retirement readiness & the bottom line · presented by: tom foster. national spokesperson....

Presented By:

Tom FosterNational SpokespersonMassMutual Workplace Solutions

Retirement Readiness& The Bottom Line

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Why we do what we do at MassMutual?Help people secure their financial future and protect those who matter most

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

http://www.plansponsor.com/Downturn_Remakes_Americans_Retirement_Expectations.aspxhttp://www.fidelity.com/inside-fidelity/employer-services/fidelity-investments-study-finds-shift-in-generation-y-attitudeshttp://www.lifeinsuranceselling.com/Issues/2010/October-2010/Pages/MDRT-study-sheds-light-on-connecting-with-Generation-X.aspx?page=1http://www.plansponsor.com/Younger_Boomers_Worry_More_about_Retirement_than_Older_Boomers.aspxhttp://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-early-boomers.pdfThe MetLife Report on The Oldest Boomers, May 2013

32MILLIONLATE BOOMERS MAY NEVER BE ABLE TO RETIRE,

OVER

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

A generation lost

72MILLIONWORKERS WILL BE AT RETIREMENTAGE BY 2020

A generation lost

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

http://www.plansponsor.com/Downturn_Remakes_Americans_Retirement_Expectations.aspxhttp://www.fidelity.com/inside-fidelity/employer-services/fidelity-investments-study-finds-shift-in-generation-y-attitudeshttp://www.lifeinsuranceselling.com/Issues/2010/October-2010/Pages/MDRT-study-sheds-light-on-connecting-with-Generation-X.aspx?page=1http://www.plansponsor.com/Younger_Boomers_Worry_More_about_Retirement_than_Older_Boomers.aspxhttp://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-early-boomers.pdfThe MetLife Report on The Oldest Boomers, May 2013

YOUNGERBOOMERSARE MORE ANXIOUS

A generation lost

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

http://www.plansponsor.com/Downturn_Remakes_Americans_Retirement_Expectations.aspxhttp://www.fidelity.com/inside-fidelity/employer-services/fidelity-investments-study-finds-shift-in-generation-y-attitudeshttp://www.lifeinsuranceselling.com/Issues/2010/October-2010/Pages/MDRT-study-sheds-light-on-connecting-with-Generation-X.aspx?page=1http://www.plansponsor.com/Younger_Boomers_Worry_More_about_Retirement_than_Older_Boomers.aspxhttp://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-early-boomers.pdfThe MetLife Report on The Oldest Boomers, May 2013

A generation lost WORKINGLONGER &WORKING INRETIREMENT

LIKELY

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

http://www.plansponsor.com/Downturn_Remakes_Americans_Retirement_Expectations.aspxhttp://www.fidelity.com/inside-fidelity/employer-services/fidelity-investments-study-finds-shift-in-generation-y-attitudeshttp://www.lifeinsuranceselling.com/Issues/2010/October-2010/Pages/MDRT-study-sheds-light-on-connecting-with-Generation-X.aspx?page=1http://www.plansponsor.com/Younger_Boomers_Worry_More_about_Retirement_than_Older_Boomers.aspxhttp://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-early-boomers.pdfThe MetLife Report on The Oldest Boomers, May 2013

76PERCENTOF WORKERS EXPECT

TO DELAYRETIREMENTWITH 24% UNSURE

A generation lost

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

http://www.plansponsor.com/Downturn_Remakes_Americans_Retirement_Expectations.aspxhttp://www.fidelity.com/inside-fidelity/employer-services/fidelity-investments-study-finds-shift-in-generation-y-attitudeshttp://www.lifeinsuranceselling.com/Issues/2010/October-2010/Pages/MDRT-study-sheds-light-on-connecting-with-Generation-X.aspx?page=1http://www.plansponsor.com/Younger_Boomers_Worry_More_about_Retirement_than_Older_Boomers.aspxhttp://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-early-boomers.pdfThe MetLife Report on The Oldest Boomers, May 2013

