Saving for retirement is something every working person who has no intention of remaining employed forever should do.
Members of Gen X and of course, the Boomers, understand this very well. Gen X, in particular, is at the right age to be witnessing first-hand whether their parents have retired well, poorly, or are unable to retire at all, despite having seen the traditional age of retirement come and go.
But convincing Millennials that they can a) afford to save for retirement and b) should save for retirement might be another matter.
An article in Forbes magazine wondered out loud whether Millennials are the “lost retirement generation,” citing a survey by Financial Finesse that found only 17% of Millennials are “on track to retire with 80% of their income in retirement.”
That said, a recent report published by PayScale, “Work Values & Attitudes By Generation” shows that Gen Y does value retirement benefits (even if they do put them behind pet insurance). How then, can you encourage Millennials to join your plan AND contribute fully?
Here are my top suggestions.
- Make it easy
Consider a negative election option that will automatically enroll eligible employees into the plan unless they take the step of opting out. (Note: Studies have shown that the same principles that make negative enrollments so effective—inertia and procrastination—also keep plan deferral rates low. So, if you do choose to enroll participants automatically, be sure and review the benefits of automatically increasing deferrals as well.)
- Make it flexible
Allow participants to join the plan at least monthly (if not each pay period), rather than, for example, having to wait until the beginning of each quarter. Be sure and allow frequent deferral changes as well. While most employees won’t adjust their deferrals very often (up or down), knowing they can will make some more comfortable with the idea of joining the plan. Allowing plan loans will have the same effect.
- Make it pay
Match participant deferrals and give employees greater incentive to save. No one wants to “leave money on the table” if he can help it.
- Make it known
Educate employees about the plan often, and work with plan administrators, plan investors, and human resources to develop programs that will help your employees get their finances in shape in general, with saving for retirement a core activity.
- Make it a no-brainer
Automatic enrollments? Tax savings? Matching contributions? Flexible deferral options? Money set aside for retirement or (if need be) a rainy day? Who wouldn’t join? If your employees know all the advantages of saving for retirement, it’ll be hard to say no.
If you have a retirement plan, you may as well do everything possible to ensure that employees join the plan. Following these recommendations will go a long way to see that they do.