For advisers working in the education market, the new year is a great time to educate teachers about the importance of retirement planning. In fact, thanks to resolutions and post-holiday budgeting, January can be one of the most active times for new clients and increased contribution levels in the education space.
K-12 teachers say they lack knowledge in several aspects of retirement planning, a 2014 survey by Greenwald & Associates found. Many, especially those belonging to Gen X and Gen Y, would prefer to learn about those financial planning issues at work.
Thre topics advisers should cover with educators include:
1) Why it’s important to get an early start. The sooner a teacher can start saving, the better. While there are a number of savings vehicles available, a 403(b) allows young educators to get into the habit of saving on a regular basis. Among teachers, 48% of those in Gen X and Gen Y say they’re behind on retirement savings, according to the Greenwald & Associates survey. Starting early means savings set aside now will have more time to grow and compound, increasing the value of the nest egg at retirement. Advisers can talk to newer teachers about how even the smallest regular contribution can add up in the long run.
2) The power of increasing savings. Some teachers may have received mid-year raises or bonuses. If even a portion of that raise is diverted to retirement savings, educators stand a better chance of ensuring a secure retirement and likely won’t notice a difference in their take-home pay. Advisers can use models to show educators how a 1% or more annual savings increase can help them better reach their retirement goals.
3) The uncertainty of pensions. Many school districts have reduced or eliminated their pension programs over the years in favor of individual retirement savings plans. In many states, pension programs are struggling to meet their existing obligations and are reducing benefits for younger generations. For most teachers at the beginning of their careers, the security of a pension is likely a thing of the past. Advisers can educate teachers about the savings options available to them and the importance of setting aside some of their own money to either supplement or replace future pension income.
Advisers can easily connect with educators at orientation or staff meetings. It may also make sense to hold after-hours or lunchtime seminars and workshops at the school building.
Additionally, online education and social media can help advisers better connect with young teachers. Fully 89% of adults ages 18 to 29 use social media today, according to the
Tenured teachers, who have seen the benefits of saving and the demise of pension plans over time, may also be helpful in educating younger teachers about the importance of saving early and often.
As teachers return to the routine of their work year, now is the perfect time to establish good habits around retirement planning and savings. While the above tips will help teachers get started, ensuring that they reach their retirement goals over the long-term will require more.
Kiley, senior vice president, Security Benefit, is the eastern divisional manager for the Education Channel and manages a team that serves nearly 3,500 school districts and more than 130,000 retirement clients. His division works with more than 3,000 independent financial advisers to provide solutions that help clients save for retirement.
Services offered through Security Distributors, Inc., a subsidiary of Security Benefit Corporation ("Security Benefit"). 99-00478-73 (2015-10-23)
