Soon-to-be the largest percentage of the working age population, millennials face unique headwinds, including high levels of student debt and risk-averse investing styles, which may hinder their ability to adequately prepare for retirement.
In our recently released research paper, “Engaging the Millennial Generation in DC Plans,” PEI surveyed academics, plan sponsors, and retirement vendors to review what is being done to support the millennials via workplace retirement plans. According to PEI’s study, while 59% of plan sponsor respondents believe millennials need to be treated differently, three out of four plans sponsors have not tried to engage millennials with targeted communications, and 82% of respondents don’t monitor the effectiveness of communications.
Plan sponsors should evaluate what their vendors are doing to address this sizable and unique population and consider plan features that may help guide this generation to a successful retirement. By addressing the challenges facing millennials early on as they begin to prepare for retirement, plan sponsors can help workers lower their financial stress and increase productivity, as well as support a healthier retirement plan for the company.
In particular, plan sponsors should:
- Analyze data on the plan’s millennial participants
- By reviewing data points such as loan activity, contribution rates, and asset allocation, plan sponsors can better understand where their participants may need guidance.
- Develop a plan to improve behavior
- At the plan level, plan sponsors can also investigate whether their policy for automatic enrollment is sufficient and if changes may help participants that are defaulted into the plan, and who are unlikely to make changes on their own, improve their retirement outcomes.
- To further encourage millennials to be set up for success, plan sponsors may want to consider guidance offered by their recordkeeper or a third-party financial wellness provider.
- Track progress and effectiveness
- As plan sponsors develop goals and an action plan to target their millennial population and drive engagement, they should also be mindful of how to track and evaluate progress toward these goals.