Business 401(k) Services / Plan Administration

Why Millennials Are Delaying Retirement Saving

Millennials or Generation Y overtook Baby Boomers as the largest generation in America. They number 75.4 million strong1, but are struggling to plan and save for retirement. In this article, I will address the common reasons for why Millennials aren’t saving enough and provide some strategies for overcoming these obstacles and driving change.

Millennials are not currently saving enough for retirement

Even with bright employment prospects, many Millennials are not saving enough for retirement. First, here’s the good news: In 2016, 7-in-10 were participating in a work or other 401(k) plan2 or other retirement. However, their plans generally have low balances. Studies show that in 2014, Millennial households were worth just $37,000 on average. Millennials aren’t delaying saving because they need a reality check. The harsh truth is that many are struggling to manage high debt loads, and the major culprit is education costs—not their saving habits. When the class of 2014 tossed their caps in the air, graduating college seniors did so knowing that they owed an average of $28,950 to their lenders.

The number one fear of Millennials is running out of money in retirement, according to a survey by Bankrate. They’re absolutely right. Millennials expect to spend just $36,000 a year when they retire, whereas the average retiree actually spends $47,000. And with inflation, actual retirement spending will continue to grow year over year.

How can small and mid-sized business executives help their younger workers save for the future?

Small and mid-sized business owners and executives may feel stuck between a rock and a hard place when it comes to motivating young workers to save for retirement. To rephrase the famous “Field of Dreams” movie quote, “If you build it, will they come?” These leaders also have an added reason for encouraging participation: They know and care about their workers.

In our industry, we often think that providing education—either the right type or more of it—will drive the results we want. Many company executives invite their 401(k) partners to come onsite and provide education: What plans encompass and how employees can use them to build wealth for their retirement.

When 401(k) education is not enough to motivate Millennials to save, use social proof

However, with Millennials and retirement savings, education isn’t enough. They know about retirement plans, but don’t put savings goals into practice. We often witness Millennial avoidance in action when we visit our clients. Here’s just one story of the many we’ve witnessed.

One of our Retirement Counselors is presenting to a small business, and the one Millennial employee on staff doesn’t want to attend. Let’s call her Tonya.

Tonya had been invited to the group session on its 401(k) plan, but declined. Our staffer asked Tonya’s peers to bring her to the meeting for just 15 minutes, so she could hear about the plan. Tonya agrees and sits on the edge of the group quietly: listening, but not contributing.

It would be no surprise that when the time comes to sign up, Tonya declines. She might say she wants to talk to her husband first. Certainly, consulting with a significant other or family before making a major financial decision is a completely reasonable thing to do. But just 10 minutes later, she changes her mind and tells our Retirement Counselor she wants to get started right away with establishing her 401(k). Why the change?

The answer is simple. During those 10 minutes, Tonya speaks with three of her female colleagues, who share their experiences and answer her questions. Tonya is able to access information she needs, and it has considerably more impact because it comes via personal appeal or what we like to call “social proof.”

So what are some strategies for leveraging social proof at your organization?

If you’d like to help Millennials (and all your employees) make retirement decisions that are in their best interests, we suggest leveraging social proof. Social proof is a powerful tool that can propel your Millennial 401(k) participation beyond what only education can provide. Here are just a few strategies to put this to work at your company:

  1. Put a human face on retirement: Use your own employees as the face of your campaign. Put photos, quotes, and insights of volunteering employees (a.k.a. - your company’s “retirement ambassadors”) on all your internal communications about retirement.
  2. Be positive: Negative information may shock employees with a jolt of recognition, but it’s unlikely to be a strong motivator. Showcase the different and exciting goals your staff are working toward—and that it is never too late to start planning for retirement.
  3. Get the facts: Small and medium-sized business executives should seek out a 401(k) provider who is willing to visit staff onsite and make a compelling case for saving for retirement. Skilled presenters can present content in compelling ways without resorting to doomsday tactics to help Millennials understand their options.
  4. Offer one-on-one counseling: Staff may feel too intimidated to ask questions or seek information in a large group setting. Set up one-on-one sessions for your employees with a 401(k) provider representative on the day of your 401(k) provider’s enrollment meeting. In addition, make peers available both in small group settings and one-on-one to engage with their colleagues who are prospective plan enrollees.
  5. Provide a help desk hotline: In addition to posting retirement collateral and resources online, make sure your 401(k) provider staffs a help desk. Employees can call and ask questions to get answers about investment products.

We know you care about your staff and want to help them. Fisher Investments 401(k) Solutions is your partner in helping employees of all generations plan and save for their retirement. If you’d like more information, please contact us.

1 Richard Fry, “Millennials Overtake Baby Boomers as America’s Largest Generation,” Pew Research Center, April 25, 2016.

2 Perspectives on Retirement: Baby Boomers, Generation X, and Millennials 17th Annual Transamerica Retirement Survey of Workers. Transamerica Center for Retirement Studies, August 18, 2016, page 18.

3 Perspectives on Retirement: Baby Boomers, Generation X, and Millennials. ibid, page 20.

4 Bailey Childers, National Public Pension Coalition, “The Millennials’ Dilemma: Pay Off Student Loans or Save for Retirement.” Huffington Post, May 25, 2016.

5 Sheyna Steiner, “Americans Racked by Retirement Fears,” Bankrate.

6 “The Interesting Truth,” ibid.

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