Recent college graduates are often times enticed to spend their job earnings on such things as clothes, travel, or, in many cases, paying off student loan debts. Thus, retirement savings aren’t exactly top of mind.
While 70% of Millennial (born from 1979-96) workers consider retirement a savings priority, according to research from Alight Solutions, that’s 13 percentage points less than their Gen X (1965-78) colleagues.
The 2017 Financial Mindset Study revealed that 55% of Millennials are in the midst of saving for retirement. On average, 20-29-year-olds are contributing 6.2% of pay, which is lower than the 7.9% contributed by the average worker. Further, nearly 30% of people in their 20s are saving below the company match threshold.
So, how can employers assist their younger workers when it comes to improving their retirement outlook? Rob Austin, head of research at Alight Solutions, said implementing automatic enrollment is particularly effective.
“It’s really easy to sit there and tell people what they should do, but then life happens, and people just don’t get around to taking action even though they know that they should,” Austin said. “So automatically enrolling people is going to happen without them having to take action.”
Alight’s research indicates that among plans with automatic enrollment, 86% of workers in their 20s participate in the 401(k) plan on average, which is nearly twice the participation rate for plans that don’t offer automatic enrollment.
While automatic enrollment might lend to higher participation among younger workers, it’s important for employers to provide plenty of education and context around what it is their workers are being automatically enrolled in. Austin said he’s had encounters with younger Millennials who, though interested, don’t quite grasp the concept of a 401(k).
“When I talk to people, I find there’s a lot of misunderstanding,” Austin said. “It really is an employer’s responsibility to make sure that those people who are interested and maybe don’t know the right questions to ask, that they have a place to turn.”
About the Author
Brett Christie is a staff writer at WorldatWork