Five Questions With: Rita Assaf

Rita Assaf serves as vice president of retirement and college products for Fidelity Investments Inc. She has more than 12 years of experience at Fidelity. She spoke with PBN about recent Fidelity research about retirement savings attitudes and trends among young investors, as well as the impact of the SECURE 2.0 Act. Assaf has a bachelor’s degree from Boston University and a master’s in business administration from Bentley University.

PBN: What are some of the recent changes/trends you are seeing in retirement savings based on Fidelity research? To what do you attribute these changes or trends?

ASSAF: Not surprisingly, ongoing market swings and concerns about inflation continue to cause financial stress among retirement savers. More people now have negative feelings about their finances rather than positive feelings. And yet, recent Fidelity data shows many young investors are making the right moves when it comes to retirement preparedness.

In fact, the number of IRA accounts continues to increase, especially among Gen Z and millennials. Additionally, account growth for women – who make up 45% of total IRA accounts – saw a year-over-year increase of 87% for Gen Z and 25% for millennials.

- Advertisement -

Recent Fidelity research indicates younger generations (81% Gen Z and 77% millennials) are more likely to be making a financial resolution in 2023, including planning ahead and staying up to date on financial market developments.

PBN: How will the SECURE 2.0 Act change retirement planning/savings in the year ahead?

ASSAF: Secure 2.0 is a sweeping new retirement law that seeks to boost retirement savings and modernize many long-standing saving and distribution rules. Importantly, the law creates opportunities for retirement providers and employers to integrate new workplace benefits that address everyday obstacles when saving for retirement.

PBN: What can employers do to leverage benefits, including matches and other retirement or education benefits, in this tight labor market?

ASSAF: Some of the notable updates that impact many investors include:

  • Student debt and retirement: 84% of Americans with student debt say it impacts their ability to save for retirement. As one of the first employers to offer a student debt benefit to employees, Fidelity believes addressing student debt pressures in the workplace is a powerful mechanism to support employees’ financial wellness, retirement security and overall well-being. The student debt retirement benefit will allow employers to match employees’ student loan payments as a traditional retirement plan contribution. Fidelity has already seen great success with its Student Debt Retirement services offered to plan sponsors and has programs in place to help plan sponsors take advantage of this recent legislation change and implement this increasingly requested workplace benefit.
  • Emergency savings: Less than half of employees have three to six months’ worth of essential expenses saved for unexpected expenses. Additionally, more than half of employees feel “overwhelmed” or “completely overwhelmed” by their lack of short-term savings. Without emergency savings at the ready, employees may look to their retirement plan as their only source of available savings when covering emergency costs. The new law allows employers to address employees’ short-term savings needs by offering emergency savings accounts linked to a defined-contribution retirement plan. Allowing employers to create an emergency savings account associated with a retirement plan (in or outside of the plan) can help employees incrementally and consistently save for emergencies. Enabling employees to save for short-term expenses helps them become more prepared for unexpected costs, while ensuring their retirement savings are not penalized when withdrawn.
  • Automatic portability: Every year, millions of U.S. workers are faced with manually moving their retirement account to a new employer’s plan. In the process, many employees (with balances less than $5,000) choose to cash out their account, which contributes to plan leakage and disrupts retirement savings goals. The new law enables retirement plan providers to offer plan sponsors automatic portability or “auto portability” services. As a retirement leader, Fidelity believes auto portability is a critical component to help underserved and under-saved employees achieve financial wellness and longer-term retirement security.

PBN: How will the potential economic recession impact retirement savings and accounts, as well as the age at which people retire? Do you see this as having a similar or a different impact to the 2008 recession in terms of retirement trends?

ASSAF: While people are understandably concerned about what the future may hold, the important thing to remember is that staying invested and making steady contributions is one way to help your retirement savings grow long-term. It’s actually one way to help savings recover from a downturn.

To demonstrate what this means in real life, Fidelity examined three different savings approaches a 401(k) investor could have taken with their savings during the Global Financial Crisis of 2007-2009. Each investor started out with $400,000 in 2007 – and Fidelity tracked how those savings performed as of 2012. As you can see, continuing to save and invest through the Global Financial Crisis would have helped the investor’s account recover from the downturn and take advantage of subsequent growth. “Staying the course” remains the best approach during uncertain times.

PBN: What advice would you give to someone when saving for/planning for retirement?

ASSAF: There are three actions people should do today to prepare for retirement.

  • Save as much as you can. Young people are 30 or more years away from retirement. At this point, your retirement plan should really be focused on determining how much you are saving on a regular basis and what accounts those savings should be going into based on tax and investing considerations. To help determine that, Fidelity suggests aiming to save at least 15% of your pre-tax income each year, which includes any employer match, with a goal to save 10 times your pre-retirement income by age 67. Breaking this down by age, aim to save at least 1x your income by age 30, 3x by 40, 6x by 50, and 8x by 60.
  • Increase contributions over time. If starting off saving 15% or more of your income isn’t possible, small increases over time can make a big difference. If you have access to a 401(k) with a company match, try to save to at least your company match level. If you don’t save to that level, it’s like leaving free money on the table. A great way to regularly increase your contributions to your retirement savings is to do it if and when you get a raise each year. Get in the habit of increasing your contribution rate by 1% each year until you get to the 15%. Even if you have an employer retirement plan, consider keeping a traditional IRA or a Roth IRA open as well. At Fidelity, there are no fees or minimums to open an account. Plus, you can get $100 when you open one of these accounts and deposit $50. That’s an instant 200% match.
  • Review your asset mix. Getting your investment mix right – investing for growth – from the start, can make a big difference. You want to make sure your money is working for you and has potential for growth. Make sure you have the right mix of stocks, bonds and cash based on how far you are from retirement, and how comfortable you are taking potential risk in your portfolio.

Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com