Key Trends: We continue to see signs of economic recovery that economists have touted for the last 18-24 months. However, we also see troubling trends in employees' retirement planning issues. With the oldest Baby Boomers turning 58 this year, we believe this is the beginning of an emerging retirement crisis.
City: San Francisco, CA
Date: March 2 2004
Financial Finesse notes problematic trend in employee retirement issues
Year In Review
Helpline demographics in 2003
Gender Ratios 64% Female 36% Male
Caller Type 97% Employees of
corporate clients 3% Spouse/Partner
2003 Call Duration:Average call length was 22.45 minutes with each caller in 2003.
Call Topic BreakdownTopic Q1 Q2 Q3 Q4 2003
Debt 39% 44% 45% 39% 42%
Budgeting and Saving 15% 17% 14% 17% 16%
Retirement Planning 12% 7% 10% 9% 10%
Homeownership 5% 11% 9% 9% 8%
Misc.* 7% 6% 8% 13% 8%
Taxes 13% 6% 6% 7% 8%
Finding a Financial Planner 6% 7% 4% 3% 5%
Education Planning 3% 2% 4% 3% 3%
- Misc. includes Estate Planning, Stock Options, Insurance and Investing
2003 Most Frequently Asked Questions (ranked by frequency)
Debt
1 How do I deal with my creditors?
2 Am I a candidate for credit counseling?
3 How can I refinance or consolidate my debt?
4 Should I consider bankruptcy or foreclosure?
5 How can I check/improve my credit rating?
Budgeting and Saving
1 How do I put together a budget?
2 How do I manage my financial affairs after a divorce?
3 I am having trouble making ends meet, what can I do?
4 How do I manage the stress of money problems?5 I need help evaluating my financial situation due to a change in employment status.
Retirement Planning
1 I have general administrative questions about my company retirement plan.
2 What do I do with my previous employer retirement plan?
3 How much do I need to retire and how much should I be saving?
4 How do I choose the right investments in my retirement plan(s)?
5 What are some of the options for funding my retirement?
Homeownership
1 What steps are involved with the purchase of a first home?
2 Are there any programs available to help me purchase a home?
3 I am interested in investing in rental real estate.
4 What are the tax consequences of selling a home?5 When is it a good idea to take out a home equity loan?
Taxes
1 How do I estimate the tax withholding allowance on my paycheck?
2 I have specific questions on the deductions I am eligible to take.
3 How do I find someone who can help me with my taxes?
4 What are the penalties for taking an early distribution from my retirement plan?
5 What options do I have if I can't pay my tax bill or haven't filed my tax return?
Finding a Financial Planner
1 I have never met with a financial planner before and am interested in what an FP can do for me.
2 I need someone to help me plan for retirement.
3 I need someone to help me assess how my investments should be allocated.
4 I need help planning for college expenses.
5 I have questions about my stock options and how they impact my overall investment strategy.
Education Planning
1 I need help planning for college expenses.
2 What if I can't repay my student loans?
3 Is it better to pay cash or take out a student loan for college expenses?
4 What repayment options are available on student loans?
Trends Analysis
About the Data
Financial Finesses Financial Helpline is available to approximately 300 different companies and 250,000 employees. The companies represent a wide range of industries and are located in different cities and towns across the country. Since the service is generally available to all employees within the companies, callers range from CEOs and executives to frontline employees who work in factories. We do not track specific demographics such as race and income from callers, but we believe the callers are representative of the population as a whole based on the demographics of our client companies and the wide range of financial questions we get from callers.
Key Trends
The data this quarter is quite revealing. On one hand, we continue to see strong signs of the economic recovery that economists have been touting for the last 18-24 months. On the other hand, we also see some troubling trends in employees' retirement planning issues. With the oldest Baby Boomers turning 58 this year, we believe that we are seeing the beginning of an emerging retirement crisis.Economic Recovery ContinuesIn last quarter's trend analysis, we called out signs of an economic recovery. In Q4 2003, this trend continued and gained momentum. Debt calls are down significantly, and employees are shifting their focus to more pro-active financial issues, like budgeting, saving, and investing.
· As a percentage, debt calls were decreased nearly 20% from Q4 2002 and 13% from Q3 2003. In fact, there were less debt calls in Q4 than any other quarter in 2003. This is very unusual considering that we generally get more debt calls in the fourth quarter as employees become overextended with holiday expenses.· There was a 42% increase in budgeting and saving calls from Q4 2002 and a 21% increase from Q3 2003, indicating that employees are becoming more proactive about managing their money and saving for their goals. In addition, it appears that employees are increasingly tackling budgeting and saving issues before their finances reach a point of crisis. In 2003, the most popular question was "How do I put together a budget?" vs. "How do I find money to begin saving for the future and stop living paycheck to paycheck?" in 2002.· Investing calls doubled. Normally investing calls only make up for about 2% of the total, but in Q4, they surged to 4%--another anomaly in a quart!
er that is traditionally a time when employees become more reactive about their finances. It is possible that the calls on investing are a response to the mutual fund scandal, which received a tremendous amount of media attention in the fourth quarter and undoubtedly prompted many employees to take greater control over their investments.
An Emerging Retirement Crisis
Retirement, in general, seems to be an increasingly important issue to employees. Retirement planning calls decreased slightly in the fourth quarter, as to be expected. However, as a percentage, there were significantly more calls on retirement planning in 2003 than 2002 (10% of total in 2003 vs. 7% of the total in 2002).While this normally would be an encouraging sign, there was a marked shift in the nature of the retirement issue calls in Q4 2003. For the first time ever, a question on the penalties for taking an early distribution was one of the top 5 questions employees asked about retirement. Equally concerning, the second most popular question in Q4 was on the pros and cons of taking out a loan against the retirement plan. Of all the top 5 questions, only 2 questions were about planning for retirement. This is a very significant issue considering that the average age of employees is rising and most employees are far behind where they need to be in terms of funding thei!
r retirements.
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