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Filed Under:Annuities, Sales Strategies

LIMRA: Innovative approaches to financial literacy

LIMRA Retirement Conference

Increasing financial literacy is a hot topic for the retirement industry these days, and with good reason, according to a group of panelists at the 2014 Retirement Industry Conference in Chicago, IL.

The roundtable discussion, titled "Innovative Approaches to Financial Literacy," offered a range of perspectives on how the industry is currently addressing financial wellness.

Why women?

Lara Hinz, Director of Programs, Women's Institute for a Secure Retirement, explained that women are especially at risk when it comes to retirement due to longevity risks.

At age 65+, there are 6.2 million more women than men, while women account for 68 percent of the 85+ age group in the U.S.

This age group is also the most likely demographic to end up in poverty, Hinz noted, and many women who have never been poor before still end up in poverty as they grow older.

"I used to be excited about the fact that women live longer than men," Hinz said.

"The more I've learned, though, the more the thought of living longer terrifies me."

Women are affected by a series of unique issues that affect their financial health:

  • they live longer than men
  • they earn less money,
  • they often spend more time away from work because of caregiving responsibilities
  • they tend to work part-time more often during their career, which negatively impacts health care and employer-sponsored retirement plans.

While many advisors work with couples to create a retirement plan that includes both spouses, it's also important to help female clients plan for the time after their partner dies.

At risk youth

Another key demographic the industry must focus on is the young, according to David Anderson, Executive Vice President, Working in Support of Education, Inc.

He noted that the average college student in the U.S. carries four credit cards and an average debt of between $3,000 and $7,000. In fact, the age group most likely to file for personal bankruptcy is 18-25 year olds, Anderson said.

Anderson's company works with high schools to build financial literacy among students before they graduate and progress is being made. Five years ago, only four states required such education, but the number is now creeping closer to 20, he said.

He noted that the recent financial crisis has helped changed many Americans' mindsets regarding financial literacy. "Rather than assuming literacy should be taught in the home, many now recognize that teaching personal finances does belong in the classroom," he said.

Still, only 10 percent of Americans graduate secondary school having had any exposure to personal finance education, Anderson said.


Developing better habits 

Liz Davidson of Financial Finesse, Inc. cited the importance of creating healthy financial habits among clients.

"We can definitively say that financial education does work, does change behaviors when it's done as a process, not as an event," she said. But it must involve an ongoing relationship — not just an initial push after the first discussion, but ongoing support to continue to make changes. 

She noted that her company has seen 401(k) deferral rates nearly double among those who have five or more exposures to financial wellness education.

And while it's tempting to try to scare or shock clients into awareness, this can backfire, leading to frustration and a feeling among clients that they can't achieve their goals. "We need to present hope and give easy, actionable steps that lead to good outcomes," she said. "We need to change the negative tone and provide optimism."


Don’t overlook opportunities with middle-market households

More than 80 percent of middle-market households have assets in a retirement plan or an IRA.

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