Stig Nybo has spent most of his career promoting best practices for qualified retirement plans, but his commitment to that task took a more personal and passionate turn about four years ago. The catalyst was an incident that occurred during a simple walk through a parking lot with his two young sons. En route to their car, they passed an elderly woman who got out of an old Volvo, folded a blanket, and placed it inside the trunk of her car—a car filled with personal belongings. Nybo recognized that the woman was living in her car, and he had a long and ultimately unsatisfactory conversation about the incident during the ride home with his sons. The conversation was unsatisfactory, he explains, because he couldn’t point to the usual culprits for the woman’s circumstances: vagrancy, for example, or drug addiction. “In fact, when I looked at this woman, she reminded me of my own mom, who is comfortably retired.”
It was at that point, Nybo told participants at the 2013 SVIA Fall Forum, “that I realized our business is not about fiduciary responsibility, although certainly that is an important part of it. It’s not even about stable value. What it’s about is making sure people have enough to retire on. And the fact is, that’s an area where we’re simply failing. By we, I mean all of us, collectively, as a society. We have not formed the habits that will get us to where we need to get. And unless we go to an additional mandatory (savings) system, like an additional Social Security system where people have no choice, we’re going to have to do better with a voluntary system.”
Since that day, Nybo, president of pension sales and distribution at Transamerica Retirement Solutions, has become an emphatic proponent of encouraging Americans to save more for retirement, even going so far as to author a book with writer and consultant Liz Alexander, entitled Transform Tomorrow: Awakening the Super Saver in Pursuit of Retirement Readiness (John Wiley & Sons, 2013). He has pledged that any profits from the book will be donated to a public service campaign to promote retirement saving.
Speaking at the SVIA Fall Forum, Nybo said three issues go a long way toward explaining why many Americans have not saved enough for a financially secure retirement: longevity, consumerism, and leverage. Americans are living longer, they spend voraciously, and they rely extensively on debt to finance their spending.
To combat these problems, Nybo wants to create a nation of “super savers.” Some of these people already exist. In the 12th Annual Retirement Survey conducted by the Transamerica Center for Retirement Studies in 2011, Nybo said, about 20 percent of those polled had built spending and savings habits that would afford them a financially secure retirement. These people were not characterized by exceptional educational levels or earnings, but rather by giving priority to consistent saving.
The lesson, he said, is simply that it is possible for many people to save adequately. And they have the tools to do it, he insists, in the form of defined contribution plans like the 401(k). While it is customary to complain that the 401(k) plan is failing the retirement needs of Americans, Nybo said some of the numbers frequently cited to support that argument are misleading. For example, data from the Employee Benefit Research Institute indicate that the average 401(k) account balance is about $60,000. But that doesn’t take into account the fact that many people have access to more than one 401(k) account, including some domiciled with former employers, and to IRAs and accounts held by spouses. In fact, he said, the average accumulated total retirement assets for people over age 60 in 2010, including traditional and rollover IRAs, was about $275,000. “And I believe it is well over $300,000 now, which is still insufficient,” he noted. He added that participants currently are deferring 3 percent of salary into their plans (in line with what companies typically match), but that it should be 6 percent. Additionally, he said, auto-escalation is 1 percent per year, but should be 2 percent.
Still, given the projected cost of healthcare alone in retirement, it’s clear that most Americans need to save more. In searching for ways to change their behavior, Nybo said he and Alexander were inspired by previous public service campaigns that had successful outcomes. Among these was an anti-littering campaign launched in 1971 that was spearheaded by a television ad featuring a Native American with a tear in his eye as he surveyed scene after scene of littering. Surveys indicate that from 1969, just before the ad’s launch, to 2009, littering in the U.S. decreased by 61 percent.
It turns out, though, that littering didn’t go down just because people were advised to stop doing it, but also because communities made it easier for people not to litter by making waste receptacles much more widely and readily available—much the way automatic enrollment in 401(k) plans make retirement savings more widely and readily used.
Nybo is pushing the financial services industry to launch a public service campaign that will rival the successful anti-littering campaign that started in 1971. He is also promoting financial literacy classes in the nation’s high schools. The consequences of failing in these efforts would go beyond financially difficult retirements for older Americans, he warned, since their reduced spending power would also harm the country’s consumer-driven economy.
“It’s a massive issue, the biggest social issue of our time, and it’s our responsibility,” Nybo told his SVIA audience.