Encouraging Millennials to Participate in Retirement Plans

In 2016, millennials became the largest generation in the U.S. labor force with an estimated 56 million workers. Born between 1981 and 1996, millennials now account for more than one out of every three working Americans. Despite its size, this generation is often overlooked by plan sponsors due to their focus on the needs of those participants nearing retirement. Without retirement plans tailored to meet their own barriers, millennial workers struggle to save adequately for retirement. While an obvious roadblock may be lingering student debt, millennial would-be savers face several additional unique obstacles. This multifaceted struggle presents plan sponsors with both a challenge and an opportunity. To attract and retain the largest age group of U.S. workers, employers need to consider the unique needs of this generation in a retirement plan context. Read on to learn how to encourage millennials to participate in your retirement plan.

More than Student Loans

The millennial generation is off to a less than ideal start to saving for retirement. A 2018 study from the National Institute on Retirement Security found that two-thirds of all millennials have nothing saved for retirement. Furthermore, millennials say they already worry about retirement finances. According to a 2019 survey conducted by MetLife, nearly half are concerned they will not be able to retire on time and two-thirds fear they will outlive retirement savings. If millennials are so concerned with retirement nearly 30 years removed from it, why are so few of them saving enough?

Given the constant concern student loans have generated in politics and the media, one would be forgiven for assuming unpaid student debt to be millennials’ biggest savings roadblock. However, according to a 2019 TD Ameritrade report, student loans do not top the list of reasons why young employees say they are not adequately saving for retirement. 37% of millennials surveyed identified housing costs as the top reason why they are behind on retirement savings. Furthermore, nearly one-fifth of millennial households responded that they spend at least half their salary on housing alone.

While not the top concern, student debt is still a major impediment for millennial savers. Of those surveyed, 21% listed student debt as the top reason for inadequate saving. A survey by the Kennedy School of Government found fully 42% of millennials are still paying off student loans. Burdened with loans, many millennials are choosing to pay down debt instead of contributing to a retirement plan.

Fortunately, plan sponsors can implement direct strategies to assist millennial participants.

How to Accommodate Millennials’ Needs

Emphasize Financial Wellness

When designing a retirement plan to attract and retain the largest working generation, sponsors need to consider the unique challenges facing millennials. By offering financial wellness programs targeted toward millennials, employers can help educate young employees on savings strategies and investment recommendations. Financial wellness and education can go beyond a workplace retirement plan to include budgeting, with a focus on housing costs. Additionally, employers have begun utilizing employee benefits focused on student loan repayments.

Include ESG Funds

Moreover, it is important to consider the role social values play for millennial investors. The millennial generation is concerned about investing’s impact on society and the planet. Plan sponsors have found that offering more ESG (Environmental, Social, and Governance) focused investment options increased engagement with the plan among millennial employees. Offering socially responsible investment strategies can be an effective and cost-efficient way to increase interest, participation, and deferral rates among younger employees.

Personalize Advice

Finally, millennials continue to express a desire for professional advice. One study found 80% of millennial respondents would like personalized investment advice incorporated into their retirement plan. Plan sponsors can consider adding professional investing resources that may be available. A word of caution: plan sponsors should not give direct advice to participants and should, through sound and well-document processes, carefully select vendors who provide such advice.

A Plan with Millennials in Mind

As the largest pool of American workers, millennials should be a focus in the recruitment and retention plans of employers across the nation. Given this generation’s anxieties and struggles surrounding retirement savings, employers designing retirement plans with the specific needs of millennials in mind can distinguish themselves while truly impacting the financial lives of current and future employees. By incorporating loan repayment plans, financial wellness resources, and professional advice into a holistic retirement plan benefit, plan sponsors can help millennial employees navigate current difficulties so they can begin setting aside appropriate amounts for retirement.

Additionally, plan sponsors should consider adding sustainable investment offerings in their plan lineups as an additional method of encouraging participant engagement and increased savings rates among millennials. All in all, knowledgeable and dedicated plan sponsors have an opportunity to better engage this generation and assist millennials with achieving their retirement objectives.

We Can Help

If you are ready to consider ways to enhance participation among your millennial employees, PlanPILOT can help. We are an independent Registered Investment Advisor, not tied to any investment fund or recordkeeper, and we deliver retirement plan advisory services to 403(b), 457, and 401(k) plan sponsors. Feel free to contact us at (312) 973-4911 if you would like to learn how PlanPILOT can help with your retirement plan and plan participants.

Related Posts