Data & Research August 4, 2020

‘Super Savers’ Remain Confident Despite COVID-19 Market Volatility

But those who fall short on saving are experiencing financial stress.

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Despite the pandemic and the extreme market volatility it has caused, “super savers” are continuing to save for their retirement, according to a survey by Principal Financial Group.

Principal defines super savers as Generation X, Millennials and Generation Z retirement plan participants who are saving at least 90% of the IRS maximum, or 15% or more of their income for retirement. The survey found that these savers have remained confident and focused on their long-term goals.

“It’s important to unpack the key motivations and drivers of super savers so that we can better understand how to inspire and encourage long-term thinking and positive savings behaviors across our customer population,” says Jerry Patterson, senior vice president of retirement and income solutions at Principal. “This latest survey indicates super savers are taking the current market volatility and uncertainty in stride. [They are] identifying new opportunities to save and invest while feeling confident, as most already live below their means and have a solid savings cushion.

Ninety-seven percent of super savers said they feel comfortable managing their finances even in periods of uncertainty, according to the survey. In addition, they say they are committing even further to their long-term financial goals.

Principal says these retirement plan participants are able to save so much because they place a greater emphasis on their long-term goals than on their short-term goals and daily expenses. Principal also says these savers are largely staying the course.

Ninety-five percent say they are in good shape to endure a recession, and 81% say that because they cannot count on equity returns in this environment, they plan on saving more. In fact, 75% view the current market environment as a buying opportunity, and 30% have already increased their investments in the stock market in the past few months.

Asked why they save so much, 70% say they want to feel financially secure. Asked what is important to them in 2020, 52% say health, 45% say financial security and 41% say having a close-knit family.

Thirty-three percent say their parents were the largest influence on their savings habits, with 81% saying their parents are/were savers.

The top motivations super savers have for maxing out their 401(k) savings are having the income to do so (73%), wanting to feel financially secure (70%), wanting to enjoy a good lifestyle in retirement (61%), wanting to be prepared for the unexpected (51%) and wanting to travel in retirement (48%).

Some super savers live below their means by driving older vehicles (48%), owning modest homes (42%), not relying on a housecleaner but cleaning their homes themselves (39%) and doing do-it-yourself (DIY) projects (38%).

“There’s a lot we can learn from super savers in terms of making really good, but really difficult, choices,” Patterson says. “For folks who are looking to boost their savings, it’s OK to start with small, positive choices that begin to snowball into a more substantial nest egg.”

There are small chinks in super savers’ armor, however. Ninety-three percent are worried about the small businesses in their communities being able to weather the closures. Ninety-one percent are worried that the U.S. economy might be in a deep recession for a protracted period of time. Eighty-eight percent are worried that COVID-19 cases might spike in the fall. Eighty-five percent are worried that the coronavirus might spread in their community and 83% are not sure that people will be able to successfully social distance.

Anxiety Up Among Others

Meanwhile, a Schwab Retirement Plan Services survey found that, for other 401(k) participants, anxiety about long-term retirement savings is up. For these people, saving enough for a comfortable retirement is their leading source of financial stress. On average, they think they need to save $1.9 million to retire. This is up roughly 11% from the $1.7 reported in last year’s survey.

Two in five participants, or 41%, say they have made a change to their retirement account due to the virus, with most rebalancing (14%) or increasing their contribution rates (12%). Eight percent increased their exposure to equities, and 7% decreased it.

Despite many feeling financial stress, 37% say they are “very likely” to achieve their retirement savings goals, and 49% think they are “somewhat likely” to do so. Only 14% say it is “not likely,” and 21% are planning to retire later because of the current uncertainty.

“Saving for retirement has been a top financial stressor for people, even when the markets were setting records and we were living through the longest bull market in history,” says Catherine Golladay, executive vice president and head of workplace financial services at Charles Schwab & Co. “Now, we are in a new reality where people are trying to navigate the health and financial challenges right in front of them, while also worrying about their long-term goals. It is a lot, and we know workers can benefit if they talk to a financial professional to help them work out the right steps for their situation.”

Seventy-seven percent of survey respondents say they are also offered a health savings account (HSA), and 45% use the HSA. Of this group, 13% have used it to cover COVID-19-related expenses.

Logica Research conducted the survey of 1,000 participants between the ages of 25 and 70 for Schwab.

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Data & Research August 4, 2020

Employees Need HSA Education, Especially Now

Education is vital for all benefits, and especially now for health insurance coverage, says Fidelity Investments.

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Fidelity Investments has published a new report showing 89% of employees with a health savings account (HSA) believe the savings account has positively affected their livelihood.

At the same time, 72% agree that holistic financial wellness programs that consider things like health care expenses are valuable. While 92% of those surveyed say they are aware their company offers HSAs, only 50% have signed up for the savings vehicle. Likewise, 61% of respondents report they are aware of the telemedicine benefit offered by their plan, yet just 34% use the feature. Aside from promoting it, employers are encouraged to explain its value.

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The report urges employers to understand why their workers use or sign up for a given benefit. For example, 62% of survey respondents state HSAs are valued because they help pay for health care in the short term. For employees who see a tool’s value but have yet to take advantage of it, Fidelity says, adding other types of engagement may prove useful, such as creating personal experiences, normalizing wellness practices and ensuring the user experience is streamlined. 

These engagement strategies are especially beneficial for employers that have changed benefits since the start of the year. According to Fidelity, one in four organizations have changed employee health benefits since the beginning of the pandemic. This hasn’t necessarily meant a reduction in health care coverage, says Hope Manion, chief health and welfare actuary and senior vice president at Fidelity Workplace Consulting. Instead, some employers are enhancing telemedicine, mental and emotional health coverage, and dependent care.

“There are two flavors of employers right now: those that have the ability to enhance benefit offerings and those that are really struggling to offer benefits because their business has been severely impacted,” she says. “Some employers are cutting back, but health insurance is the last thing they’ll touch. A lot of emphasis is on trying to get employees able to find a provider in their area or maybe a virtual arrangement. Dependent care is of big interest too, as well as extended or expanded paid time off [PTO] policies. It’s about trying to meet employees where they’re at, provide them with the flexibility and an ability to take care of their families, so they can be more productive at work.”

Whether it’s an expansion or reduction of benefits, the report suggests employers review their offerings during the enrollment process, especially when it comes to employees’ health insurance. According to the survey, 79% of employers do not expect to spend additional time evaluating benefits this year.

“If 2020 has shown us anything, it’s that this is not a typical year and, arguably, we are approaching the most important annual enrollment we will ever experience in our lifetime. We cannot simply default our benefits like we may have done in previous years,” Manion says. “Given so many have experienced financial and health crises this year, now is the time to ensure they don’t overlook benefits that could impact their future health and financial well-being.”

Education and communications surrounding health care options can have lasting effects on employees and pre-retirees. According to Fidelity’s annual Retiree Health Care Cost Estimate, a 65-year-old couple can expect to spend $295,000 on health care and medical expenses throughout retirement. For single retirees, the 2020 estimate is $155,000 for women and $140,000 for men. These figures are up from 2019’s report, and up from $250,000 for a couple in 2010.

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