In 2014, only 65% of people had any money set aside for retirement. Even more astounding is that 42% of those with retirement savings had less than $50,0002. While the numbers paint a very bleak picture, the good news is that there is still time for Generation X to get on track.
Despite relatively flat salary growth recently, Millennials are still saving almost as much as Baby Boomers. Based on a recent survey by T. Rowe Price, the average savings rate for Millennials is 8% compared to 9% for Baby Boomers. Tellingly, 40% of Millennials increased their deferrals over the past 12 months, almost double the 20% rate Baby Boomers increased their deferrals over the same period3. Millennials appear to have a strong awareness that their primary source of retirement savings will derive from retirement plans such as 401(k)s or IRAs with only 18% expecting to receive any social security benefits1.
A key component to driving positive retirement outcomes for all generations is to get participants saving early. Plan design features such as automatic enrollment are especially effective with Generation X and Millennials given that over 90% of workers value a retirement plan such as a 401(k). Additionally, automatic deferral escalation routinely increases a participant’s deferral rate each year and will improve savings accumulations over time. With retirement in the distant future, Millennials will also benefit from creating a long-term strategy to achieve their retirement readiness goals. Plan Sponsors can facilitate this dialogue by directing participants to online retirement modeling and income tools typically available on the Plan recordkeeper’s participant website.
Plan Sponsors fall in the unique and often challenging position of providing retirement benefits to three very distinct generations of the workforce. Implementing features such as automatic enrollment and automatic escalation will benefit younger participants by getting them into the Plan and saving early whereas promoting catch-up contributions will help older participants close the retirement gap and retire with confidence.
For further information and assistance with targeted participant communication and education or other Plan design features, please contact any of the professionals at DiMeo Schneider & Associates, L.L.C.
