Your clients may have saved enough for retirement … but are they truly prepared? Catherine Collinson joins the podcast to unpack the real challenges—and surprising resilience—shaping today’s retirement outlook.

Show Notes Info:

If you’re interested in hearing more from Catherine and reading the full

report, Retirement in the USA: The Outlook of the Workforce, you can visit transamericainstitute.org.

Hi, I’m John.

And I’m Julie.

We’re the hosts of the Hartford Fund’s human-centric investing podcast.

Every other week we’re talking with inspiring thought leaders to hear their best ideas for how you can transform your relationships with your clients.

Let’s go!

Catherine, welcome to the Human Centric Investing Podcast. We’re so happy to have you here with us today.

Well, thank you for having me. I’ve really been looking forward to this.

You know, Catherine, Julie and I were, we get lots of different reports and analyzes of kind of what’s going on in our industry. But one of the reports that you’re joining us to discuss today is called the retirement outlook report. And there were several data items in there that we thought were pretty unique and we wanted to have you on the podcast today to share with all our listeners some of the insight that you gained. But can you tell us a little bit about the retirement Outlook report? Kind of what the key metrics were, what you were trying to discover by casting a report like this.

Well, what we were trying to do is take a snapshot in time. Where does the US workforce and workers currently stand with regard to the retirement preparations? We live in a time where people are increasingly expected to self-fund a greater portion of the retirement income, in large part because defined benefits and traditional pensions have been fading. There’s some questions about what the future of social security holds in terms of benefits. We know there’s gonna be benefits. Social security is not going away, but the benefit structure might change, especially between now and the time that people retire. We just wanted to weigh in and see where they’re at. And the headline we came up with was between a rock and a hard place. Workers are doing a phenomenal job saving for retirement. That is one thing that we’ve seen consistently in recent years. Most workers are setting aside funds for the future. Most often through a 401k or similar plan and the convenience of workplace retirement savings arrangements. But then we’re also seeing other life factors, because sometimes life gets in the way of the best of plans. And from that, we see a backdrop that many are still financially recovering from the pandemic. People have been during high rates of inflation and making adjustments to their overall budgets. And then some have even had to tap into their retirement savings out of urgent need, and obviously a decision that probably was not taken lightly, probably the best of a series of not great alternatives when you find yourself in a cash crunch. So the intake is as much as people are saving. Many are still at risk of not saving enough. It helps if you have years to retirement and that time horizon to save and your savings to grow and compound, but these life’s unforeseen circumstances can really disrupt that trajectory.

So interesting. As you think about the initial report, Catherine, when you first sort of read through some of the statistics, what was most surprising to you? And then maybe we could move on to digging into some of those specific ideas that financial professionals can really think about as it pertains to their engagement with clients as they help them think about retirement, save for retirement and all the things that we just touched on.

One of the things that is so surprising to me and as a reminder for financial professionals, the world moves very quickly these days. And the media cycle also moves extremely quickly. And today’s big headlines can be forgotten at a week or two or three. And so many workers are still recovering financially from the pandemic. The world’s moved on from the pandemic. Hopefully we will never have another one in our lifetimes. And as people are thinking of new ways to save and new ways, to grow and new way to do something, it’s just so easy to forget that not everybody is caught up with or caught up from where they were at. And I’ve been doing this survey for a really long time. We’re now in our 25th year. And something that we saw after the Great Recession, because economists kind of pegged it between 2007 and 2009, but with the widespread between the market volatility, the job loss, some people losing their homes, we were asking the question, what is, how well have you recovered or what’s the status of your recovery from the Great recession? And we were asked that all the way up to 2019. Yeah, each year, because half of people still hadn’t recovered yet. And then when the pandemic hit, we didn’t think was appropriate to ask that question anymore. The next the next big financial disruption had occurred. So in some ways, it’s really surprising that people haven’t caught up. But another way, it’s not surprising, because it takes a long time to recover from a setback, especially if it’s a big one.

You know, Catherine, Julie and I and our team oftentimes encounter through our work with financial professionals, a wide cross-section of people who attend our educational events. Oftentimes, some are still employed. Others may be self-employed. Some may be unemployed, but state that they seek to return to work in some form or fashion. In your survey, did you find that... And employment status, whether they’re employed, self-employed, or unemployed, but intending to continue to work. Does that have an impact on general retirement outlooks?

Absolutely, because my mantra is the single greatest ingredient for achieving a financial secure retirement is access to meaningful employment throughout one’s working years, whether it be through an employer or self-employment. And so that is something that we see very, very clearly in the research. And employment setbacks translate to future retirement setbacks.

