Millennials Motivated But Not Educated
“Younger Workers and Retirement” by Prudential Retirement found that Millennials (born in or after 1991) recognize that contributing to their retirement is important, even in an economic recession (81%).
Eighty-three percent say that seeing what can happen to people who do not save enough for retirement makes them want to save more, and 73% reported feeling “highly motivated” to save for retirement now. The study also revealed that 58% discuss retirement planning with friends or peers and 42% check their retirement accounts at least monthly.
“Our research dispels the myth that Millennial workers don’t care about preparing for retirement,” said George Castineiras, senior vice president of Total Retirement Solutions. “Saving for retirement ranks highly in this generation’s list of financial priorities and we are encouraged that these younger workers are taking responsibility for their future.”
Nearly two-thirds (63%) of those eligible to participate in their employer-sponsored retirement plans do so, reporting a median contribution of 7% of their annual salary, or $1,750 for last year. The study presented Millennial workers with a “Retirement 101” quiz and also offered them the opportunity to grade their workplace retirement plan’s education, tools and information. The quiz asked participants to allocate 10% to 20% of their monthly income to various discretionary areas, after paying all necessary expenses, such as housing, utilities, food and transportation. The results demonstrate that Millennial workers prioritize saving for retirement ahead of leisure spending, saving for vacation or a house.
The study also discovered that, although Millennial workers understand retirement planning as a concept, they perceive their employer-sponsored plans as complex and overwhelming (63%). More than half (57%) feel intimidated and uncertain about their plans, and 45% believe they are “very risky” because of volatility.
Four in 10 Millennials eligible for participating in their employer-sponsored retirement plans have no knowledge of the maximum amount they can save annually; 17% are unaware if they are contributing the maximum proportion of annual salary; and 15% are unsure of the matching contribution their employer may offer.
In addition, among Millennials who are eligible for—but do not participate in—their workplace retirement plan, 19% say they do not know enough about the plan. More than one-quarter (29%) cite it as the main reason that they may not stay long with their current employer, indicating they are unaware of their rollover options. However, nearly three quarters (73%) of Millennials eligible for their workplace retirement plans say incentives would motivate them to increase their participation in or contribution to their employer-sponsored retirement plans
“This population of workers readily adopts new and emerging technologies and therefore it is important for plan sponsors to find ways to motivate these workers and keep them engaged in their retirement planning with personalized, high-tech solutions that they find compelling,” Castineiras said.
The survey received completed responses from 800 employed U.S. consumers between the ages of 21 and 29 who are eligible to enroll in their employer-sponsored defined contribution plan. Northstar Research Partners Inc., a third-party independent firm, not affiliated with Prudential, conducted the survey online from July 28 to August 1, 2012.
The complete study report is here.