A generation lost UNDER-& UNDERSERVED

LEADS TOUNPREDICTABLEOUTCOMES

PREPARED

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

http://www.plansponsor.com/Downturn_Remakes_Americans_Retirement_Expectations.aspxhttp://www.fidelity.com/inside-fidelity/employer-services/fidelity-investments-study-finds-shift-in-generation-y-attitudeshttp://www.lifeinsuranceselling.com/Issues/2010/October-2010/Pages/MDRT-study-sheds-light-on-connecting-with-Generation-X.aspx?page=1http://www.plansponsor.com/Younger_Boomers_Worry_More_about_Retirement_than_Older_Boomers.aspxhttp://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-early-boomers.pdfThe MetLife Report on The Oldest Boomers, May 2013

The retirement industry An example of alignment between individual and employer goals.

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Let me retire, on my own termsWe need to survive and thrive in an ever-changing

competitive environment

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Benefit programs are evolving

Healthcare & protection

Retirement

Employer sponsored plans & gov’t

managed care

Cash balance + DC + Social Security

Employers provide healthcare benefits

during WWII

DB + DC + Social Security

SUBSIDIZEREMPLOYER

High deductible healthcare plan, protection &

employee wellness

Defined contribution plan + Social Security

ENABLER

Converging marketplace

Holistic benefit solutions

INFLUENCER

Can Plan Sponsors afford to invest in Defined Contribution plans?

The reality is...They can’t afford not to

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

When employees work longer than desired, costs become harder to predict

Unpredictable workforce costs

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Lower productivity

Higher healthcare and salary costs

Unexpected turnover and financial stress

Drive volatility and instability

Insurance costs and salary differential add up

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Source: CIGNA (healthcare premium)Source: www.lanl.gov (Voluntary LTD rates); Ge Re Research, www.genre.com/aboutus/press-releases/gen-re-announces-2013-us-group-disability-and-group-term-life-market-survey-results.html

Source: Bureau of Labor Statistics, www.bls.gov/news.release/archives/wkyeng_10202015.pdf (Salary Differential)

$11,300

$50,700

Annual employerhealthcare & disabilitypremiums $3,100

20-30 60+

Averageannual salarydifferential

$38,400

20-30 60+

Costs employer $20,000+ per employee per year

Source: CIGNA (healthcare premium)Source: www.lanl.gov (Voluntary LTD rates); Ge Re Research, www.genre.com/aboutus/press-releases/gen-re-announces-2013-us-group-disability-and-group-term-life-market-survey-results.html

Source: Bureau of Labor Statistics, www.bls.gov/news.release/archives/wkyeng_10202015.pdf (Salary Differential)

Company 1 Company 2 Company 3

Percent ofWorkforce 60+

Percent ofWorkforce 40-60

Percent ofWorkforceUnder 40

Annual healthcare &Disability premiums

30% 20% 10%

Annual salary costs

45% 40% 35%

25% 40% 55%

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Three like companies with 1,000 employees that only vary in worker demographics

Case Study

$7.6M $6.6M $5.5M$49.5M $48.0M $46.5M

http://www.forbes.com/sites/financialfinesse/2013/06/13/are-you-financially-stressed/”https://www.kansascityfed.org/publicat/cap/carwp09-01.pdf

Financially stressed workers

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Reducing stress with just 10% of employees

reduces costs by ~ $500,000 per yearper employee, on average

Cost employers $5,000 per year

Costs an employer roughly 150%of salary for replacement and productivity loss

1% improvement in employee retention saves an estimated ~ $700,000 per year

http:///ww2.cfo.com/big-data-technology/2015/10/big-data-can-help-cut-employee-turnover-costs

Unexpected turnover

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

EMPLOYER

ADVISOR / INTERMEDIARY

EMPLOYEES

A “Predictable Workforce” drives good outcomes for all parties in the equation

http://ww2.cfo.com/retirement-plans/2015/05/employers-plan-bump-401k-contributions/

