It’s been said that Millennials, whose influence grows daily, generally don’t like the name their generation has been given. And while much has been written about them, Millennials do share undeniable characteristics — some of which have important implications for retirement plan advisors.
Speaking at the National Tax-Deferred Savings Association’s 30th Anniversary Summit in Tampa, FL, Jan. 27, Lisa Greenwald of Greenwald Associates offered a look at the Millennial generation and how best to engage with them and help them work toward a financially secure retirement.
Why do we talk about them so much? Because they are a huge demographic group, and by 2025 they will be the largest generation in the workforce, Greenwald observed.
It’s a generation that presents unique challenges and opportunities, according to Greenwald. And there are myths about them that should be understood — and dispelled, she suggested. For instance, it’s a myth that Millennials are all broke and in debt, Greenwald says. It is true, she added, that “they face unprecedented debt levels.” But at the same time, she observed, some Millennials already are among the richest Americans. Millennials may be in debt, but they also are “pretty darn good defined contribution plan savers,” she said.
The Elephant in the Room
But debt still is a problem for Millennials, Greenwald said, calling it “The elephant in the room.’ How big an elephant? She noted that in a poll, 9 out of 10 Millennials told her firm that paying off student loan debt is a major obstacle to saving for the future. Credit card debt is also an impediment.
But emphasis on paying off debt comes with a pitfall, Greenwald suggested. She warned of the “snowball effect,” the results of waiting to start saving for retirement until debt is paid off. By then, she says, “it will be too late” to save for it.
Going it Alone
Another myth, Greenwald says, is that Millennials are too young to save for retirement and be concerned about saving for it. She said that her firm found that 9 out of 10 consider it a top financial priority — second only to building general savings. “Millennials know they’re not saving enough, but they’re optimistic,” she said.
And not only do they believe in saving, they also expect to do it themselves. “Millennials are the product of a DC/DIY world,” Greenwald said. They believe it is no longer an employer’s responsibility to take care of an employee’s retirement. “It shows the impact that the DC plan has had on the Millennial world. They’re going it alone,” she said.
The fact that Millennials are going it alone and feel alone regarding saving doesn’t mean that they don’t want help, according to Greenwald. She reported that in her firm’s research, 81% of Millennials said they want to talk to a professional, and nearly three-quarters trust an advisor more than an algorithm. “Most would like to manage their retirement accounts primarily online, with the option for in-person help,” Greenwald said. They are comfortable with shopping and banking online, she said, but not with investing online. She added that they found that 67% check their bank balances online, but a mere 2% want to select investments online.
Employers have a role in meeting those sentiments, Greenwald indicated. “Most financial professionals that Millennials will encounter are likely to be at the workplace,” she said. In addition, the employer match is important. Her firm found that when their employer matches their contribution to their retirement accounts, 50% of Millennials contribute to the level of the match, 14% contribute below it, and 14% contribute above it.
These ‘kids’ aren’t kids anymore,” said Greenwald. “They can’t really afford to wait. The DC/DIY mentality is there, but they really want help.”