A new defined contribution (DC) plan study by J.P. Morgan Asset Management indicates that Millennials under 30 are strong proponents of automatic features in 401(k) plans, and they generally believe their employers should play a direct role in helping them choose the right investments.
“Our research found that Millennials under 30 typically need and also want guidance from their employers, and prefer a DC plan structured to simplify investment decisions,” explains Catherine Peterson, global head of insights programs, J.P. Morgan Asset Management. “Getting these young employees on the right track now, early in their careers, can allow the benefits of consistent saving and age appropriate asset allocation to compound over their working lives. The good news is, those under 30 recognize the challenge they face in saving and investing for retirement and appear very receptive to the knowledge, tools and guidance that employers and advisers can provide.”
The study found that 69% of Millennials under 30 would describe themselves as “do it for me” investors who prefer to leave the complexities of asset allocation strategies to professional managers. Only 56% of those above the age of 30 reflect this notion. Those under 30 are also more likely than those above 30 to appreciate receiving notifications from their employer indicating whether they are saving enough (62% of those under 30 vs. 34% of those 30 and older).
J.P. Morgan notes, “These young employees, less experienced in managing their own finances, and admittedly a long way from retirement, are more likely to assign at least some degree of responsibility to their employers for helping them save for retirement (82% vs. 73% for those 30 and over). What’s more, half of those under 30 think their employer has an obligation to help them choose the right investments, compared with only 22% of their older colleagues.”
In addition, the firm found this group is the strongest proponent of the “automatic 401(k)” or a DC plan that utilizes features such as auto-enrollment and qualified default investment alternatives (QDIA) such as target-date funds (TDF).
And despite some plan sponsors’ reluctance to adopting automatic features due to fear of employee push back, J.P. Morgan found that 84% of Millennials under 30 are in favor or neutral to automatic enrollment and 86% feel the same way toward automatic contribution escalation. This group is close to unanimous (97%) in its support of TDFs and re-enrollment (93%), the study found.
J.P. Morgan Asset Management’s full paper, “Three things to know about DC plan participants under 30,” can be found here.