Do you find that the self-employed are even, let’s say more confident about the future, only because I know there may be more volatility in their given company or industry, but it seems like maybe they’re a little bit more in control of their destiny. Does it pan out that way or not so much?

And that’s a really interesting question, because when we look at people who are employed versus self-employed, in many ways, for people who who are self- employed, the idea of retirement is somewhat less relevant, because why give up something that you love, and that you’re good at and successful at, just because you reach a certain age? Or even just because You achieve a certain level of wealth that maybe you don’t need to work this hard. The self-employed, especially those who have found their way in, they’re successful, they love what they do, they look at retirement very differently. And they may want to continue work, maybe scale back, bring in family members, succession plan. It’s a different planning process for them. For people who are employed, employed workers spend their years maybe employed by others employed in the corporate world. The surveys that we’ve done, in many ways, retirement is like graduating from the corporate rat race, graduating from the eight to five lifestyle. And the visions and ideas people view retirement so positively as a time of freedom and enjoyment. Financial security is of course a big part of it. But it’s also maybe even more the ability to manage your own time.

Thanks for that.

That’s so fascinating. I’m also curious, did you find any differences in outlook between generations? It was fascinating that compare and contrast between if you’re employed versus self-employed. Will you talk to us a little bit about any other demographic notes that you found in the results?

Yeah, so we have a new report on generations and we are seeing some big difference in generations in the workforce. And I’m gonna start with boomers and then work younger. So many boomers are already retired. So when we look at boomers in the work force, they are going strong, but retirement’s coming pretty close to them. And the things that we see that I think are really exciting is just sort of blowing out the long-standing idea that work and retirement are mutually exclusive. They have a very clear vision about transitioning, ideally on their own terms, but the transition is maybe full-time to part-time, or working seasonally, or ways to keep bringing in income, which can help fill savings gaps and weather market volatility, and that’s where they are And they’re stretching the boundaries of working into older age. So they’re blazing a trail for younger generations. As we look at Generation X, I’ll tell you I lose a lot of sleep over Gen X. And the reasons goes all the way back to when Gen X started entering the workforce, which was in the 80s, mid to late 80s early 90s, and the retirement landscape then was silently shifting. We knew that traditional pensions were starting to fade, and there was this new thing on the scene called a 401k. But at the time, I don’t know that anybody really knew that 401ks would be the dominant retirement savings vehicle, because at the the time the idea was they could supplement or augment what you were getting in a pension, not necessarily replacing it. And as GenX was entering the workforce, many employers had not yet adapted 401Ks. And if the GenXer was lucky enough to work for an employer that did, chances are they were not aware of how critically important it would be for them to save down the road. And though we also have to remember, this is before the internet. The back in the day, you saved, you might’ve had five investment options. It was all done on paper. You got a statement in the mail, six weeks at the end of the quarter. It was just a very different investing experience. And so the net result was GenX got a late start saving. They started at age 30, which is younger than boomers, but still the fight you can save in your 20s is really important. And then it’s like they just never got caught up. And they also just, from a timing perspective, likely to get, you know, suffer even more during the Great Recession and encounter even more setbacks during the great recession. And then, of course, they’re still financially recovering from the pandemic. And yet, the first Gen Xers are turning 60 this year. Retirement is the light on the horizon that is growing closer and brighter. Keep going on, generations.

Sure generationally or any other demographic shift.

I’ll finish the sort of the arc where we’re at. Millennials, and more concisely, millennials are now in their sandwich years. They’re in their late 20s to mid 40s. They are juggling their jobs. They’re raising their kids. Many are caregivers for an aging parent or loved one. They are, they are in a crunch. And they got a strong and early start saving for retirement, which bodes well for them. And they are consistently saving for a retirement, but they’re kind of in this risk zone or danger zone because life is pulling them in so many directions that it might be easy to fall off track. And the most important thing millennials can do is really hunker down on financial planning, budgeting, mapping things out, prioritizing, maximizing. Maximizing their savings, optimizing their decision-making, because they’re at a point in their life it’s really easy to make less than perfect decisions because they just have so much going on. And that requires time and focus. Gen Z, who the youngest generation in the workforce, who are many are not 18 yet, and our survey is 18 and older, they’re extraordinary. And they’re a generation that we really need to keep our eye on, lend them a helping hand whenever we can, because they are busting so many myths about myths and long-standing stereotypes about younger people in the workforce. And that is at least employed Gen Z workers are exhibiting an extraordinary work ethic. They are financially crunched. Of those in the survey, one in three are working two or more jobs, almost six in ten have a side hustle. They’re doing everything they can to bring in money, and at the same time, caregiving, they’re being called upon to care for loved ones, most typically a grandparent or a parent who we know amid population aging and the aging of the boomers and the high cost of long-term care. The support naturally is going to fall on adult children. There’s a lot of myths that it’s the older, you know, older workers. Now, Gen Z, it’s 41% are either currently serving or have served as a caregiver. That’s huge. And then when we ask about their financial priorities, which range from things like just getting by to paying off debt. Of course, we throw in saving for retirement for good measure. More than one in five site. Supporting their parents as a financial priority. So all too often, a younger generation is thought of as maybe a little more carefree, starting with the balance sheet. It might be zero, but not a lot of debt, and it’s their decade to sort of really get their careers off and running, but the reality is if they went to college, they’re graduating with student debt, they’re being called upon to help. Aging parents and grandparents in one way or another, and they’re in a really difficult job market, which is in our survey work during and right after the pandemic, they were most likely to lose their jobs. They’re showing a lot of perseverance and resilience, and they should really be applauded and appreciated for that.

