We believe there are a number of reasons for the relatively low levels of engagement among employees with their workplace retirement savings plans, and at Fair Share Partners we are seeking to address two in particular.
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- Uncertainty
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- The greater the uncertainty the more difficult the decision, and the more difficult the decision, the more likely it is that it will be deferred or avoided altogether. It is very difficult for a twenty year old to answer questions such as:
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- How much wealth do I need to accumulate to minimise the risk of running out of money while spending a desired level of retirement income?
- How much do I need to start saving and investing today to accumulate that much wealth?
- How should I invest my savings?
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- We believe our calculator and the personalised tables that employees would be able to generate using it, similar to Tables 5, 6 and 7 on our Prosper Tomorrow page, would help employees to better navigate this uncertainty.
- The greater the uncertainty the more difficult the decision, and the more difficult the decision, the more likely it is that it will be deferred or avoided altogether. It is very difficult for a twenty year old to answer questions such as:
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- Complexity
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- There can be considerable unnecessary complexity with retirement savings plans in terms of terminology, investment choices, administration and investment charges, tax benefits etc. That is why we have sought to identify as simple a way as possible for employee to achieve their personal wealth goals.
- The tables generated by our calculator combine the effect of a number of factors into easy to understand personalised tables for employees so that they can evaluate the probable impact of decisions they make today on their wealth outcomes potentially decades down the road.
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- Uncertainty
Fair Share Partners is focused on absolute wealth outcomes for young people. We are not concerned with day-to-day or year-to-year fluctuations in stock markets, nor do we believe that employees and employers should be preoccupied with such short-term fluctuations, commonly referred to as ‘volatilty’.
We are also not concerned with performance relative to benchmarks or other investment managers over short periods of time, although, having said that, over complete market cycles (peak-to-peak or trough-to-trough) we do expect the Buy & Hold approach to hold its own as shown here.
What matters most is that users of our website and members of retirement savings plans have as much confidence as possible, in an uncertain world, that they’ll achieve their personal wealth goals when they want to achieve them. Warren Buffett has said that “Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.” Similarly, the main risk that members of retirement savings plans need to be concerned about is the risk of not achieving their wealth goals, not short-term price fluctuations, and not short-term comparisons to benchmarks or other investment managers.
Today’s twenty-somethings could live well into their nineties and as a result they will need to have a meaningful investment in higher growth assets such as the stock market to and through retirement, especially if they want to retire in their sixties and wish to minimise the chances of running out of money.
Ultimately, we believe the safest way for young people today to achieve their wealth goals is to ensure they save and invest enough from young enough, and plan from the very beginning for unlucky outcomes while hoping for lucky outcomes, so that they’ll be unsurprised by anything in between, as shown in Table 4 of our Prosper Tomorrow page.
Finally, employers may be interested in our charitable giving program whereby we would make annual donations to schools nominated by their employees, so we would encourage employers to make their employees aware of our website. We have chosen schools as the beneficiaries of our charitable giving program because we believe the sooner children observe and learn about the benefits of saving and investing from an early age, the better, but also because many schools have funding gaps that they need to raise money for every year.