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Throughout this presentation, we uncover how different generational workers are saving and spending, and indentify the statistics that differentiate these populations.
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• Lack of income and funds are considered the main reasons for financial woes, not respondents’ fiscal behavior
• Financial education is key to debt reduction and increased savings, according to respondents
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Why young parents nervous about having more children
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Young advisors are most optimistic about financial literacy improvement and college’s role.
In danger of outliving their money
Didn’t know their monthly spending
Didn’t know their retirement number.
Had no estate or gift plan.
Why are so many Americans hesitant to obtain estate and gift plans?
While consumer optimism remains steady, we see signs of discretionary spend recovery.
These exhibits are based on survey data collected in the United States from February 18 through 22, 2021. Check back for regular updates on US consumer sentiments, behaviors, income, spending, and expectations.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
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Engaging the disengaged. Nearly 170,000 participants at T. Rowe Price contributed $50 or less in 2016. How do you gain their attention and get them to act
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Over 40 percent of financial decision makers in the US report having skipped or only partially paid a bill over the past month. They reported that they were most likely to skip or partially pay a credit card bill or auto loan. Rent and mortgage payments were the next most likely bills for non-payment. Young people and those making less than $50,000 were the most likely to miss or partially pay one or more bills, with people earning more than $100,000 most likely to skip or partially pay out credit cards. Most consumers who have received or expect to receive a support payment from the government report are intending to use it to pay utilities, followed by credit card. The smallest number of people report intending to use their support payment on auto loan payments.
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T. Rowe Price's recent Retirement Saving & Spending Study revealed that across groups of 401(k) savers, millennials are following better financial habits than those of baby boomers.
“We think it’s encouraging that millennials are so receptive to saving for retirement and that they are generally practicing good financial habits,” says Anne Coveney, senior manager of Retirement Thought Leadership at T. Rowe Price who led this research study. “When they have the means to do the right thing, it appears that they often do.’
Throughout this presentation, we uncover how different generational workers are saving and spending, and indentify the statistics that differentiate these populations.
Kicking off the world’s largest financial content expo, FinCon 2016, Experian — together with eight bloggers — announced the findings from a nationwide consumer survey that covers the gamut of personal finance topics. What did we learn?
• Respondents feel optimistic about their finances, but stress surrounding income expectations, debt reduction and retirement investments diminish their confidence in a strong financial future
• Lack of income and funds are considered the main reasons for financial woes, not respondents’ fiscal behavior
• Financial education is key to debt reduction and increased savings, according to respondents
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Wealth advisor confidence survey findings for slide share-compressedHank Berkowitz
Rick Telberg (CPA Trendlines) and Hank Berkowitz (HB Publishing & Marketing) present findings of 3rd annual Wealth Advisor Confidence Survey at Terrapin Media Accounting & Finance Show NYC July 2019
Wealth advisor confidence survey findings for slide share-compressedRick Telberg
(c) 2019. HB Publishing & Marketing Company, LLC | CPA Trendlines Inc. | The Financial Awareness Foundation
Accountants and Wealth Advisors increasingly pessimistic over the past 12 months.
What’s keeping the affluent up at night? Advisors say…
Advisors say Millennials increasingly pessimistic about their financial futures
Why young parents nervous about having more children
Has America’s financial literacy improved over the past 2 years.
CPAs most skeptical that America’s financial literacy has improved.
Young advisors are most optimistic about financial literacy improvement and college’s role.
In danger of outliving their money
Didn’t know their monthly spending
Didn’t know their retirement number.
Had no estate or gift plan.
Why are so many Americans hesitant to obtain estate and gift plans?
While consumer optimism remains steady, we see signs of discretionary spend recovery.
These exhibits are based on survey data collected in the United States from February 18 through 22, 2021. Check back for regular updates on US consumer sentiments, behaviors, income, spending, and expectations.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
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Here are some top highlights:
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1. MODEL DEVELOPMENT
June 29th, 2015 – RPS Team Meeting
USIS Client Market Insights
Macro Trends Impacting DC Contributions & Distributions
2. 2
Project Overview
Hypothesis
– While the RPS Segment and the markets it participates in will remain
under pressure due to growth in distributions taken by Boomers entering
retirement there are distinct strategies that can offset this macro trend if
executed effectively.
Objective of this project
– Develop a model that will help RPS leadership better understand the
evolving generational demographic effect on DC Plan cash flows by
projecting into the future and testing when, if ever, contributions might
outpace distributions from an industry perspective.
Complex and interdependent set of variables
– Industry experts such as EBRI, Cerulli, the Federal Reserve, the
Department of Labor and academic sources we researched have not
generated research on this issue beyond a five to seven year window.
