“Generation X and Y workers know they need to plan for retirement, but often don’t feel confident in their ability to do so,” said Chris Augelli, vice president, product marketing and business development at ADP Retirement Services. “These younger generations are looking for assistance in meeting retirement savings challenges. Employers who can provide them with the tools, guidance and investments to help them successfully plan for their future can significantly boost employee recruitment and retention, and improve overall morale within their businesses.”
To best engage with Generation X and Y employees, employers should:
- Speak Their Language: Technology has reshaped the way younger generations communicate. Use modern communication channels to inform employees about the importance of having a retirement savings strategy by creating blogs or social media forums for employee benefits programs, and consider communicating with employees via text message.
- Offer Automatic Options: Using technology to simplify the process can help Gen X and Gen Y employees maximize the benefit of their company’s retirement plan. Consider plans with features like automatic enrollment, automatic rebalancing and automatic deferral increases. Including target-date funds (TDFs) for employees to choose from can also be beneficial. These investment options provide fully diversified investment portfolios based on the employee’s targeted retirement date.
- Provide Retirement Readiness Information: Younger employees generally want to study plan information and retirement savings projections on their own time, so providing easy access to online, mobile-optimized plan data as part of a retirement readiness program is important. Consider plan providers that offer participants interactive retirement savings calculators and the ability to compare their investment options based on investment type, performance, fees and more.
While Gen X and Gen Y employees may feel that retirement is too far away to consider today, it is prudent to start planning early. ADP suggested three steps to help younger employees begin saving for retirement:
- Leverage the Stock Market: The 2008 financial crisis may have convinced younger workers to distrust the stock market since many were directly impacted by the unemployment and underemployment issues that followed. However, the market still remains one of the best pathways to grow their retirement savings over time.
- Diversify Investment Portfolio: Younger workers typically have a longer investment horizon and often have a higher risk tolerance. This can give them the opportunity to invest in higher risk investment vehicles that may offer higher returns. Most importantly, they should embrace a well-diversified portfolio.
- Enroll Early and Consider Automatically Escalating 401(k) Contributions: Building on the savings principle of paying oneself first, younger workers who auto-escalate their 401(k) plan contributions can take advantage of compounding investment returns and train themselves to live within their means.
To learn more about ADP Retirement Services, visit http://www.adp.com/401k.