Retirement benefits for millennials key for job retention
August 1, 2014
By Kristin Cifolelli, courtesy of SBAM Approved Partner ASE
Many of the Millennial/Gen Y generation (born in the early 1980s) graduated from college and started their careers right before or during the Great Recession. Unable to find jobs in their field of study, Millenials often had no options other than taking low-paying or part-time employment and moving back in with Mom and Dad in order to make ends meet. The economy is rebounding but at a still-agonizingly slow rate, still making finding well paying jobs difficult.
A March 2014 Pew Survey reports that the Millennial generation is the first in the modern era to have higher levels of student loan debt, poverty and unemployment, and lower levels of wealth and personal income, than their two immediate predecessor generations (Gen Xers and Boomers) had at the same stage of their life cycles.
According to John Schmitt, a senior economist at the Center for Economic and Policy Research, “When young people graduate from high school or college into a bad labor market, that has very important implications for salary and advancement. People are having that initial decade of relatively rapid wage growth postponed or lost altogether”.
One would assume with all these economic challenges and barriers for Millenials, their financial outlook and ability to plan and save for retirement would be quite grim. But the opposite is true, as recently reported in the 15th annual Transamerica Retirement survey. According to the survey results, Millennials are emerging as a generation of retirement supersavers taking early advantage of their employers’ retirement savings programs. This makes sense considering most Millennials are skeptical that Social Security and Medicare will be around for them and that their own personal retirement savings will be their primary source of income in retirement.
Employers should take notice that two-thirds of Millenials indicated that they would actually change their job for another based simply on the fact that the new one has better retirement benefits. When it comes to other key findings, a high percentage (73%) of Gen Ys/Millenials would like more education and advice from their employers on how to reach their retirement goals, more so than even Generation X and the Baby Boomers.
Knowing that Millenials were brought up in the age of technology, it should come as no surprise that Millenials find technology-based tools helpful, especially mobile apps. Lastly, a significant majority of Millenials (61%) are looking for some level of advice on saving and investing for retirement, although of the three generations they are the least likely to use a financial advisor.
As employers are looking for ways to recruit and retain Millenials to their workforce, savvy organizations should be finding ways to promote the benefits of their retirement programs. Some steps employers should consider taking:
- Proactively encourage participation. Some avenues include adding automatic enrollment and escalation features (automatically increasing the deferral percentage over time) to increase retirement savings.
- Consider structuring matching contribution formulas to promote higher salary deferrals. For example, instead of matching 100 % of the first 3% of deferrals, change the match to 50% of the first 6% of deferrals.
- Discourage loans and withdrawals from retirement accounts. Ensure participants are educated about the ramifications of taking loans and early withdrawals. Allow for an extended loan repayment time for terminated participants.
- Ensure educational offerings are easy to understand and meet the needs of employees. Provide education related to calculating a retirement savings goal, principles of saving and investing, and, for those nearing retirement, ways to generate retirement income and savings to last throughout his/her lifetime.
- Offer pre-retirees greater levels of assistance in planning their transition into retirement. This includes education about distribution options, retirement income strategies, and the need for a backup plan if forced into retirement sooner than expected (e.g., health issues, job loss, family obligations).
- Create opportunities for workers to phase into retirement by allowing for a transition from full-time to part-time employment and/or working in different capacities
Now more than ever, employers play a critical role to helping employees plan and save for retirement.