Retirement is the last thing on the minds of people just entering the workforce. But plan sponsors can build the bridge between a young career and a healthy retirement.
Huge student debt. Their first housing expenses. Marriages and possibly children.
This is your millennial employee.
As more millennials begin to make inroads into corporate life, they’re looking to stay afloat financially. Part of the pressure on today’s younger employee is the mounting cost of college tuition. According to the Federal Reserve Bank of New York, the average student loan debt in 2016 was approximately $34,000, a $20,000 increase from 2006. By 2017, that figure had climbed to $39,400.
Then there’s where they’re going to live. According to a survey conducted by Apartment List, 79% of millennial renters want to purchase a home, but can’t afford it.
As more financial pressures bear down on the millennial employee, there’s little wonder why they’re not eager to take part in any retirement savings plan. However, studies have shown millennials are indeed interested in saving for retirement, and 58% of them are managing to do so, according to an Aperion Care survey. Of those, 84% have saved less than $50,000.
Other disturbing finds: 34% of those same millennials in the Aperion Care survey think $200,000 or less is what they plan to save in order to have a comfortable retirement. And on average, millennials believe they’ll live to age 81.
The National Institute on Retirement Security report says that while 66% of millennials work for employers that offer retirement plans, just slightly more than 34% of them are actually participating.
How Plan Sponsors Can Help
Luckily, there are a number of ways in which a plan sponsor can motivate their millennial employees to take part in a retirement savings plan. Understanding that the financial pressures on millennials are like no other employee group, plan sponsors can still clear a path toward retirement savings for their younger employees.
Introduce Auto-Enrollment and Contributions
The easiest saving a millennial can do is one that isn’t noticed. At hiring time, plan sponsors can help millennial employees sign up for auto-enrollment, as well as agree to incremental increases in contributions to their retirement plans each year. Plan sponsors can encourage younger participants to allocate just one percent of a 3-percent raise to retirement.
Provide ongoing education and awareness
An informed participant is an active participant. Providing millennials with regular education and communication regarding how to save smartly or how to understand their allocation options can help them improve their saving results. Communicate what the employer match is and how that translates in dollar amounts into retirement savings.
Introduce them to the Saver’s Credit
For new retirement plan participants, the Retirement Savings Contributions Credit, or Saver’s Credit, can help offset their contributions. The first $2,000 in voluntary contributions to a workplace retirement programs is available to individuals whose income does not exceed $29,500 (filing single status) or $59,000 (married filing jointly).
Reduce participation waiting periods
Instead of a six-month to twelve-month waiting period for your millennial hires, consider a three-month waiting period. Longer waiting periods can impact significantly a younger worker’s retirement savings, and can cost them tens of thousands of dollars. Allowing entry earlier in your employee’s tenure can be economically advantageous and go a long way toward improving employee satisfaction.
The millennial workforce is eager to save for retirement, but with immediate financial pressures may not be able to see their way to doing so. By giving them simple ways to save, plan sponsors can help their younger employees find their financial footing and save for a better retirement outcome.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.get xpress proposal