It’s Prime Time for IRA Deposits – Here’s Why
By Steve Christenson, Ascensus LLC
I have seen a number of trends with community banks during my 30+ years of working with IRAs. As a bank service representative in the mid 1980s, I saw CDs paying 18 percent over 10 years. Customers were placing their IRA contributions and rollovers into deposit accounts as part of their investment plan. 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.
I am hearing with greater frequency today that 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 more 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.
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• September-October 2019
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 career 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 longterm dollars. And while they are comfortable using the Internet for financial services, boomers are also very 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 more quiet 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 percent of those approaching retirement are