3. 3
Inputs & Challenges
Model Inputs Modeling Challenges
Minor variations in employment
populations, savings rates, and market
performance can paint completely
different outcomes relative to
contributions and distributions
Product innovation, particularly the
impact of income solutions, along with
regulatory and/or legislative actions
would have significant impact on our
analysis
Our current model utilizes population
trends and employment participation
rates as primary variables
Broadly, the number of variables and
their interrelations increase model
complexity driving our decision to focus
on a narrower set of variables
EBRI - Employment-Based Retirement Plan
Participation: Geographic Differences and Trends,
2010
DOL – Bureau of Labor Statistics
Cerulli – Retirements Guide 2013
2010 U.S. Census Population
Projections
JP Morgan Sell Side Analyst Report on
Asset Managers 3/29/2015
4. 4
Catalogue of Macro-environment
Attributes
Impacting Contributions
Retirement Decumulation Rates
Cash-out Rates
Transition to IRA
Job Change
Retire
Leave Job Market
RMD’s
Hardship Withdrawals
Employee Demographics/#’s
Employer/Sponsor Participation
Employee Participation
Auto Enroll
Auto Escalation
Catch-up Contributions
U.S. GDP
Consumer Confidence
Legislative/Regulatory Change
Impacting Distributions
Contribution Rates
Wages
Stay in Plan Rates
Market/Investment Performance
Company Match
Roll-ins
Income Solutions
5. 5
Agenda
1. Demographic Affects on DC Net Flows (Recap)
2. Sensitivity Analysis of incremental contributions by
Millennial Cohort to offset Boomer Distributions
3. Demographics of the RPS Book & Comparison to
Record Keeping industry
4. Demographic Analysis of Top 10 RPS Clients
5. Distribution Behavior of Generational cohorts
6. Demographics of TDF Industry & at TRP
7. Plan Design Features & Age Segmentation Programs
to increase savings from Millennial Cohort
6. 6
Demographic Affect on DC Net Flows
Flows pressured net negative by boomer exit for next 20 years (2014-2035)
If Millennials exhibit similar behavior as Boomers, DC Flows will turn positive
Implications:
As Boomers exit there is a shrinking pool of DC Cash Flow & Greater
Competition to capture flows
Sources: Cerulli/JPM ( 2003-2036), TRP CMI (2036-2045)
DC Flows have been positive for last 10-20 years
7. 7
What’s driving Flows: ‘Retirement Sprint’ Years
2010 Boomers
2014 Population Facts:
Millennial Population: 91M (1980 – 2000) are 14-34 years old
Baby Boomer: 75M (1946-1964) are 50-68 years old
Gen X – 61M: (1965-1979) are 35-49 years old (20% less than Boomers)
Gen Z – 57M: (2001-2020?) are 0-13 years old ---> From projections this cohort will be on par with Millennials if not exceed
There are 50% more Millennials than Gen Xer’s & 21% more Millennials than Baby Boomers
2045 Millennials
2025-2030 Gen X
8. 8
What’s driving Flows: Work Force Demographics
Sources: BLS ( 1992-2014), TRP CMI (2014-2060)
9. 9
What’s driving Flows: ‘Age Wave Gap’ - Gap in DC Saving
2014 Population Facts:
There are 50% more Millennials than Gen Xer’s & 21% more Millennials than Baby Boomers
Millennial Population Count – 91M
Baby Boomer – 75M
Gen X – 61M ( 20% less than Boomers)
Gen Z – 57M but expected to rise
As the large Boomer population ages we observe
work force dips from Boomers leaving and not
enough Gen Xer’s replacing them. This begins to
change in 2028+ as the Millennials age.
10. 10
Key Assumptions for Sensitivity Model
Employment Population Projections
Held 2014 US Employment Participation Rates by age constant and applied census projections to get future workforce totals & share
Plan Population Projections:
Held 2014 U.S. DC Plan Participation & Employment Participation rates by age cohort as a constant rolling forward (JPM & BLS Data)
Applied 2010 U.S. Census population projections to the rates above to get future DC plan participation total & share by age cohort
Contribution Projections:
Held 2014 Avg Income of Full Time employed by age cohort as a constant and applied a 2% annual income growth rate for
projections (BLS)
Applied 2014 Avg Deferral Rate by Age Cohort as a constant (Vanguard)
Net Flow Projections:
Used JPM’s Reported Net Flows for 2008-2036; For 2036-2045 assumed Millennial’s, as they age, will exhibit similar retirement
savings behaviors as Boomers and that historic net flows would repeat as Millennials reach ‘Retirement Savings Sprint’ in 2045
Distribution Projections:
Distributions are the difference between Contributions & Net Flows
Held the share of Distributions by each Age Cohort in 2014 as a constant and applied it to projected Distributions
11. 11
Sensitivity Analysis To Offset Boomer Distributions
Scenario 1
In 13 to 15 years - 2028
Increase net savings (employee + match) of:
• 18-24 year olds: by 0.5% from 7.5% to 8% (mill)
• 24-34 year olds: by 0.5% from 8.6% to 9.1% (mill)
• 35-44 year olds: by 0.5% from 9.4% to 10.1% (gen x)
