Millennial workers say one of their top financial priorities is paying down debt, but paid-off debt won’t offer an income in retirement, says Jack Dorsey, a researcher with The Center for Generational Kinetics.
According to recent research from the Insured Retirement Institute and CGK, while millennials may be thinking about retirement they are not actively preparing or planning for it. Only 29% say they are actively preparing for it, while 11% expect to receive a gift from family so they can one day retire.
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“It’s easy to be trapped in the mindset that we’ll get to it later,” said Rep. Jason Smith (R-Mo.), a member of the House Ways and Means committee, speaking on Capitol Hill Tuesday.
Millennial employees say their top priority is paying down debt, but as CGK’s chief strategy officer and lead millennials researcher Jason Dorsey points out, paid-off debt won’t offer an income in retirement.
When it comes to retirement decision-making, Dorsey says it’s important for employers to bear in mind how different generations approach financial literacy. For millennials, the generation of FaceTime and texting, a huge majority (87%) say they actually prefer to see financial advisers face to face.
For employers, understanding and providing these services will be an attraction and retention tool, he adds.
“Smart millennials are rejecting higher salary offers for quality retirement plans,” he says, “and the value of attraction is totally worth [the higher priced retirement plans].”
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And as pensions disappear and workers question the viability of Social Security, the defined contribution industry will shoulder the lion’s share of retirees in the coming years.
The role of employers, believes one expert, is to take a stronger approach on auto features like enrollment and escalation. Praising the success of these tools, Patrick Delaney, assistant vice president, T. Rowe Price Investment Services, says automatic features have become more mainstream but with the wrong group.
Millennials aren’t a generation known for employer loyalty, he points out. If an employee is auto enrolling at 3%, that person will probably only make it to about 5% before starting the cycle over with a new employer, Delaney says. “They’re never getting to the 10% and 15% [savings target] they should be,” he says, recommending employers begin auto enrolling employees at higher savings levels.
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And for small employers who can’t afford retirement programs, Jamie Kalamarides, senior vice president of institutional investment solutions at Prudential Retirement, recommends lawmakers tackle fiduciary responsibility challenges around multiple employer plans – retirement plans adopted by two or more unrelated employers who are unable to afford the responsibilities of sponsoring a plan alone.
