Help Millennials Make Retirement Saving a Priority
Millennials may not be thinking about stashing savings away for their retirement — especially ones who have just landed their first job.
It's hard to blame them; entry-level wages are low, college debt is high, and rents are increasing around the United States. Older generations can likely relate to scraping by when starting careers, and struggling later on in life. The sooner millennials save for retirement, the more freedom they'll have during retirement. As an employer, lend a helping hand, show your millennial employees the importance of saving for retirement, and help them get on track.
Millennials may not have much experience with saving, so simply removing a chunk of their paycheck may not sound appealing to them. When you're just beginning in the workforce, it's hard to imagine the immediate need to start saving for the day you retire. For this reason, retirement planning may not be priority — the idea of "I'll eventually get around to setting up my 401(k)." If you automatically enroll your employees in their 401(k), they'll need to make the decision to not participate, which is a harder decision. Don't let them get away with an "I'll do it later" philosophy, help them with the power of "now."
Set up automatic increases
If electing to participate in a 401(k) causes procrastination, you can be sure the idea of contributing more annually may be just as contemplative. Experts suggest increasing 401(k) contributions by about one to two percent each year (or more if possible), presumably the amount of increase you'd expect to see from an annual raise. The goal is to maximize your annual contributions to the annual limits as often as possible. The suggested percentage increase each year is an obtainable amount, and could help immensely in the long run.
Incentivize contributions with a match
A pushback to retirement contributions from your millennial employees may be, "I have a ton of student loan debt." Overcoming debt should be a priority; however experts agree that if an employer offers a match to 401(k) contributions, an employee should contribute enough to earn the match, even if they're in debt. "Free money" is hard to come by, and can be a lifesaver by the time they reach retirement age.
You, as an employer, may be the first person to offer a plan for your millennials' retirement. Some millennials may not know where to begin. Stocks and compound interest could be new to them, and without having a bit of understanding about these high-level concepts, they may feel overwhelmed and choose not to participate in their plan. An innovative idea (and company perk) may be a training seminar about the basic functions of retirement plans and diversifying a portfolio.
Helping your employees save for their retirement is a valuable asset. Emphasize the importance of contributing to a retirement account; you can be sure your employees will appreciate it.