How to get Millennials on track for retirement

Crushing debts could make long-term savings goals a hard sell

Jul 11, 2014 @ 11:56 am

By Mary Beth Franklin

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As a mother of two Millennials — those young Americans born between 1980 and 2000 — I know that preaching the value of saving for a distant goal like retirement can be a hard sell.

But it's a critical message, as these young workers will have to rely largely on their 401(k) savings as the source of their retirement income. By the time they reach retirement age, pensions will be viewed as a quaint relic of the previous century and Social Security benefits, while still around, will represent a smaller portion of their post-career income — due to the higher minimum age of 67 for full retirement benefits.

I often tell young college grads that if they are lucky, they will go to work for a company that will automatically enroll them in a 401(k) plan. But I caution them that the standard default contribution rate of 3% of salary is much too low for the sizeable amount of savings they will need to accumulate during their career.

In fact, I tell them, if they save just 3% of their salary — and their employer doesn't have the foresight to automatically increase their contributions each year nor the generosity to match their contributions — retirement is going to look a lot like their college days. They're going to be eating a lot of ramen noodles. But they won't be as cute. And when someone asks to see their ID, it will probably be for the Walgreen senior discount.

If that doesn't scare them into action, I don't know what will!

I participated in a forum on Capitol Hill recently sponsored by the Women's Institute for a Secure Retirement. The focus of the forum was to debate the intriguing question of who will be better off in retirement: baby boomers or Millennials? I moderated one of the panels.

Dallas Salisbury, president of the Employee Benefits Research Institute, said he thinks Millennials will do fine in retirement, assuming they get an early start on savings, because they know right from the beginning that they are essentially on their own.

In a way, this youngest generation of workers may be better off than their baby boomer parents, he said. Many boomers falsely assumed their employers would provide for them in their old age. While some may have worked in jobs early in their careers that offered a pension plan, a lot of them didn't hang around long enough to reap the benefits. As a result, many boomers saved too little, too late to build a sufficient nest egg, leaving them with no other option but to keep working.

While the Millennial generation, at 76 million strong, is nearly as large as the 78 million boomers, they are much more diverse. Nearly 50% of Millennials are minorities, compared with 20% of baby boomers, Gary Mottola, research director and head of investor education for the Finra Foundation, told the forum. That means one message will not fit all.

Karen Wimbish, director of retail retirement at Wells Fargo & Co., unveiled a new survey about Millennials' attitudes and behaviors. Although a strong majority — 80% — said the Great Recession taught them they need to save now to survive economic problems down the road, nearly half of them — 45% — haven't started to save.

Their biggest concern is their crushing debt — including credit cards and student loans. More than half of Millennials surveyed reported living paycheck to paycheck and nearly half of them — 47% — said they spend more than half of their monthly income paying those debts.

That sets up a real challenge for employers, plan providers and financial advisers to help young workers juggle their current debts with their future retirement savings needs.

Even harder is communicating with the Millennials on their terms. That means mobile devices, text messages and one-click actions to engage and educate them, said Kelley Butler of Benz Communications. They want to be able to check their 401(k) balance while they're standing in line at Starbucks and text a question to the human resources department before you can say, “Caramel macchiato — no whip.”

And if you really want to get their attention, don't bore them with jargon and long-winded explanations. (Imagine the Ben Stein character as the droning teacher in the film “Ferris Bueller's Day Off,” stultifying row after row of the dozing, drooling zombies in his class).

Josh Braun, the young, hip vice president of Jellyvision, an interactive marketing and multimedia production company, offered some simple tips for communicating with young workers, who were raised on video games and are seldom more than a few inches away from their smartphones, but can hyperfocus when you capture their attention (think binge watching on Netflix).

“Don't just explain things, tell them why it matters to them,” Mr. Braun said. “Every one of your communications should meet the 'So what?' test.”

Whenever possible, tell them a story and don't only use words. Include illustrations and graphics to make a point. For inspiration, check out the Jellyvision website where stick figure animations and interactive videos make filing taxes, deciphering credit scores and signing up for health insurance downright entertaining. Pass the popcorn.

(Questions about Social Security? Find the answers in my new ebook available at


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