While the importance of an early start for retirement savings is often cited in the financial world, the reality is that at every stage of life Americans find themselves with competing priorities that may interfere with their ability or willingness to save—a trend that can have a significant negative impact on their long-term financial stability. This is especially apparent among young adults in the infamous millennial cohort.
Using responses collected from a Nationwide survey of 1000 401(k) plan participants, an August 2016 survey by Schwab Retirement Plan Services, Inc., revealed that saving enough money for a comfortable retirement is the most common financial stress for people of all ages. Specifically, the survey found that building adequate retirement savings was cited most often (40%) as a significant source of financial stress in respondents’ lives – even more than job security (24%), paying off credit card debt (21%) or keeping up with monthly expenses (20%).
For Millennials in particular, saving for retirement was still named the most significant source of financial stress (38%), beating out monthly expenses (29%), credit card debt (26%) and even student loans (24%). About Half of respondents (49%) reported feeling that it was impossible to save enough in their 401(k) for a comfortable retirement while only 43% knew how much money they might need for a comfortable retirement, significantly lower than awareness of other statistical targets such as the ideal credit score (91%), weight (90%) or blood pressure (77%).*
But if young adults are in fact worrying more over their long term finances, there is little evidence that they are doing much to address it. According to data shared by T. Rowe Price Retirement Plan Services, just 30% of young workers get around to signing themselves up for their 401(k) plans when left to their own devices, compared to more than half of workers in their 30s, 40s, 50s and early 60s. At the same time, younger workers also contribute a smaller percentage of their salaries to T. Rowe Price retirement plans than older workers do. While experts recommend workers devote 10-15% of their pay to retirement, including employer contributions, the average young worker submits less than 8%.**
Part of the problem is simple experience. Referencing an earlier Nationwide survey, also focused on different age groups and retirement, Catherine Golladay, vice president of participant services and administration at Schwab Retirement Plan Services, stated: “Managing a 401(k) can often be intimidating for young people who have little to no investing experience… Getting professional investment advice early on can go a long way toward easing some of this anxiety, boosting confidence and getting people started on the right foot.” ***
This makes it imperative that financial agents effectively reach out to young, working-age adults with simple solutions and low-cost products that address their felt needs and boil down the necessary steps to bring them to financial independence and security. The surveys above reveal that young adults are becoming painfully aware that their retirements should be a priority but, bogged down by immediate financial challenges and competing priorities, are unsure how to proceed or what long-term plans to commit to.
Teaching them how and when to invest and walking them through the basics is an opportunity that should not be missed.
To learn more about training and modern marketing techniques, please contact Imeriti Financial Network directly at Info@Imeriti.com.