52 MAY / JUNE 2019 DIRECTORS / SENIOR MANAGMENT Steve Christenson Executive Vice President Ascensus steve.christenson @ascensus.com Ascensus is an associate member of the Indiana Bankers Association. A number of trends with community banks have taken place through the years with individual retirement accounts. In the mid-1980s, CDs were paying 18% over 10 years. Customers were placing their IRA contributions and rollovers into deposit accounts as part of their investment plans. When the stock market and interest rates both fell dramatically in 2008 – the Great Recession – customers were sent reeling in an attempt to secure their retirement dollars. The stock market has recovered over the past decade, but interest rates have only begun to do so. Today, community banks are seeking more deposits. One key strategy to gain deposits is IRAs, but many banks have not focused beyond minimum maintenance with IRA for some time. Customers Need Assistance Over the past 10 years, as interest rates remained low, banks were better able to borrow low-cost funds, and deposits were not a primary focus. IRAs became something that banks were required to service, and there was little worry when IRAs were closed. Additionally, banks experienced a significant loss of knowledge over the past decade, often requiring other staff to absorb the IRA duties into their routines. But with rates slowly beginning to rise and with recent volatile activity in the stock market, customers again are more actively considering where to place their retirement dollars. Generational Characteristics for Saving Baby boomers. Baby boomers are actively retiring every day, thus slowly becoming a smaller part of the workforce. Some are leaving their primary careers to work part-time to supplement their retirement. They are seeking modest growth and preservation of capital. Baby boomers are also rolling over significant employer-sponsored retirement plan savings (new dollars) into IRAs, and are taking direct control of how they are invested and used. They remember when CDs offered a valued and safe choice for long-term dollars. And while they are comfortable using the internet for financial services, boomers are also willing to visit a branch, if the service provides value. This group also is spending time planning on how best to provide for their beneficiaries. Generation X. Generation Xers (a quieter generation) are now entering their 50s. Many are sending their children to college or vocational school, and others have completed that phase in their life. This group is becoming more focused on accelerating their retirement plan savings and making up for lost time. A recent study by Allianz Life, Chasing Retirement Study, found that approximately 50% of those approaching retirement are “chasers,” meaning that they may have retirement savings, but are behind on their retirement savings plans. This group is looking for ways to get back on track. One factor that is seldom referenced in retirement planning advice and online tools today is Traditional and Roth IRA catch-up contributions for individuals age 50 and older – this now comes into play for Generation Xers, who are ages 39-53. An IRA owner can add to the maximum regular IRA contribution ($5,500 for 2018 and $6,000 for 2019) an additional $1,000 contribution annually to help them catch up on their savings. Generation Xers also are willing to conduct online transactions, but because they have been busy raising their families and advancing their careers, many are not aware of this. Providing information and advice to Generation Xers can be an important element, especially if it is done proactively. Lastly, Generation Xers likely are dealing with the loss of a parent or grandparent. They will look to their banks to provide assistance with beneficiary claims and all the complexities that come with those transactions. Prime Time for IRA Deposits
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