By 2028 start to see net positive flows. 3 years earlier than 2031 projections
2014 Deferral Rates & Income Stats:
Sources: JPM (2008-2013), TRP CMI (2014-2045)
Sources: Vanguard, JPM, BLS
12. 12
Sensitivity Analysis To Offset Boomer Distributions
Scenario 2
In 10 years - 2025
Increase net savings (employee + match) of:
• 18-24 year olds: by 1% from 7.5% to 8.5% (mill)
• 24-34 year olds: by 1% from 8.6% to 9.6% (mill)
• 35-44 year olds: by 1% from 9.4% to 10.4% (gen x)
By 2025 start to see net positive flows. 6 years earlier than 2031 projections
Sources: JPM (2008-2013), TRP CMI (2014-2045)
13. 13
Sensitivity Analysis To Offset Boomer Distributions
Scenario 3
In 5-6 years – 2021
Increase net savings (employee + match) of:
• 18-24 year olds: by 1% from 7.5% to 8.5% (mill)
• 24-34 year olds: by 2% from 8.6% to 10.6% (mill)
• 35-44 year olds: by 2% from 9.4% to 11.4% (gen x)
By 2021 start to see net positive flows. 10 years earlier than 2031 projections
Sources: JPM (2008-2013), TRP CMI (2014-2045)
15. 15
Demographics Comparison:
TRP RPS & the Competitive DC RK Landscape
EBRI Data: DC Universe vs TRP RPS - Share of Assets by Age group
EBRI Data: DC Universe vs TRP RPS - Share of Participants by Age group
TRP has a higher
share of participants in
the 20 year old cohort
TRP has a lower share
in the 30-50 year old
buckets than industry
Assets by age group
are similar to the
industry except RPS
skews a little younger
16. 16
Demographic Analysis of RPS Top 10 Clients
As of 2014 Top 10 Clients represent 30% of Total Assets & 20% of Total Participants
OMNI Total Assets: $140B
OMNI Total Ptc (Term + Active): 1.8M
Top 10 Clients Demographic Resemble overall book of business
Boomers hold 60% Assets & 30% of Participants of Top 10
But variations exist by client – Costco Youngest & Kodak Oldest
Top 5 ‘Younger’ Clients by Participant (Millennial & Gen X’ers) of Top 10:
Top 5 ‘Older’ Clients by Participant (Boomer & Silent) of Top 10:
17. 17
Distribution Behavior Termed Participant Assets
1 Year of Termination After 3 Years After 5 Years
60% of Termed Assets
& 30% of Termed Ptc
are Boomers
50% of Plan Assets
leave within 1st year of
termination across all
cohorts
After 5 years Boomers
preserve 86% of their
assets, Xer’s 80%,
Millennials 64% for
retirement
Cash out rates 2-3x
that of boomers for
younger generations
18. 18
Demographics of TRP Target Date Funds
Take Away:
1) 62% of TDF Assets Held with Boomers ($88.1B)
2) 27% with Gen X ($38B)
3) 5% with Millennial ($7B)
4) About 1/3 of TDF Assets ($46B) will be winding down over the next 5 years (2000-2020 Funds)
As of 2014 TRP at $141B has a 18% market share
19. 19
Plan & Product Design: Improve Millennial Savings
Our book resembles Industry so the 1-2% increase in Millennials & Gen X savings rates
should be an appropriate target
Influence increases in Auto Enroll default deferral
43% of RPS Plans elect a 3% Deferral Rate
23% of RPS Plans elect a 6% Deferral Rate
Influence Auto Increase Opt Out Plan Design
38% of Plans use Opt-Out Method has an 66% participant adoption rate
62% of Plans use Opt-In Method has an 11% participant adoption rate
Implement Specific Age Relevant Campaigns or Plan Design features to modify savings
behavior by age or salary
Influence Plan Sponsors to increase match incentives (stretch match)
Educate Plan Sponsors & Participants of the immediate importance of increased savings
behavior less focus on outcomes
Increase efforts to get Boomers & X’ers to save 1-2% more
Incentivize Sales Staff to influence Plan Design Changes
Solutions to keep money in plan
20. 20
Key Insights & Facts
U.S. workforce is currently at an inflection point across generational
cohorts impacting DC Cash Flows
“Retirement Sprint”; age 45 - 64 years are peak for savings and account
balances
Next 15 - 20 years (2015 – 2035) shows a dip in the “Retirement
Sprint ” employment rate as the smaller Gen X population enters the
sprint
T Rowe Price
60% of assets & 40% of participants are held with Boomer generation
Need to increase savings of younger generations by 1-2% to offset
Boomer outflows
Need to influence better plan & product design adoption to increase
overall savings & keep more money in plan
Decreasing Plan Size has implications for Fees & Pricing
23. The Wealth Business impacted by Boomer Redemptions
As our investor base ages, net new flows will be pressured by increased redemptions among retiring
baby boomers
2
Source: Retail Metrics+
*among customers who were age 55-69 from 2014 to 2022
$16
$44
$62
$104
$140
$189
$210
$274
2015 2016 2017 2018 2019 2020 2021 2022
Estimated Increase in Annual Redemptions Attributable to Aging
Investor Base* (millions)
Editor's Notes
Some plan & product design features that we can influence to encourage higher savings with participants. Either by age or salary. AE, AI, campaigns, match etc.
Increase savings of younger generations or higher salaried individuals…