By chance I sat next Lisa Massena at a recent forum on the future of retirement savings. Lisa launched OregonSaves, the original state Auto IRA that has become the template for twelve other states and more to come. Lisa is now the COO of Defined Contribution Institutional Investment Association (DCIIA), which has been conducting great research on the contributing and interdependent factors to retirement security and confidence.
Needless to say, Lisa is brilliant, practical, and action-oriented. Her newsletter – Retirement Savings Matters – is a must read for any leader touching retirement savings, workplace financial health, and the future of wealth in America and beyond. It’s also chock full of fun pictures and anecdotes that humanize – let’s be honest – an otherwise heavy topic. So check it out!
With Lisa’s permission, I am presenting a preview to a recent conversation I’ve had with her about why emergency savings is just now becoming a thing, and what that means for retirement security.
A Preview to “Double-Clicking on Emergency Savings: A Sunnier Take”
“After the other E-word (ESG), Emergency Savings is one of the year’s hottest topics. We wanted to know: how much of that is talk, and how much of it is action? We cornered our friend Sid Pailla, CEO of new firm Sunny Day Fund, to shed some light for us.
Sid, workplace emergency savings has become a very hot topic, but it’s not very common at work. What’s the impediment? It’s expectations, I think. Until recently, we haven’t thought about emergency savings as something the employer offers. Now we are extending – because emergency savings close to the paycheck works better. We’ve seen the early data that nine in ten working adults want this. When we are looking at the initial kickoff period typically, we see around 30% enrollment right off the bat. Think about that – right away, 30% voluntary enrollment. Over time, we’re getting closer to 50% to 60% stabilized voluntary enrollment. So, I’m very enthusiastic about what we can do in emergency savings.
Enter the experts – tell us what you’re doing in this space. I’m the founder and CEO of Sunny Day Fund. We focus on making saving toward emergencies easy, accessible, and rewarding for both employees and their employers. Our technology enables the offering of a savings program. That’s automated savings wrapped with a thoughtful engagement approach that improves success.
So how does that work? To learn more and get the details on a perspective we haven’t heard before, read the full piece here).
What are you discovering with regards to any links between workplace emergency saving and improvements in retirement saving? I’ll say first that the research shared has been absolutely fantastic. I’m sure you have read the pieces from the Aspen Financial Security Program, DCIIA, and Morningstar that have found that having a thousand dollars in emergency savings cuts the incidence of 401(k) loans and withdrawals in half. So, we started asking some why questions: what is it that has people excited about both retirement and emergency savings? Turns out it’s a sense of competence and security. A sense of competence and security – the emotional undertone to the rational savings behavior they are doing matters a great deal.
This is a taste of our longer conversation with Sid Pailla – click for more.“
Bonus: A Great Post on Understanding Inequality in the US
OK, it was very cool to talk with Lisa and I certainly encourage you to listen to or read the full conversation above.
But let’s feature someone else that Lisa has brought on whose findings resonate deeply with the motivation behind our mission.
Geoff Sanzenbacher, an economics professor at Boston College, recently published a book called Six Facts that Matter: Understanding Inequality in the United States. Lisa talked with Geoff to distill the message of his book. Here’s a quick preview on one of his responses that I believe is very timely about the outsized impact of inflation (and combating inflation) on lower-income individuals:
“When we fight inflation the point of it is to make labor markets less hot. That lack of heat hurts people in the middle and the bottom the most. While we do need to fight inflation, we need to recognize that the burden of that falls disproportionately on these lower segments.”– Geoff Sanzenbacher on Retirement Security Matters
We constantly think about how we can change the economic incentives so that lower-income individuals have the same, if not better, ways to build at least liquid wealth. And when we realize that women and BIPOC disproportionately constitute the lower-income segments, we start understanding why these gaps feel personal.