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Coming off another highly contentious presidential election, advisors heard plenty from the candidates regarding policies geared toward the middle class and it’s relevant because chances are many advisors have client bases with plenty of folks that fit that bill.
Middle class is typically defined as “middle-income” or the household income range of $50,000 to $99,999 per year. That might not sound like much, but if it’s a two income household with one earner flirting with the top end of that range and another somewhat close to middle-income territory, it’s possible for a couple with a combined household income of say close to $150,000 to amass enough assets to make them appealing clients for any number of advisors.
Of course, getting there requires diligence. It appears as though plenty of middle-income folks are answering that call, particularly when it comes to saving for retirement. That’s a positive for advisors for multiple reasons, including the point that America is often described as being in a “retirement crisis” and the fact that a diligent client is often an engaged client.
Consider What this Survey Says
A recent survey from Principal Financial Group® contains some encouraging details regarding retirement savings among the middle class.
“77% of middle-income households (those with between $50,000 and $99,999) are saving for retirement at an average rate of 7.8% of their income before receiving additional contributions from their employers. Additionally, 40% of the middle-income household respondents anticipate their retirement will be better than the one they first envisioned,” according to Principal® Real Life Retirement Journeys.
In what’s good news for advisors and clients alike, the study indicates many workers are taking advantage of matches in employer-sponsored retirement plans and many are at or close to the 15% annual savings rate needed for comfortable retirements. That’s impressive when acknowledging the aforementioned range that defines middle-income.
Add to that, a substantial majority of middle class folks realize that saving for retirement is vital, even if it means cutting back in other areas such as discretionary spending. Translation: middle-income people have their retirement priorities in the right place.
“In total, 93% of individuals surveyed said saving for retirement is important, even when it’s financially difficult. More than half said their retirement aspirations were first influenced by family members (65%) and/or friends or peers (52%),” adds Principal.
Advisors Still Needed
While many middle-income folks lack the $500,000 or $1 million-plus that advisors look for in new clients, smart advisors should see opportunity with the middle class. The aforementioned retirement savings diligence is a clear reason why.
Add to that, many folks in “the middle” may not yet be working with financial professionals, but they’re open to the idea and believe there’s value in it.
“However, while family and friends were reported to be the most influential in inspiring them to start saving, the survey found employers, financial professionals, and retirement plan service providers to be increasingly more helpful sources of information when they began saving,” concludes Principal.
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