So Catherine, along those same lines, when we talk about how people envision retirement, I’m wondering if those visions and expectations are changing over time. I know one of the statistics that’s familiar to Julie and I is that I think 60% of American workers expect to receive a defined benefit pension in retirement, but only 40% say they ever worked for a company that offered one, but I’m just wondering, from your survey work. Do you see the the vision of retirement changing and if so how and how realistic do you think today’s expectations of retirement in the future are?

Well, in the context of increased life expectancies, and we do see a healthy percentage say they plan to live to 100 or older, and the survey findings illustrate people are thinking about and envisioning working longer, fully retiring at an older age. So working longer gradual transition, fully retiring, at an old age, which makes perfect common sense. To be able to work as long as you kind of can, but also want to have that third chapter where you have more time for family, friends, travel, things that you, for your bucket list. It makes a lot of sense. However, it, thus far it’s easier said than done because it’s contingent on a couple of things. One is staying healthy enough so that you can continue working, which is huge. But also it depends on the employment market. It depends on employers being welcoming and supportive of older workers, and it is for workers of all ages. It is absolutely critical that we keep our job skills up to date and marketable amid this rapid pace of change and the proliferation of advanced technologies. So in concept it’s great, but you have to have a really good plan to be able to pull it off.

Absolutely. You mentioned- And a lot of luck. You mentioned, Catherine, that, you know, many have not recovered financially from the pandemic. How do we, first of all, I guess, what are some of your indicators of resilience and maybe a positive forward-looking picture for these groups? And how can groups continue to be more resilient and make sure that they are doing everything that they possibly can or controlling all of their controllables in preparation for a successful transition into retirement, whatever that picture may look like for them, whether it’s part-time work or volunteering or some blend of all of that.

I think there’s a lot of really positive indicators about resilience and indicators that we need to put a bright spotlight on to encourage people because it could be easy to get discouraged. One is people are still focused on the future and on retirement. And when looking at a really tense short-term financial situation, it might be easy to side of the future, but all indicators are. People in the workforce are still looking towards retirement and still looking forward to it. Then another thing that we’ve seen, especially in the context of those who are offered and participating in a 401k, participation rates have held steady pretty much through thick and thin. We saw through the Great Recession and we’ve seen it in recent years. So people are committed to saving and they are staying the Of course, some find themselves in what we’ll call a financial pickle that they have to tap into those savings, but there’s still a real focus there. Then the other sort of indicators of how people can improve their resilience are going to be through financial planning and not only short and long-term goal settings, but building adequate emergency savings and insurance protections so that if disaster Strikes! You don’t have to tap into your retirement plans to get through it. I think those are some things that we can put a big focus on as well as just continue encouraging people to save for the future. Another huge opportunity is, and we know this, in the employer retirement plan space, retirement plan providers, their education and advice resources. That’s one of the most. Competitive aspects of those product offerings, and yet a lot of workers are taking advantage, and yet there’s still quite a few who are not yet taking advantage of those resources, and that’s an area where they can improve their resilience.

So Catherine, we started off our conversation. You were talking about today’s worker still recovering from the pandemic, kind of pressed, a rock and a hard place, right? Dealing with today’s cost of living challenges from inflation to rents to just day by day expenses while they’re trying to save for the future. Does someone like Catherine come away from this study hopeful? Or do you fall more in the category of what we read in the general press to say, Boy, people are in a lot of trouble. They’re just not preparing adequately and that there’s no hope in sight. Where do you put yourself?

