Learning how someone’s cultural background may affect their perspective on money – especially when structuring their retirement savings – can help you better understand what drives your prospects and clients and affects their decisions.

Preet believes that asking clients about how money was handled when they were growing up can help financial professionals better understand what impacts their clients’ financial decisions now. “For example, some of my research has found that sometimes the more financially insecure a household was when you were growing up, the better decisions you make when you are an adult,” he shares. “And the reason is that you never want to replicate those feelings that you had when you didn’t have money. Maybe it was a parent who suffered a job loss or some other financial disaster, but that sticks with you.”

Preet and Vicki encourage financial professionals to ask clients the following questions to learn what may be shaping their retirement savings goals:

• What did you learn about money when you were growing up?
• How has that influenced your view on finances and how you choose to spend and save money?
• Why do you prioritize certain financial goals over others?

One significant cultural factor that affects nonwhite clients is the racial wealth gap. The median net worth of the nation’s top 10% of families by income is $1,789,300 for white families versus $343,160 for Black families. Black families make up only 3.6% of the top decile by income.¹

Vicki points out that this racial wealth gap means “there’s a huge group of people who don’t have generational wealth or have not had generational wealth passed to them.” Vicki explains that for many people in this situation, creating a bequest often becomes important because they want to pass down money to the next generation to give them a stronger financial start than they had.

Financially taking care of family members can also be a high priority as a result of the wealth gap. One analysis concluded that high- and middle-income white professionals are less likely than Black professionals with comparable incomes to provide financial support to their relatives.²

Source: Black and Hispanic Retirement Confidence: Diving Deep with the Retirement Confidence Survey. Employee Benefit Research Institute, June 23, 2021. Statistic is for those earning more than $75,000 per year.

Being mindful of how someone’s culture may be influencing their goals can help build trust with prospects and clients. Financial professionals can further strengthen the relationship by providing valuable insight about how to integrate those goals into their clients’ plans in a way that allows clients to financially support themselves during retirement.

Sometimes a prospect or client relies on their employer-provided retirement benefits, if any, as a critical component of saving for their retirement. If none are available, such as if a person doesn’t have access to a company 401(k) plan, financial professionals can play an even more important role in advising prospects and clients on ways to save. Employment, and specifically the type of occupation someone has, may also be a factor for financial professionals to discuss with prospects and clients when determining their plans. During these conversations, make sure to bring up how the physical and mental demands of a client’s occupation may impact their plans.

For many years, the responsibility of saving for retirement has been placed on individuals, as pension plans covered fewer workers and were replaced with defined contribution plans such as a 401(k). An emerging factor, however, is the growth of the gig economy, which generally refers to freelancers and contractors. Currently 36% of Americans work in the gig economy,³ and 41% of gig economy workers don’t have access to an employer-sponsored retirement plan.⁴

Financial professionals who have prospects and clients working in the gig economy may want to have conversations with those clients about ways to boost their retirement savings. Some topics could include:

• The potential benefits of a recurring, automatic monthly contribution to an IRA or other retirement savings account
• The percentage of income clients are contributing to retirement accounts – and adjusting that percentage once they are earning more
• The value of having regular reviews – at a minimum of once a year – covering their employment situation, current salary, and retirement savings options

Because gig economy workers are often on shorter-term contracts or may be adding jobs or clients on a regular basis, their income can often fluctuate. Financial professionals may consider discussing with clients who work in the gig economy whether they should be setting aside more funds for retirement during months of higher income.

While the implications of the gig economy can significantly reduce clients’ options to save for retirement, Vicki says some individuals have the attitude that they don’t need to save as much because they plan to work forever. “For a financial professional, discussing occupation is a critical conversation to have because if you have an occupation that is physically demanding, you may not have adequate health to work as long as you anticipate,” she shares.

In one survey, 47% of retirees said they had retired earlier than they had expected, and 32% of those who retired early said it was due to a health problem or disability. And while 44% of current workers said they hope to have a gradual reduction of work that leads them into retirement, only 17% of retirees said that was the case for them.⁵

Vicki encourages financial professionals to ask clients these questions as they relate to their jobs:

• How stressful and mentally taxing is your job?
• How might the mental and physical demands of your job change over time?
• Will you be able to meet those demands as you get older?

Discussing these answers could help you and your clients adjust how they’re saving for retirement and possibly re-evaluate how long they anticipate working. If a client is unable to continue their career for as long as they expected in order to save for retirement, they may need to explore a late-career transition to a job that is less demanding or stressful that still allows them to continue working and saving until they are ready to retire.

Vicki adds that mental health stressors may also have a significant effect on some people’s retirement savings behavior. She encourages financial professionals to check in with clients about their mental health and says some clients may benefit from working with a financial therapist to address any financial stress they may have.

“Financial therapists engage with individuals to understand their emotional connection to money to help them develop good, strong financial behaviors,” Vicki explains. Financial therapists use their money expertise and understanding of psychology to help individuals and couples recognize problematic behaviors, reduce negative feelings toward money, and improve decision-making skills. The Financial Therapy Association is one organization that can help financial professionals find a licensed therapist to help their clients.

Vicki has found through her research that individuals with anxiety and depression had lower retirement savings as a share of financial assets by as much as 67 percentage points relative to their peers who did not have those mental health concerns. Married individuals with psychological distress had retirement savings accounts that were valued at 20-28% less than those of their nonstressed peers.⁶

“Depression and anxiety are associated with a lower total amount of retirement savings and also increase the amount of withdrawals from retirement plans,” she shares. Financial professionals can support their clients by watching for the beginning signs of mental stress to help clients with these feelings. Early signs from clients may include them being scared or in a state of panic about their retirement savings plans. Identifying these signs gives financial professionals the opportunity to have further discussions about their clients’ plans.

Understanding the variety of perspectives that prospects and clients may have as a result of their cultural, occupational, and mental health experiences expands the ways financial professionals can continue to help clients reach their retirement savings goals. Whether your clients want to financially support loved ones, are working in the gig economy, or need professional guidance to better understand their financial habits, providing them with the resources they need allows you to continue to be their trusted expert.