In all sectors of business, people are talking about Millennials. This generation, or those born from the early 1980s to the early 2000s, has shifted the status quo. Their worldview, their desires, and their expectations have presented a new challenge for businesses.
So how does this emerging workforce affect how a company runs their retirement offerings? Do Millennials engage in retirement savings and do they participate in the 401(k) plans offered them?
How Millennials Save
Studies have shown that Millennials are actually some of the most proactive and hopeful about their retirement, as they consider the benefits of saving early and a potentially long life. A survey by New York Life found that 66% of Millennials aged 30-35 believed that they would be in better financial shape throughout the next year, compared to just 46% of Generation X-ers and 33% of Baby Boomers. Many Millennials also begin saving for retirement earlier than either of the two previous generations. Many factors may influence their early desire to save for their later years, but an essential difference for this group is that only 55% of Millennials believe that they will be able to count on Social Security in retirement.
Even though this generation is on board to participate in company-sponsored retirement plans, they do face challenges when it comes to their retirement savings. For many Millennials, student loan debt is one of the biggest obstacles to their retirement planning. For older generations, the needs of their families, children, and aging parents might stand in the way of them saving what they need for retirement.
Though all generations have challenges when it comes to retirement savings, Millennials and older generations alike say that financial planning is a priority. More than half of all surveyed plan to reduce debt, increase savings, and meet long-term goals in 2017.
The confidence that Millennials feel about retirement savings plans, though, is not always combined with confidence in how to manage key planning areas. Millennials are generally more likely to spend on “important purchases” and vacations than Generation X or the Baby Boomers, which may decrease the amount that they are willing to put into a 401(k). Assistance from a financial adviser could put Millennials on the right track toward meeting retirement goals. Providing an opportunity to meet with an adviser in the workplace can also increase their likelihood to participate in the company’s plan.
How to (Potentially) Increase Millennial Participation
Millennials, just like all participating generations in the workforce, will benefit from the right program design features. Older Millennials (28-34) are more likely to participate in an employer’s retirement savings plan than younger Millennials (21-27), but it has been found that automatic enrollment increases the younger participation rate from 38% to 78%.
The “Plan Wellness Scorecard” by Bank of America Merrill Lynch found that Millennials produced more contribution rates than any other age group in the first half of 2016, due in most part to automatic enrollment. In another survey, it was found that 84% of younger workers are in favor of automatic enrollment, compared to 72% of their older colleagues.
One final characteristic of this younger generation is that workers younger than 30 tend to expect their employer to have more control over their retirement plan. Generally, this emerging workforce is more likely to have a “do-it-for-me” attitude than those older than 30 (JP Morgan Survey).
This is possibly due to a lack of knowledge in investment basics, therefore younger employees could greatly benefit from financial education in the workplace, TDF options for their portfolios, and individual meetings with a financial adviser.
Employers can help every generation save for retirement by creating comprehensive 401(k) plans that offer incentives and a well-thought out range of investment choices. Younger employees tend to embrace the tools and education that an adviser can provide, and employees of all generations can use guidance as they seek the chance to retire with confidence.