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An Agreeable Disagreement

By Tom Foster

When is a negative really a positive? It’s when a majority of people disagree with the notion that spending money today is more important than saving for tomorrow.

The 2017 MassMutual Middle America Financial Security Study1 (Middle America Study) found that 73 percent of Americans with household incomes of between $35,000 and $150,000 disagreed with the statement, “Spending money to enjoy myself now is more important than saving for the future.”

The findings seem to tell us two things: Middle Americans are more likely than not to want to save for retirement and most of them would be boring party guests. At least until they retire.

But the willingness to make sacrifices today for a brighter future is a step in the right direction when it comes to promoting the need for retirement savings. It’s something that financial advisors should keep in mind when they are helping educate workers about the need to save and invest in their employer’s retirement plan. You’re singing to the choir.

More good news: most Middle Americans (77 percent) disagreed with the statement, “Retirement is too far away to think about,” the Middle America Study found. Another agreeable disagreement about money.

Yet, the study found that 72 percent of respondents admit they are not saving enough for retirement. So why is there a disconnect between knowing and doing? What can advisors do to reverse the tide?

For starters, many workers admit that they need help with financial education, including basics such as budgeting and debt management. A majority of respondents (56 percent) said their monthly income tends to be equal or less to their expenses or bills or are unpredictable, according to the study.

Advisors can play a big role in helping people determine strategies to save and invest by helping educate them about sound financial planning strategies. MassMutual’s study reported that more than half of respondents who found managing their finances to be difficult pointed to financial issues such as having too much debt and lack of knowledge about financial management.  Four in 10 reported their household’s finances were too complex.

A good place to start is with basic savings strategies.  While 35 percent concurred that they don’t understand how to save and invest appropriately for their situation, the number shot up to 47 percent for those with household incomes below $45,000. A quarter admitted that they have a spending problem, including 43 percent of those in the lower income bracket.

Many people say they would welcome help at the workplace. At least half said they wished their employer offered resources to help set financial priorities, educate them on saving for retirement, and inform them on other financial products and insurance to help protect them and their family from financial hardship.

It’s a very agreeable message for a potentially very disagreeable problem: helping Americans save for retirement before it’s too late.

E. Thomas Foster Jr. is head of strategic relationships for retirement plans for Massachusetts Mutual Life Insurance Co. (MassMutual).

12017 MassMutual Middle America Financial Security Study.