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Retirement Plan Participant Reactions to Market Uncertainty

The COVID-19 pandemic has had a tremendous financial impact on U.S. households.

Recent polls support this fact:

  • 46% of parents say their average stress level related to the coronavirus pandemic is high1
  • 9 in 10 Americans to feel anxious about money2
  • 39% of employed Americans called job security a top financial concern, followed by income fluctuation, at 29%2

But what can you be doing as an employer to provide reassurance and support for your employees?

My answer to this question is very straightforward—encourage them to talk to a financial advisor and make it easy for them to do so.

Here are three simple employers are encouraged to take:

  1. Ask a financial advisor/participant educator to provide one-on-one sessions with employees. Make sure they are prepared to answer questions about more than just retirement plan provisions and investments.
  2. Send out company-wide messages encouraging employees to sign-up and allow them to attend these sessions on company time.
  3. Offer this service on an ongoing basis at both a group and an individual level.

Employees need an opportunity to ask questions specific to their financial situation and are looking for guidance. According to Fidelity, top themes in participant calls in March 2020 included:3

  • Expressing concerns about market volatility, a looming recession, and the impact on retirement savings.
  • Looking for advice or reassurance during this difficult time.
  • Thinking about how to transition to retirement after the market downturn.
  • Asking for help in making asset allocation changes or looking for safer investment choices.
  • Inquiring about withdrawal and loan options, including CARES Act provisions.

As you can see, these calls are most likely driven by emotion and recent headlines. While there are advantages of self-service retirement planning tools, the impact of human connection and conversation is especially crucial during high-stress, high-emotion times and cannot be overstated.

Preventing employees from making investment decisions out of short-term fear is critical in improving retirement outcomes. The good news is, up to this point, we are seeing statistics showing that most participants have not interacted with their retirement savings. T. Rowe Price Retirement reports that nine weeks into the market event, 96.5% of their participants had not changed their investments.

Research by Empower Retirement suggests, most people do not want to look at their savings until the markets stabilize. They report, since the downturn, only 23% of participants called or logged in to see their balance, the majority of those who checked did so only once.4

That said, no one has any idea how long or exactly how impactful this event will be, and we must remember that “impact” is relative to each household based on their unique financial situation.

I would stress that participant emotions and fear-based decisions may continue to increase as people’s emergency savings dry up and job market uncertainty continues. You must not wait to provide financial support for your employees. Failing to do so could affect your workforce's ability to retire on time as well as increase absenteeism and decrease productivity in the short-term.

For more information on the important steps you should take during this uncertain time, visit our OneDigital Coronavirus Advisory Hub, or reach out to your local OneDigital advisory team.

Investment Advice offered through Resources Investment Advisors LLC, (d/b/a OneDigital Investment Advisors) an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.

Sources:

1Stress in America 2020 Stress in the Time of Coronavirus, Volume 1. Accessed June 2020.

2National Endowment for Financial Education. Accessed June 2020.

3Fidelity Investments. Leading Through Uncertain Times: Addressing Customer Needs During the COVID-19 Pandemic. Accessed June 2020. . Accessed June 2020

4Empower Retirement. Sponsor and Participant Reactions During the COVID Crisis. Accessed June 2020.

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