Millennials are known for their inclination to live in the moment. This cultural outlook has shown us that with each new generation, people will marry, buy homes and have children later in life.
Millennial retirement planning is far different than previous generations and unfortunately, the YOLO motto that has influenced these youngsters doesn’t really set them up for the future.
Understanding how the trends in retirement planning for Millennials have changed gives employers the opportunity to develop new strategies that will encourage the Millennial workforce to invest in retirement.
1. Reducing Millennial Debt
According to a September 2015 study conducted by the Insured Retirement Institute and the Center for Generational Kinetics, contrary to popular belief, Millennials are thinking about retirement.
In fact, the number one step 77% of Millennials are taking to actively plan for retirement is reducing their debt. Helping employees plan for financial wellness is not only good for them, it’s great for your company’s employer brand!
2. Retirement and Social Security are no guarantee for Millennials
Though most are aware that planning for retirement is important, only 29% of Millennials are actively pursuing a personal plan. The majority of Millennials feel that they won’t be able to retire at the age they want and 28% aren’t confident that retirement is even an option for them in the future.
A large percentage of them feel that Social Security will not provide meaningful income to their retirement. All of these side effects can most likely be attributed to growing up during the Great Recession.
3. Millennial Employees can be Products of Helicopter Parenting
Many believe that a sizeable amount of Millennials are the products of helicopter parenting. This style of parenting has created dependent individuals. A large portion of Millennials are financially dependent on their parents, all the way into their 20s.
Perhaps this is the cause of why Millennials are developing in certain areas of their life much later than previous generations. Whatever the reason, they seem to be behind when planning major life events.
4. Millennials Expect to Take Care of Their Parents
Half of Millennials expect to take care of their parents financially as they age and some of them already are. Founder and financial advisor for Gen Y Planning, Sophia Bera (@sophiabera) explains in an article featured on CNBC that many of her clients, all of whom are in their 20s and 30s, provide financial assistance to their parents regularly, some going as far as moving in with their families for cost efficiency. A recent TD Ameritrade study revealed that currently 20% of Millennials are providing financial support to their parents.
5. Millennials have a Longer Life Expectancy
A recent study conducted by Lancet shows the global life expectancy increased by about six years between 1990 and 2013. At this rate, Millennials will retire for nearly the same amount of years as they will work. So, why is the mindset of this generation to be living in the moment if they have more time than anyone to plan for their future? Help Millennials apply the same forethought to their financial behavior as environmental concerns.
6. Millennials’ Consumer Behavior is Different
A recent consumer study shows that advertising has very little effect on Millennials’ decision to buy and 43% of them rank authenticity over content when consuming news. This means that Millennials won’t even consider a product if they don’t trust the brand.
7. Millennials Appreciate Transparency
In a world run by apps and social media, Millennials have developed an intolerance for vagueness and ambiguity. With so many outlets for feedback, they can find out pretty much anything about companies, the good, the bad, and the ugly and this largely influences how they make decisions in nearly every aspect of their life.
8. Millennials are Woefully Misinformed About the Cost of Retiring
77% of Millennials think that they will spend less than $36,000 per year in retirement. That’s 30% less per year than what retirees are currently spending. In fact, with inflation rising at even normal rates, Millennials will likely have to budget for at least twice that.
9. Millennials are Aware, but Inactive
Though only a small percentage of Millennials are currently being proactive about their retirement planning, 62% of them expressed interest in retirement planning if they could be walked through the process step-by-step. This is practically a cry for help for employers to start motivating their Millennial workers to prepare themselves financially for the future.
10. Approaching the Millennial About Retirement
87% of Millennials said it was important to them that they meet face-to-face with a financial advisor. This generation has a reputation for being glued to their mobiles devices. Still, it’s clear that there is a desire to connect and build trust when it comes to making important life decisions.
Employers can be proactive in the future of their workforce by encouraging them to invest in retirement planning. Here are some suggestions to help get you started:
- Promote the benefits of retirement planning through a variety of mediums such as video, social media, email, and blog
- Distribute compelling content that describes retirement planning in simplified, informative, and motivational terms
- Invite a financial advisor to discuss and walk employees through the retirement planning process
- Encourage employees with retirement plans to promote the benefits of those services to their colleagues
If retirement planning or how to approach the communication of yours is a mystery, don’t go it alone. The Olson Group is happy to help you create the best retirement plan for your organization!