Millennials Mull More Retirement Mandates

While Millennials appear to acknowledge personal responsibility for their retirement preparations, they are also much more likely to want substantial change in retirement plan design, according to a new survey.

According to the Natixis 2016 Retirement Plan Participant Study of 951 workers of all ages across the U.S. who have access to a retirement plan at work, Millennials are much more likely to want substantial change:

• 69% of Millennials, compared to 55% of Baby Boomers, believe individuals should be required to contribute toward retirement savings.

• 82% of Millennials, compared to 77% of Generation X, agree that employers should be required to offer retirement plans.

• 76% of Millennials, compared to 66% of Baby Boomers, agree businesses should be required to chip in and provide matching funds.

• 84% of Millennials want investment options that reflect their personal values.

Earlier Starts

On average, Millennials first enrolled in a retirement savings plan at age 23, while Gen Xers signed up at age 27 and Baby Boomers at 31. Even though they started saving for retirement earlier than previous generations, the survey authors say that Millennials’ openness to 401(k) mandates may stem from a sense that retirement security is increasingly their own responsibility, in part because they aren’t confident Social Security will be a strong source of income.

While most Baby Boomers (82%) are now counting on Social Security benefits in retirement, Millennials are not as optimistic, with only half (55%) believing such benefits will be available to them when they retire.

‘Draw’ Strings

According to the survey respondents, the biggest obstacle to them signing up for their workplace retirement plan is the employer’s failure to offer enough matching funds — or any match at all (48%).

For the workers who do participate, the biggest draws are:

• company matching contributions (cited by 63%);

• tax incentives (56%); and

• convenience of having money automatically deducted from their paychecks (56%).

Additionally, more than two-thirds (69%) of workers say they would contribute more if their employer offered a larger match. Nearly three-quarters (72%) believe employers should be required to provide matching contributions.

For the participants in its survey, Natixis found that people who receive professional financial advice have saved on average 10% more of total retirement savings than those who go it alone, and 17% said they would save more if they had access to professional advice. However, just 30% of active plan participants surveyed say they are offered that service by their employer.

Allowing plan participation from the first day of employment may help improve participation rates and increase employee contributions — 81% said they would save more if they could start on the first day they joined a new employer. Automatic escalation features also serve to seamlessly increase contributions, with 23% indicating that would incentivize them to save more.

The survey found that respondents are holding back for various reasons, including rising health care costs (35%) and saving for children’s college funds (20%). For Millennials, 33% said student loans are an obstacle.