The solution

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Driving outcomesat two levels

Plan design

Employee action

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Design easy choices to address inertia

Manage losses to address loss

aversion

Provide behavioral time machines to address myopia

SAVE(ENROLL)

SAVE MORE(ADEQUATE

SAVINGS RATE)

Auto enrollment

Optimize employer match

The face tool

Pre-plan savings increases

Get raise and save

Visualize retirement

Target date funds

Lifetime statements

Projected retirement income

Save (enroll)

Save more (adequate

savings rate)

Save smarter (wise investment

decisions)

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Practical prescriptions to build better outcomes

Nationwide Small Business Owners Survey, October 2014J.P. Morgan Asset Management “Navigating the every-changing health care landscape”-August 2015

84% of small business owners are anticipating changes to benefits in next two years

Help free up $$$ and re-position investment towards other benefits like retirement and protection gaps

The advisor’s role

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Help employees retire in a respectable fashion

Help companies and employees view retirement savings in the context of the broader benefits package

Help companies understand the implications of health care costs on employees’ ability to save in 401(k) plans

Help people retire earlier & deliver long-term net benefits

Do nothing Invest-plandesign

Invest &reduce

Invest w/upside

Costs Invest $ Net benefits

MassMutual Analysis- 2015

Invest in plan design changes

Invest in participant engagementactivities

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

As health savings accounts and other benefits become more prevalent, there will be competition for savings in the 401(k)

Competition for savings

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Do I save for healthcare

cost today?

Do I save for retirementfor tomorrow?

23

Driving the need for guided interactions and holistic benefit solutions

Healthsavings

High deductiblehealthcare

Defined contribution

plan

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Employee wellness program

Defined benefit or cash balance plan

Benefits will continue to bundle andcomingle…

*2015 MassMutual Employee Benefits Security Study

The opportunities are clear

38%SAY THEY KNOW

LITTLE OR NOTHINGABOUT THEIR EMPLOYER-PROVIDED

BENEFITS

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

37%FIND MANAGING THEIR

PERSONALFINANCESSOMEWHAT ORVERY DIFFICULT

42%TWO IN FIVE ARE

CLUELESSWHETHER OR NOT THEY ARE ON TRACK

TO RETIRECOMFORTABLY

40%PERSONAL FINANCES

ARE ADISTRACTIONAT WORKMAKING THEM LESS

PRODUCTIVE

Make sure to have the right plan that:

What’s the bottom line for employers?

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Meets your current goals and objectives

Conforms to all of the fiduciary guidelines

Has the ideal plan design to optimize long-term returns and outcomes

Delivers an active participant engagement model

Incorporates guidance tools and holistic solutions to help people retire on their terms

Make sure you have the right interactive tools to engage and measures to act:

Assess current state of employee retirement readiness and paycheck

Understand cost to the business when employees lack retirement readiness and financial security

Assess potential cost re-deployment from benefits right-sizing

Provide tools to measure how well an employee is progressing in replacing 75+ of their income at age 67

Monitor progress & make adjustments to keep employees on track

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

What’s the bottom line for employers?

Employees - tools & guidance:

Focused Personalized Simple and easy-to-understand

Encourage action

What’s the bottom line for employees?

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

What’s the bottom line for advisors?

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

Advisors – support & vision: Converging markets require a holistic view

Help companies and employees view retirement savings in the context of the broader benefits package

Identify opportunities to re-deploy benefit costs into improving retirement readiness and financial security

Leverage MassMutual’s interactive tools and thought-leadership

Why should the employer care?

How does an employee maximize limited benefit dollars?

How do you administer themodern cafeteria plan?

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants

The future@work

© 2016 Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001. All rights reserved. www.massmutual.com. MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) [of which RetirementServices is a division] and its affiliated companies and sales representatives. RS-38335-02

For Financial Professional use only. Not for use with Plan Sponsors or Plan Participants