According to the research paper “Filling the Financial Knowledge Gap for All Generations” from Principal Financial Group, 57% of Millennials think a retirement plan is simply putting money away. Another 14% define it as “saving a certain amount,” and 10% believe it involves general guidelines that need to be followed in order to retire one day.
None of those definitions involve strategy, ordered steps, long- or short-term goals, or specific target numbers, Principal notes. This essentially means that 81% of Millennials are shooting in the dark toward a large but mostly theoretical bulls-eye called “retirement.”
This presents opportunities for plan sponsors to design targeted employee education. Even just basic training on personal finance would be of great value, particularly to Millennial employees, the study says.
Further, it notes, disinterest is not the reason Millennials have failed to seek help from those in the financial services industry but because of their misperceptions about the industry as a whole and the accessibility of professionals in it.
The study found that Baby Boomers, Generation X and Millennials have the same top three areas where they feel they lack the most knowledge or education. Topping the list for all is how to choose smart investments—19% of both Boomers and Gen Xers and 16% of Millennials said this is what they know the least about.
The topic people know the next least about is how to diversify with less traditional investments such as commodities, real estate or private equity. Fifteen percent of both Boomers and Gen Xers and 13% of Millennials cited this first.
Last of the three, but still a top area of concern, is how to structure a portfolio. Thirteen percent of Boomers, 11% of Gen Xers, and 12% of Millennials said they lack the most knowledge or education about this topic.
Where Gen Xers feel the strongest is regarding how to prepare for retirement, with 16% citing it as the area where they lack the most knowledge. Fifteen percent of Boomers and 12% of Millennials agreed.
The study also found the majority of people think an online tool could be a valuable means to explain particular aspects of retirement—especially how to calculate what will be needed in retirement, and how to build a unique retirement plan specific to a person’s situation with target goals and steps to reach retirement. These were chosen by 80% of employees, respectively.
The Center for Generational Kinetics conducted the research.
Survey suggests targeting communications by age group can help raise retirement readiness
Monitor their plan
at least monthly