Engaging Gen Y in Retirement Saving
Gen Y has a very short-term view, so sponsors should focus communication efforts on short-term benefits. Even though it may be true investing today will result in $1 million at age 65, Gen Y employees are not sure they are going to work for their current employers for many years. Torabi said sponsors should relay to Gen Y that even though it may not be their final stop, they are building a career and establishing roots and relationships. They can also start building retirement that they can take with them. She added that sponsors should tell the younger workforce that if they do it now, they will be years ahead of peers. “If you tell them they’ll be $50,000 ahead of their best friend, that will get their attention,” she said.
Gen Y is used to being rewarded, so retirement plan education should focus on the incentives, such as the company match contribution, according to Torabi. Companies can also offer breakfast or lunch during education meetings. “A free meal goes a long way when you’re young and struggling to pay bills,” she said.
Participation on projects is important to this generation, so sponsors could include them in benefit communications. In addition, sponsors should acknowledge their efforts and praise them.
Social engagement may be tricky, but social networks and texting are the preferred way for Gen Y to communicate, so retirement plan sponsors should use Facebook, Twitter and texts to communicate about retirement benefits. However, Torabi noted, the message should be customized to them. “The minute they see or read something that doesn’t apply to them, they click it off, but show them something that will make them laugh or provide a picture of their life, and they’ll pay attention,” she said.
Employers should talk to Gen Y employees with understanding about their debt and not knowing how to organize financially, and give them the option to choose how they want to communicate, she added.
Sponsors should understand that Gen Y generally is commitment-phobic, according to Torabi, so they may think that opening a defined contribution (DC) plan balance is too much of a commitment. Again, this is why sponsors should emphasize that they have total ownership of their accounts and they are portable. Relay the message that “when you leave, it won’t be with just a box of books and a plant; you will leave with huge assets,” she said.
Finally, Torabi suggested plan sponsors just make it happen for Gen Y. Automate participation and do not make it too conservative. She said sponsors should start with a higher deferral rate than 3%, because many assume since you start with this, it is the recommended savings rate. Let them know saving more is the key. A replay of the MassMutual seminar can be accessed here.