Data & Research November 12, 2014

Holidays Prompt Shift in Saving and Investing Strategies

Nearly four in 10 Americans (35%) intend to alter their saving and investing strategies to accommodate for the 2014 holiday season, according to a survey by Edward Jones.
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The Edward Jones “Holiday Spending and Saving Study” reports households in the lowest earnings category (those bringing in less than $35,000 per year) are the most likely to adjust their normal saving and investing plans for the holidays, with 42% saying they will make changes. Households with income levels between $50,000 and $75,000 are the least likely to adjust their plans, with 26% intending to do so. Unexpectedly, the survey revealed the highest income earners are no more or less likely than the survey average to adjust their plans.

The survey results indicate investors ages 18 to 24 are nearly twice as likely to adjust their strategy when compared to those 65 and older. The 45 to 54 age group is the most likely to focus on paying off debts as the year ends. Additionally, respondents with household income levels greater than $100,000 are more likely than all groups to focus on making final contributions to savings and retirement plans during the holiday season.

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There are differences in spending habits when comparing genders, with 40% of women likely to make accommodations for increased year-end spending due to the holidays, compared to 30% of men. The difference between responses from women and men was smaller when selecting for those who say they are most financially focused on holiday purchases during the end of the year, at 32% to 26%, respectively.

“To ensure people spend wisely during this time, we suggest they create a holiday shopping budget and stick to it,” says Scott Thoma, retirement strategist and principal at Edward Jones. “And to make up for the extra spending, we also suggest that people reconnect with their financial advisers or take a closer look at their own financial plans and make sure they’re well positioned to remain on track after the holidays.”

Data & Research November 12, 2014

Nonqualified Plans Have Issues with Education and Recordkeeping

More than three-quarters (78%) of nonqualified retirement plan sponsors surveyed indicated they have some concerns and challenges with their plans.
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Topping the list of issues among nonqualified retirement plan sponsors is educating participants, increasing participation, maintaining compliance, and ensuring accuracy in the administration of the plan, according to the 2014 Wells Fargo Nonqualified Plan Benchmarking Survey.

One in five respondents cited employee education as a top challenge, while 18% said participation and appreciation for the plan is a top challenge.  Nearly half of plan sponsors indicated they have difficulties with their recordkeeper involving errors, administration, compliance, or poor service, among other factors.

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Flexibility of the recordkeeping system (66%) is the number one factor used to evaluate service providers for nonqualified plans. Also in the top five: cost for services (64%), nonqualified expertise (61%), ability to bundle services (56%), and providing plan design guidance (51%). Two-thirds of plan sponsors said they use their nonqualified plan recordkeeper for plan design services, while one-third said they use the recordkeeper for both plan design and financing.

Thirty percent of plan sponsors said they do not follow a formal due diligence review schedule for their nonqualified plans.

In the nonqualified marketplace, stability is the norm. While about one-third (32%) of plan sponsors intend to make a change to their plan in the next 12 months, there is not one particular type of change that is sweeping through the market.

Trends show some plan sponsors are exploring changes to make the plans more generous and others are limiting benefits. For example, 7% of plan sponsors are looking to expand eligibility; 5% are considering limiting eligibility. And 2% might increase their match, while 2% might decrease or eliminate it. The most often mentioned change is to the funding strategy; but even here, only 9% of sponsors mention this as an important consideration for the coming year. 

Account-balance plans outnumber non-account-balance plans by a margin of four to one. Most companies with account balance plans set aside investments to cover participant balances, with mutual funds cited as the most frequently used investment vehicle. 

The majority of nonqualified plan sponsors surveyed (62%) have set up a Rabbi trust for their plans. On average, 83% of plan liabilities are funded. 

More findings from the Wells Fargo survey may be found here.

The survey was conducted in March 2014 in conjunction with Boston Research Technologies. It involved 150 telephone interviews of Fortune 1500 human resources and treasury managers.

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