Smart, timely communication on retirement may be key to engaging younger generation

Having an engaging 401(k) plan recordkeeper, partnered with innovative online educational tools, may provide a solution to piercing the Gen Y markets as more and more of the current employee base moves closer to retirement.

As a financially successful group, the baby boomer generation has put more than $6 trillion into a still growing retirement assets, according to recent data from Cerulli Associates. However, the boomers have already begun to distribute their 401(k) retirements, and according Cerulli, estimates show 2016 will be the definitive year that distributions outpace contributions. Further, by 2019, the gap between contributions and distributions will be closing in on $60 billion.

But the lack of engagement isn’t just seen in retirement alone, says Matt Fellowes, founder and CEO of HelloWallet and former scholar at the Brookings Institute, but can also be seen in the health markets as more and more employers start to provide consumer-directed health plans and health savings accounts.

This is the broad problem employers have today, he says. “And it’s particularly challenging with millennials, because retirement is far off,” he says. “Younger people are focused on issues more relevant,” he adds, like paying off credit card and college debt.

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Gen Y’s saving habits are going to determine the future asset base of financial service firms, Cerulli says in its recent report. “Plan sponsors and recordkeepers must be aware of these realities and use a wide range of resources to help plan participants save more,” according to the report.

Fellowes advises employers and plan sponsors to provide a value proposition that is broader than just retirement — “Most millenials don’t want to talk about retirement. You’re basically asking to be ignored,” he says. As an example, HelloWallet offers consultations on everyday financial obstacles like money management and reducing debt, which frees up capital that can be directed to retirement savings in the future, he says.

This also allows an in-road to the younger generations for future discussions on retirement, another hurdle the Cerulli spotlighted.

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As employers tell younger employees to start saving when they’re already living paycheck to paycheck, it reinforces the notion that employers don’t understand their employees, Fellowes adds.

Some suggestions Cerulli provides include a reduced, but intelligent amount of communications between employers and staff: for instance, initiating 401(k) outreach programs closer to bonuses and pay increases. Also, the report notes more personalized and actionable communications will lead to more success.

“Ultimately, there is no individual cure-all for low deferral rates and participation inaction,” the report’s authors say. But with a Gen Y population just 2 million shy of the baby boomers — filling in the deferral gap can be accomplished, “It’s just a matter of getting the demographic more in tune with the importance of saving.”