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Fidelity® “Retirement Vision 2020” Prescribes Successful Savings Strategies to Drive Better Outcomes

July 10, 2014

Roadmap Defines Key Employer Tactics to Help Working Americans Achieve 30-plus Years of Retirement

BOSTON--(BUSINESS WIRE)-- Employers often develop a strategic plan based on what they think their companies will look like in five years. Fidelity Investments is asking employers also to consider what their employees’ retirement outlook will look like down the road. “Retirement Vision 2020: Fidelity’s Prescription to Help Drive Better Outcomes” is a holistic retirement readiness roadmap for employers, advisors and consultants to ensure that as many American workers as possible, across all generations, are prepared for retirement. It includes strategies that look at plan design, health care costs, employee engagement (including aggressive defaults) and personalized help as employees transition into retirement.

Fidelity released Retirement Vision 2020 in mid-June 2014 in noting that millions of employees are now responsible for managing their own retirement savings and investments. An overwhelming 91 percent of Americans say they know it is their responsibility to obtain the information they need to make sound retirement saving decisions, compared to only 4 percent who say that it is their employers’ responsibility and another 4 percent who would lean on the government for this information.1

The company drew on its expertise and insight as the nation’s largest retirement and benefits provider2 to map out four critical strategies to help employees save and invest more effectively -- ranging from accounting for health care costs to incorporating digital and mobile technologies that increase employees’ knowledge and engagement in workplace benefits.

“Twenty years ago, many Americans were still depending on their company’s traditional pension and retiree medical plans to finance their retirement needs,” said Doug Fisher, senior vice president of Thought Leadership and Policy Development for Workplace Investing at Fidelity Investments. “Today’s employees are being asked to assume more personal responsibility for their health and retirement savings – which can be empowering, challenging and even intimidating all at the same time.”

The four-pronged approach includes Fidelity’s “prescription” to drive outcomes by helping employees better prepare for retirement:

  • Design for Income recommends that employers design 401(k) plans with a targeted income replacement goal. A reasonable starting point could be to target 50 percent of final net pay. But an employer may set a different income target depending on a number of factors, including other benefits offered and overall plan demographics.3
  • Account for Health Care encourages both employers and employees to recognize the role health care expenses are likely to play in retirement. Health care strategies -- such as High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA) -- can help boost employee savings opportunities. More than half (57 percent) of pre-retirees4 and recent retirees5 think they will need less than$50,000 to pay for health care expenses in retirement.6 However, Fidelity’s 2014 Retiree Health Care Cost Estimate shows that the average 65-year-old couple may need more than $220,0007 to pay for health care expenses in retirement – a significant gap between employee perception and reality.
  • Engage and Empower promotes the importance of setting employees on the appropriate path to retirement. The right combination of guidance and easy access to resources can significantly drive engagement and affect behavior. Employees who used Fidelity web-based tools raised their average deferral by 4.3 percentage points.8 For those who won’t engage, aggressive automatic defaults -- including enrollment, increasing savings rates and investing in age-appropriate investment vehicles -- can put employees on the correct path even when they don’t engage.
  • Transition with Confidence is the ultimate goal of Retirement Vision 2020, andprovides employees with help as they think about the next phase of their lives, whether it is traditional retirement or an encore career. Nearly one in three (31 percent) Americans say they are not sure if they can meet their retirement income requirements, while more than one in 10 (11 percent) flat out say they can’t.9 By empowering employees with access to information and insight, employers can help them determine whether they are ready to retire with confidence.

    “Benefit designs, financial education and innovative delivery methods using mobile and social must evolve to address the realities of today’s participants and their workplaces,” said Fisher. “Fidelity’s Retirement Vision 2020 provides actionable insights and solutions to help employees of all generations generate savings that can last throughout retirement.”

    The full version of Fidelity’s Retirement Vision 2020, and an accompanying white paper and infographic, can be found here.

    About Fidelity Investments

    At Fidelity, our goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. We do this by focusing on a diverse set of customers: from 23 million people investing their own life savings, to 20,000 businesses needing help managing their employee benefit programs to 10,000 advisors and brokers needing technology solutions to invest their own clients’ money. Privately held and with 40,000 employees around the world, Fidelity is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products.

    As of May 31, 2014, the company held assets under administration of $4.8 trillion, including managed assets of $2.0 trillion. It is one of the largest mutual fund companies in the United States and the No. 1 provider of both workplace savings plans and Individual Retirement Accounts (IRAs). For more information about Fidelity Investments, visit www.fidelity.com.

    Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

    Diversification does not ensure a profit or protect against a loss.

    Fidelity Brokerage Services LLC, Member NYSE, SIPC

    900 Salem Street, Smithfield, RI 02917

    Fidelity Investments Institutional Services Company, Inc.

    500 Salem St., Smithfield, RI 02917

    693131.1.0

    © 2014 FMR LLC. All rights reserved.

    1 Fidelity 2013 Better Outcomes Survey conducted by GfK Public Affairs and Corporate Communications, November 7 – 13, 2013.

    2Pensions & Investments, March 3, 2014, “The largest DC record keepers” and Cerulli Associates’ The Cerulli Edge®—Retirement Edition, fourth quarter, 2013 based on an industry survey of firms reporting total IRA assets administered for Q3 2013.

    3 With Social Security and other savings and sources providing the remaining income.

    4 Plan to retire within 5-7 years.

    5 Retired in the last 2-3 years.

    6The Retiree Health survey was conducted by GfK Public Affairs & Corporate Communications from February 12–18, 2014. The survey used GfK’s KnowledgePanel, a nationally representativeonline panel where members are chosen via a probability-based sampling method covering 98% of the U.S. population.

    7Fidelity Benefits Consulting, 2014. Based on a hypothetical couple retiring at age 65 years or older, with average (82 male, 85 female) life expectancies. Estimates are calculated for “average” retirees, but may be more or less depending on actual health status, area of residence and longevity. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and co-insurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.

    8 Fidelity analysis of web guidance tool usage, 1/1/13 – 12/31/13.

    9 Fidelity 2013 Better Outcomes Survey conducted by GfK Public Affairs and Corporate Communications, November 7 – 13, 2013.



    Fidelity Investments

    Kirsten Plonner, 201-915-8225

    Kirsten.plonner@fmr.com

    or

    Corporate Communications, 617-563-5800

    Fidelitycorporateaffairs@fmr.com

    Follow us on Twitter @FidelityNews

    Source: Fidelity Investments


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