Risk management, diversification and products with guarantees have proven to be tried and true approaches when it comes to what financial advisers suggest to members and credit union employees.
Programs that educate members on retirement planning continue to be pivotal when many have postponed their plans. In 1999, 17.2 million American workers were age 55 or older. By mid-2009, that number had increased to 27.1 million, according to data compiled by CUNA Mutual Group's 2010 retirement plan forum newsletter. With this aging of the U.S. work force, credit unions are being urged to ensure that their retirement education programs meet the needs of preretirees as well as those of younger employees.
"Diversification still matters especially for members' long-term growth needs," said David Foster, vice president of product distribution at CUNA Mutual "If we continue to have a jobless recovery, other economies have the potential to grow faster than ours."
In 2008 and 2009, Foster said advisers saw more activity in helping members assess their risk management to their time horizon toward retirement. Those with a 529 plan for college who are also facing retirement in the next three to five years may need to rethink if their assets need shifting. The conversation certainly takes on a different tone depending on the member or CU employee's age.
CUNA Mutual said most retirement education materials focus on encouraging employees to enroll in the company's plan and contribute as much as they can to their plan accounts. Communications concentrate on plan basics such as how the plan works, the advantages of pretax contributions, tax-deferred compounding, starting early, contributing regularly and how to invest plan contributions to reach retirement goals. As employees move closer to retirement age, they need additional information about their plan distribution options and how to invest their accounts to preserve their assets.
Foster said advisers are adding guarantees either through certificates of deposits, stable value accounts in 401(k) plans and fixed annuities. Members looking at retirement may consider immediate annuities or variable annuities. CUNA Mutual had record annuity sales in 2009 because of the guarantee feature, he pointed out.
Older employees and members are advised to review their asset allocations periodically as they move closer to retirement and in some cases, gradually shift some of their growth investments into more conservative investments to help preserve their savings, according to CUNA Mutual. The impact inflation can have on retirement expenses and the resulting need to keep some growth investments to stay ahead of inflation is another important topic for both preretirees and retirees.