Men’s and women’s NCAA basketball teams across the nation know it’s time for March Madness, and that means time to step up their game. You can take a similar approach this spring by stepping up your game with Millennials by helping them better prepare for their future retirement.
From just out of college themselves to age 35, these workers are important now and in the years ahead. They are your up and coming go-to players and leaders. Indeed, the longevity and prosperity of your business dynasty rests with Millennials.
Millennials are smart, tech savvy, and understand the importance of saving for the future. According to a recent study, 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.
Yet this group is also cautious and looking for direction from a good coach. 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 saving options with retirement plans, according to a BNY Mellon white paper. They are equally confused about the benefits of pre-tax contributions and the likelihood of a lower tax bracket when they access funds upon retirement.
Address this confusion with both early and reoccurring 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 bracket. 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.
Play or Sit on the Bench? – While Millennials acknowledge the general necessity behind saving for the future, only about half of them are actually participating in retirement plans, according to studies by both Wells Fargo and Fidelity.
You can help get these holdouts off the bench 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, 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, help bolster employer retirement savings with a strong employer matching program. This two-fold contribution incentive of auto increase and employer match communicates teamwork and the importance you place on helping them 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) have 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 target date funds or other 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 players and innovative thinkers. They have the ability to take your business to new and creative playing fields. Help them and help yourself by making sure they understand the inner workings and benefits of your retirement savings plan.