From just out of college to age 35, millennial workers are an important asset to your business now and in the years ahead. They are your up-and-coming employees and leaders. Indeed, the longevity and prosperity of your business rests with millennials. And you can help them, too, by making sure they’re prepared for their future retirement.
Millennials are smart, tech-savvy, and understand the importance of saving for the future. Some 90 percent of millennials view retirement benefits from employers as important, and 76 percent say the benefits were a major factor in making their job choice, according to The Retirement Readiness Challenge: Five Ways Employers Can Improve Their 401(k)s — 15th Annual Transamerica Retirement Survey, October 2014.
Yet this group is also cautious and looking for direction. In general, millennials have four main barriers keeping them from saving adequately for the future. Here are those weaknesses and some key strategies you can use to address these points.
What’s My Position? – Many millennials report they don’t understand the basic concepts and savings options with retirement plans, according to The Generation Game: Listen to your future, or it won’t listen to you, a BNY Mellon white paper, 2014. They are equally confused about the benefits of pretax contributions and the likelihood of a lower tax bracket when they access funds upon retirement.
Address this confusion with both early and recurring education. Beginning with new hires and then during enrollment periods, target your retirement plan education to this younger crowd and make sure examples speak to their age range. Be sure to include some holistic fiscal training as well, so they can see how retirement savings plans go hand in hand with financial goal setting, budgeting and debt reduction.
Join or Wait it Out? – While millennials acknowledge the general necessity behind saving for the future, only about half of them are actually participating in retirement plans, according to the 2014 Wells Fargo Millennial Study.
You can help get these holdouts into the plan with auto-enrollment and a Qualified Default Investment Alternative (QDIA), and then keep that participation growing with auto-contribution increases. Just be sure to once again adequately explain these terms and features, how they work, and the benefits.
Team Approach to Contributions – Like other age groups, millennials are not saving enough to sustain themselves later in life. While they are starting to save for retirement sooner than Generation Xers and boomers, their contribution rates are still too low to adequately carry them through their retirement years.
Beyond auto-contribution increases, you can help bolster employee retirement savings with a strong employer-matching program. This twofold contribution incentive of auto-increase and an employer match communicates teamwork and the importance you place on helping employees save for their future. Most millennials report that they want your help and guidance!
Playing Not to Lose – Economic turmoil (think the tech bubble in 2000 and the recent 2008 financial crisis) has many millennials wary about investing. They need guidance to help them understand how to weather changing economic climates and when to be more aggressive with their investments.
Consider offering professionally managed age-based or risk-based asset allocation portfolios. Millennials are poised to benefit the most from compound interest and long-term growth strategies, if they understand how to save for retirement and when to adjust their portfolios.
Millennials are motivated team players and innovative thinkers. They have the ability to take your business to new and creative heights. Help them and help yourself by making sure they understand the inner workings and benefits of your retirement savings plan.
The opinions voiced in this material are for general information only and are not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or advisor for guidance on your specific situation.