During my recent vacation, I had the chance to check in with some “real” people about their retirement accounts.
As I’m sure is the case for many of you, when it comes to my family, I am the de facto retirement “go to” person (and worth every penny they pay for the counsel). It turned out to be an interesting window into the perspectives and experience of individuals who know enough to know they should know more than they do, but don’t always know where to go for help.
And while these aren’t all unique to Millennials by any means, these investor/savers are at a stage when helping them get it “right” could have a huge impact on their retirement readiness. And so, for your consideration, here some of my observations from an admittedly small and unscientific Millennial sampling:
Those who are auto-enrolled probably know how much you are taking out of their pay – but they almost certainly do not know how those contributions are being invested.
The beauty of automatic enrollment is that those enrolled don’t have to concern themselves with how much or where. They’re watching that paycheck, and the miscellany of deductions and withholdings carefully, so they know how much is coming out of their pay, and they know that it’s a deduction that is going toward retirement savings. But as for where and how that is being invested – well, that’s not exactly top of mind.
Those who are auto-enrolled almost certainly don’t have a clue how they can increase that default contribution rate – and might not even understand that they can increase it.
Not knowing how much to save for retirement is hardly limited to Millennials, but they have read enough to know that the default contribution rate isn’t likely “enough.” That said, they aren’t sure how to increase that rate, nor are they even sure that they can do so.
If they know how those “automatic” contributions are being invested, they almost certainly don’t understand what that investment option actually is.
These days it’s a near-certainty that the default investment option for the plan is some kind of qualified default investment alternative (QDIA), and in many, if not most, cases, a target-date fund (TDF). But don’t be surprised if participants defaulted into those investments aren’t completely sure where their money is being invested.
And don’t be surprised if those who have an opinion on the matter think their money is being invested more conservatively than it actually is. It’s perhaps just as well they didn’t – your typical 2055 TDF probably has more equity exposure than they would be comfortable with.
If you haven’t given them a reason to log onto their retirement account, they haven’t.
Sure, you’ve got all these fancy online calculators, an intranet chock full of plan information, and maybe even an “app” with which to tap into all those resources, including the ability to view and make changes to their contributions and investments.
That said, if you haven’t given them a reason beyond checking their balance (or making changes to it), then it’s not only likely that they haven’t logged in, they probably don’t remember their user ID, their password… or even the link at which to use them.
They may be technologically inclined, but don’t assume they want their advice from a “box.”
It’s easy to overgeneralize about complicated, personal complex matters like retirement advice. This is, after all, a generation that has never really known a world without the Internet, and many grew up carrying the ability to find out pretty much anything they wanted to know about anything everywhere they went. Yes, they’re comparison shoppers; and yes, they very much care about the recommendations of their various social networks. But that investment menu and plan options? Not exactly a trending topic.
Yes, they’d rather text than talk, and while they may do their homework online, when it comes time to actually make a move, they may be more likely than even their Boomer parents to want to get affirmation/direction from a real, live person.
They are thinking about retirement. Or at least thinking about saving for retirement. Probably more than you were at their age.
I don’t know when I started thinking about retirement. Oh, I started saving in my first workplace retirement plan as soon as they’d let me (after a year of employment in those days), but it was more about saving, making sure I got that company match. I wasn’t thinking about saving “for” retirement – the notion that there was a personal responsibility to do so hadn’t yet made its way into the “messaging” around such things.
But your Millennial participants have never known a time without a 401(k), nor a time when a personal responsibility for saving hasn’t been part and parcel of the education around their benefits package.
They may not know how much they need to save for retirement, they may not yet feel that they can afford to save for retirement, they may not even know how to save for retirement – but you can bet they know they need to.