Addressing Retirement Readiness of Multigenerational Workforce
Some retirement plan features can address needs of certain generations over others. For example, Bill McClain, a principal with Mercer in Seattle, notes Roth accounts can appeal more to younger, Millennial employees because they offer an opportunity to get taxes out of the way now, while they are at the beginning of their career and potentially at a lower tax bracket than they will be later on in their career. However, he tells PLANSPONSOR generational issues have less to do with plan design and more with employee communications.
“For example, many Millennials are used to receiving information as a smartphone text rather than by speaking with someone on a phone or seeing something on paper,” he says. “When it comes to delivering information about retirement planning, it is important that plan sponsors choose the delivery system that’s most appropriate for each age group. Otherwise, you’re putting up a barrier that could lower the level of engagement and plan participation. By the same token, you need to have the whole spectrum of delivery systems covered so that no one is left out.”
According to McClain, Mercer has seen Millennials, and Generation Xers to some extent, are used to having information available when they need it, usually online. For plan sponsors, the key to successful communications with these groups is to have the information readily available.
Technology also allows for immediate action. McClain observes, “In the past, the level of technology wasn’t sufficient enough to offer features that we now take for granted, such as individual participant accounts, online trading and multiple levels of investment options.”
Plan sponsors need to be more sophisticated in monitoring participants’ retirement needs and their preferences for receiving information about retirement-related topics, according to McClain. For example, a simple survey of employees may reveal Baby Boomers and some Gen Xers prefer paper materials or someone with whom to speak on the phone, such as with a call center. “On the other hand, Millennials, having grown up with a lot of technology, may prefer to get their information via social media or smartphone or online webinars,” he says.
However, one thing Mercer has found that seems to transcend any generational divide is “when it comes to the issue of trust, especially for something like investment advice, there’s a definite preference to obtain that information in a face-to-face setting, to deal with a real person rather than solely with technology,” McClain notes.
He adds that technology and live representatives can complement each other. Participants can get their initial information via technology, such as websites, and then speak with a call center representative or other specialist to get more details about a topic or to ask questions about something that may not be covered online.
In terms of targeting communications at the various age groups, McClain says plan sponsors need to understand each group’s financial goals, since they may not all be the same. “Many Millennials are just a few years out of school and are entering a less-than-ideal job market, so their immediate financial goal may be to get out from under student loan debt. Gen Xers, on the other hand, may have goals like buying a house or paying for some portion of their kids’ college education.”
Messages conveyed in participant communications should not be the same for every age group. “Millennials may need to be educated about basic financial wellness practices. For Gen Xers, it will be helping them to see how they can balance the multiple savings goals they have. Baby Boomers, being closer to retirement, will be more concerned with knowing when exactly they can retire,” McClain adds.
He points out if participants do not handle their accounts efficiently, then the health and efficiency of the plan as a whole is negatively impacted. And if a participant does not have enough saved to retire when they want to, or retire at all, then issues like decreased productivity and increased absenteeism could become business issues for plan sponsors in the future, affecting the company as a whole. “So from a purely economic standpoint, it’s in the plan sponsor’s best interest to make sure that participants have the information needed to determine how ready they are for retirement and what steps they need to take next,” he says.
McClain acknowledges that plan sponsors have budget constraints that may limit what resources they can use to improve participants’ retirement readiness. It is important, he says, for plan sponsors to coordinate such efforts with their recordkeepers, since these firms may offer tools that can be tailored to be helpful, and especially in helping to determine what message goes to which group of participants. “In addition, services such as call centers may be built into the costs of your recordkeeping contract,” he notes.
Mercer has launched “Making Accountability Work: Effective Employer Strategies in a Multigenerational Age,” a human capital strategies and solutions suite to help employers address talent, benefit, and risk management challenges of a multigenerational workforce. More information is here.