I’m an optimist. I couldn’t do what I do if I were not an optimists and I am hopeful. And one of the reasons that I am so hopeful is that people are staying focused. They are demonstrating resilience. There are things people can be doing that are within reach that can help improve their outcomes. They may not go from being, you know, super financially stretched too. Having, you know, a piece of cake, lavish retirement, but there are things they can do to better their outcomes and also that are in line with their life priorities. Another area which has bubbled up in the data. So you asked me about surprises. I think it’s one that we cannot appreciate enough and that is the importance of family and the importance friends. And seeing people coming together when we see the caregiver stats and how many people in the workforce are already caregiving or have caregived for a family or relative or loved one. In the looking at the verbatims, we ask them, why did you take a loan or early withdrawal from your retirement plan? And often it’s not themselves, it’s for a member and distress. And we’ve got to remember that. And then one of the things that I see is something that can give more people hope, even though on one level it might not be for the faint of heart, there’s opportunities for more family conversations, knowing where people are at financially and that there’s gonna be any expectations of either providing support or needing to receive support. And in the end, our families are our families. What’s more important than life?

Absolutely. Well, Catherine, I know that your report can be found at transamericainstitute.org and it’s called Retirement in the USA, the Outlook of the Workforce. So for our listeners that are interested in reading more, that can certainly be found there. But maybe before we wrap up, if you were a financial professional and sitting down for your next client conversation, what are the one or two things that you would be focused on or you would encourage a financial professional to think about. Because you are so immersed in all of these statistics and the findings.

Um, the first would be, and this is for the financial professional, because of course, the delivery is going to be very different with their clients. It is, don’t make too many assumptions about the basics. Because a lot of people aren’t fully engaged in the basics in a way that they sure can and should be. And when I say the basics, I mean, having a budget, understanding their tax situation, building a financial plan. Really, you know, optimizing daily decision-making. So, and we all make trade-offs every day, and the suboptimal trade-off, they can have a cumulative effect over time. It can make a difference with people. So, a focus on the basics, and then in the context of building plans, we know that there’s life milestones and things that require greater attention. A big one right now, and I touched on Gen X, but people who are in that pre-retiree space, really critical to help them figure things out, especially the interplay between employment, their savings and investments, and the risk if they were to lose their job. What would their backup plans be? Big focus on pre- retirement planning, and then of course retirement income is a whole. That’s a whole big topic unto itself. And then another thing I’ll add is financial advisors can also bring a calming influence, because we see a lot going on in the news headlines these days. We’ve seen a lot of market volatility, a lot a change in the wind, some of it coming to fruition, some of not. That’s where an advisor can also help, be a calming and influence. And then the last thing, and I promise this will be the last. Especially for people nearing retirement, the Gen X and the boomers, if they’ve been saving in a 401k throughout their working years, it’s been in a traditional pre-tax for most of that time because Roth 401ks really didn’t come into their own until after the Pension Protection Act of 2006. So we’ll say 2010-ish. Retirement income planning is also a major tax planning exercise. And we know that tax reform is in the works right now. We don’t know, but it’s ultimately going to play out like, but that’s an area where advisors can really help guide their clients in their analysis and what their pivot points might be if there are changes in the tax code that affect them.

Well, Catherine, throughout our discussion today, we’ve been talking about surprises in the data, but Julie and I have a surprise for you, which we often surprise our guests with on the podcast. We call it our lightning round of questions, and it helps our audience just to get to know Catherine a little bit better. So if you’re game, Julie and are going to fire a series of top of mind questions to you. We just want the first thing that comes into your head in terms of how you would respond and by doing that. As I said, I think our audience will learn a little bit more about you. Julie, why don’t you start?

Perfect, I’d love to. Okay, Catherine, on a scale of one to 10, how good of a driver are you?

8.

There you go. How about, are you a dog person or a cat person or none of the above?

I’m a both person.

Both.

Love them both dogs more because I definitely are allergic to cats, but I love cats too.

What’s your favorite holiday?

Thanksgiving. For obvious reasons. It’s a day of gratitude.

Catherine, if you had your choice, beach house or lake house?

Hmm. Beach house.

What’s the best age?

The one that I am today.

There you go.

And if you ask me again tomorrow, I’ll give you the same answer.

I love that. Live in the moment, right?

Live in the moment.

When you were a young girl, what did you want to be when you grew up?

Oh, a lot of different things. Let’s see. Everything from a writer of fiction. So that was probably my biggest dream early on, is writing novels and such. Very cool. And maybe that will be a retirement.

I love that. Well, Catherine, we can’t thank you enough for being here today with us on the Human Centric Investing podcast and sharing all of your insights. And for those interested in the actual research, it can be found at the transamericainstitute.org website. And the title of the research report is called Retirement in the USA, the Outlook of the Workforce. Thank you again, Catherine for all the work that you’re doing to help us continue to have better conversations.

Thank you for having me.

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The views and opinions expressed herein are those of the guest who is not affiliated with Hartford funds.