Data & Research September 17, 2024

Americans Brace for Election’s Impact on Retirement Planning

Experts from Wealth Enhancement, summarizing a recent survey, say Americans are still optimistic about retirement in the long run.

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As the U.S. presidential election draws near, a retirement lifestyle study from Wealth Enhancement Group LLC shows that 80% of Americans are preparing for potential changes to their retirement plans based on the political outcome, including 73% of those already retired.

Among respondents, 23% said they worry about the election’s impact on their retirement portfolios. The study also found that 55% of unretired Americans fear inflation has delayed their retirement goals, with the average setback estimated at more than eight years.

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Inflation concerns are a major focus heading into the election, with 49% of respondents worried about the rising cost of goods and services and 39% anxious about future tax implications. These concerns are compounded by apprehension over government programs like Social Security and Medicare, with 31% of those surveyed, including 38% of Baby Boomers, reporting concern about future stability, according to the study.

Despite these short-term worries, Americans reported being generally optimistic about their long-term retirement lifestyle, with 77% expressing positive emotions such as happiness (45%) and gratitude (37%), according to the survey. Among retirees, 90% reported satisfaction with their decision to retire when they did, and 33% said their retirement is even better than they anticipated.

Generation Z is particularly anxious, with 29% fearing the election will affect their retirement timeline, despite historical data showing U.S. markets tend to perform well in election years.

“Historically, elections have had minimal long-term effects on market performance,” stated Ayako Yoshioka, a portfolio consulting director at Wealth Enhancement, in the report. “Anyone concerned about the election should connect with their advisor to ensure their financial plan is resilient, no matter who wins. … Want to invest in an election year? Think long term.” 

Even as economic uncertainty looms, retirees generally reported a more positive outlook than their working counterparts, with 60% feeling happy and 51% expressing gratitude, significantly higher than the 40% and 33%, respectively, of working adults. While concerns remain, only 19% of those surveyed reported regularly meeting with a financial adviser.

However, in contrast, those still in the workforce reported lower levels of happiness (40%) and gratitude (33%). Instead, working adults tended to report more anxiety (37%, vs. 16% of retirees) and fear (26%, vs. 8% of retirees).

Nearly 69% of Gen Xers reported negative emotions, such as anxiety (39%), likely influenced by the fact that 25% of non-retirees said they have not set retirement goals.

The study, conducted by Wakefield Research in July, surveyed 1,000 U.S. adults through an online poll representative of U.S. adults ages 18 and older.

Wealth Enhancement recently told PLANADVISER the firm was nearing $5 billion in retirement plan assets as it builds the practice with wealth management services. Its total assets are about $85.7 billion.

Compliance September 17, 2024

Court Grants Genworth Class Certification Appeal

Plaintiffs can appeal class action status granted earlier this month to participants who were invested in BlackRock Inc. target date funds.

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The U.S. Court of Appeals for the Fourth Circuit has granted plan sponsor Genworth Financial Inc. the chance to appeal a decision to give class action status to a group of participants who were invested in BlackRock Inc. target date funds through a workplace retirement plan.

The appeals court had been considering Genworth’s appeal to class action certification granted in the U.S. District Court for the Eastern District of Virginia. In that ruling, Judge Robert Payne gave class action status to all participants enrolled in the BlackRock LifePath Index Funds at any time on or after August 1, 2016, without giving a ruling on the plaintiff’s allegations that Genworth’s retirement plan committee had failed their fiduciary duty by not shopping for alternatives.

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The granting of class action status in the case, Trauernicht et al. v. Genworth Financial Inc. et al., stood out after numerous lawsuits filed by the same law firm, Miller Shah, had been dismissed by other courts.

In the appeal filed August 30, Genworth argued that plaintiffs did not sufficiently argue for class action status in the lawsuit. The firm, represented by Gibson, Dunn & Crutcher LLP, made the case that many of the “thousands of participants and beneficiaries” that would make up the class may in fact have “fared worse under Plaintiffs’ preferred alternative investments, depending on different individuals’ choices of when and how to invest.”

The defendant also argued that giving class action status in the case would have far-reaching consequences for ERISA fiduciary-breach cases, making such class certification a “fait accompli,” according to the appeal.

“That includes cases like this that are manifestly unfit for mandatory classes because they purport to resolve the rights of unharmed class members who will never even receive notice and the chance to opt out of the wasteful, attorney-driven litigation prosecuted in their names,” attorneys wrote in the request for appeal.

Genworth also accused the district court of erring when it did not decide if “any, let alone all” of the class members had standing for the allegations of fiduciary breach.

In his class certification ruling, Payne had not made a judgement on the merits of the complaint, but found only that there was enough to provide class status.

“Demonstrating financial injury in the context of standing is different than in the context of the merits,” he wrote. “Plaintiffs do not have to prove that they have suffered financial injury to establish standing. … Rather, standing is a threshold inquiry to determine whether the court may proceed to the merits.”

The fourth circuit court of appeals, in its order Friday, ruled that Genworth made enough of a case for it to review the class certification status before allowing the case to move ahead.

The plan held assets of $847.34 million as of December 31, 2023, according to a Form 5500 filing.

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