Helping Your Clients Navigate an Accelerated ‘VUCA’ World

VUCA World Sri Reddy

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Welcome to VUCA world—one that’s volatile, uncertain, complex, and ambiguous. While the term may feel new, the concept dates back decades to when students in the U.S. Army War College first used it to describe life after the Cold War ended. Fast-forward to today: We’re approaching a new, accelerated VUCA world—one that’s shaping-up to be exactly what each word of its acronym implies.

Principal’s Sri Reddy

The past year has certainly been turbulent. A surprising number of individuals left jobs or chose to stay away from work. And, at the same time, prices rose and inventories shrunk, pushing the stock market to record levels, given low yields in fixed investments. All this instability took a toll, eroding financial confidence for the future.

In a recent Principal survey, people shared their concerns about having adequate savings set aside for retirement. Only 38% felt confident they’d saved enough to live comfortably—the lowest confidence levels reported since first quarter 2020 (from our pre-pandemic survey).

Waning financial confidence may be a sign of fatigue from living in a constant state of uncertainty. But that likely won’t go away any time soon. Late last year, the Federal Reserve announced it would start acting quickly and aggressively to encourage stability in spending and employment. Those actions may create even more market volatility in the year ahead.

4 strategies for managing retirement planning, no matter the economic outlook

Just because life may continue to feel a bit VUCA these days, doesn’t mean your clients’ financial confidence or well-being needs to suffer too. The following strategies can support business owner and plan sponsor clients as they prepare for another bumpy economic year:

Approach retirement in reverse

Financial security is complex—which is why it’s important for employers to think holistically about what retirement and “financial wellness” may mean for their employees’ futures.

Sometimes it helps to think about retirement in reverse. Considering first how they want to spend their retirement years may guide employees to focus on their end goal. Working backwards from that point, and finding ways to consistently save, can help get them on the right track. For example, pay raises this year are generally expected to be higher than previous years—employees may want to consider paying themselves first by banking their raise as savings.

Tips like this can be so important for employees. We know  they’re looking for help reaching their financial goals, particularly when it comes to building a successful retirement income plan. Our survey shows that as many as 74% of workers who met with a financial professional last year alone did so specifically to create a plan for income in retirement.

Evolve with and elevate employees

Workers are leaving their jobs in record numbers in a movement that has become known as “The Great Resignation,” but others are starting to more aptly reference it as the “The Great Renegotiation.” People aren’t just walking away from jobs. Many are looking for new types of work with better work-life balance, benefit options, pay, and additional perks. This new reality is causing many organizations to adapt and fundamentally change how they conduct business.

As employers evolve to meet changing workforce demands, new skills and abilities will be required from workers. In some cases, jobs may go away completely, requiring workers to explore new careers. No matter if workers are wishing to retain their current job or search for a new one, supporting their growth and development can be essential. Courses, certifications, and other opportunities to develop skills can help business owners and their workforces become stronger, together.

Competition for talent is front-of-mind for many business owners and workers too. In fact, 70% of employers are concerned about the increased competition for talent. As a result, some employers may be offering added benefits, like support for caregiving responsibilities and mental health to attract and retain workers.

Think out of the box: Working into (and during) retirement

The fear of outliving retirement savings is a concern for 62% of workers and 37% of retirees, a worry that could be mitigated if business owners are able to do a little out-of-the-box thinking when it comes to their employees nearing retirement.

Generating income into and throughout retirement can be the key to workers building a secure retirement future. In addition to connecting workers with guaranteed income sources, business owners may wish to explore alternate employment opportunities with their senior-aged employees. Nontraditional work arrangements, like part-time job sharing, contract work, consulting, and virtual training are all ways workers nearing retirement may shorten their 9-5 while still pocketing a paycheck.

Seek out and support a balanced life

Although financial well-being is important, it’s only one aspect of life. It is easy to become consumed by finances and worries or concerns about the future. A good reminder for us all, no matter which side of the desk we sit on, is to find a healthy balance.

Budgeting support, tips to manage student loans while also contributing to a retirement plan, HSAs, and more can help workers confidently enjoy today while saving for their futures.

Each of these strategies plays a part in helping clients gain better control over their finances and build a more confident retirement outlook. The days ahead may include challenging and uncertain times, but financial professionals can play an important role in creating and supporting the right client mindset and preparing businesses and their workforces for a more financially secure future.

Sri Reddy is Senior Vice President of Retirement & Income Solutions, Principal Financial Group, Des Moines, Iowa. The subject matter in this communication is educational only and provided with the understanding that Principal is not rendering legal, accounting, investment or tax advice.

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