Millennials Engaged in Retirement Saving, But Challenge Norms
Millennials are taking steps to save early for retirement, but they also have higher expectations that employers should be offering access to a retirement savings plan and socially responsive investments, according to new survey results.
The Capital Group’s Wisdom of Experience survey found that nine out of 10 Millennials report that they contribute to a 401(k) or IRA account, and while a large majority believe they have primary responsibility for ensuring their retirement, an even larger majority believe that employers should be helping.
The survey found that 7 out of 10 Millennials believe that individuals have primary responsibility for taking steps to ensure they have a secure retirement (compared to 83% of Boomers), and 80% believe that all employers should be expected to provide a retirement savings option, compared to 71% of Boomers.
All three generations surveyed (Millennial, Baby Boomer and Generation X) agree that the top three “must-have” benefits are health insurance, a matching 401(k) plan and vacation time.
When it comes to their choices of employers and investments, Millennials are also looking for new workforce benefits and companies that deliver financial and social value. For example, 82% of Millennials say it’s important for companies in their investment portfolio to promote the health and wellness of consumers and employees, 10 percentage points higher than Boomers. In addition, 34% of Millennial respondents want employers to offer a 529 or college savings plan as a benefit, and even more want tuition reimbursement (37%).
“By the time Millennials entered the labor market, long-term job security and traditional pensions were ancient history,” says Heather Lord, senior vice president and head of strategy and innovation at Capital Group. “Millennial investors understand they need to take charge of saving for their retirement early in life, and they also demand more than older generations when it comes to their choices of employers and investments.”
At Ease with Rollovers
With Millennials changing jobs often, one of the more positive findings is that 83% say it is easy to transfer retirement savings from their prior plan. Perhaps this is because two-thirds of Millennials say they got help moving their 401(k). The results show that 33% got personal advice from a financial advisor and 21% from their employer plan sponsor, while 11% relied on friends and family for guidance.
Interestingly, a higher percentage of Millennials compared to Boomers keep their money within the employer-sponsored 401(k) system when they switch jobs instead of opening their own IRA.
The survey notes that 35% of Millennials roll their funds over to their new employer’s 401(k) plans, while 15% kept their money in their prior employer’s plan. For Boomers, an IRA rollover was the most popular option at 31%, with only 21% reporting that they roll funds over to their new employer’s 401(k) plan.
Despite this reported ease with rolling over balances, the survey also found that Millennials are not always making the best choices when it comes to managing the transition of their retirement accounts. Almost one in five Millennials (15%) cashed out of their last plan, compared to only 4% of Boomers, according to the results.
Other key findings show that 75% of Millennials say their employer does a good job of explaining retirement investing options, with 71% saying they are aware of employer 401(k) matching contributions. In addition, 72% of Millennials say they either know exactly or are somewhat confident about what types of mutual funds and investments they have in their retirement accounts.
While all three generations had similar results in wanting mutual funds with a long track record of outpacing the stock market average, Millennials were out front in saying that target date funds are the best approach for their retirement savings goals, coming in at 23% — five percentage points higher than Boomers and Gen Xers (both 18%).
The survey was conducted by APCO Insight in March 2017. It consisted of an online quantitative survey of 1,200 American adults of varying income levels who have investment assets and some responsibility for making investment decisions for their families.