professionals: Advisors who provide personalized advice must also shift their focus from asset accumulation to helping clients plan for income they won’t outlive.

We’re on the verge of enacting real change for the future financial security of American workers. But change depends on the power of people. Too often in our industry, we focus on numbers and dollar figures, when the true value of our businesses comes from our talent, not assets under management. Talented individuals get involved and interact to create something bigger than what they can do individually. That’s how innovation happens and that’s what powers growth.

I’m optimistic that these different players in the retirement planning industry can come together to support and enact meaningful changes to address America’s retirement challenges, especially in developing protected retirement income solutions. The work to reshape the retirement landscape won’t be accomplished without the private sector working collectively and driving innovation and the public sector bringing structure and regulation to the marketplace.

We did it before with the expansion of automated retirement plan features and SECURE Act changes. We can rally together once more to help shift the American retirement saving mindset and enter a new era of retirement security.