Retirement Savings by Generation: How to Help Clients of All Ages

Investors approach retirement savings with varying motivations and needs, many of which are dependent on their age. To best meet the varied needs of different generational groups, financial advisors must learn the tools and educational approaches that resonate with baby boomers, Gen X and millennials.

Millennials: Better savers than you think

First, it’s important to dispel some savings stereotypes, particularly for the younger cohorts. A recent Bank of America report found that millennials “deserve more credit” for their money habits, which it found are just as good -- or better than -- previous generations.

“Millennials are very tech friendly and are cost driven when it comes to advisor fees,” says Edwards Jones financial advisor Nick Lalonde. “They have access to a lot of information and often want to do their own independent research.”

The technological mindset means they are also more likely to welcome automated features (enrollment, deferral, etc.) and other tools that make saving easier, according to T. Rowe Price.

“In a ‘microwave society,’ [millennials] want easy and quick,” adds Lalonde. He says he’s noticed that e-signatures are a no-brainer with younger clients, while older generations often prefer traditional signatures. Millennials are also more interested in recordkeeper portals, whereas navigating the web can be “excruciating” for those who weren’t raised with it.

Millennials may appreciate the ease of use that technology brings, but Lalonde cautions advisors to maintain connections. The more automated the world becomes, “the more of a premium will be put on face-to-face contact,” he says.

Or, as the T. Rowe Price report sums up, “Given [millennials’] openness to education and services that help them make decisions, the door is wide open for sponsors and advisors to step in and help them become financially independent.”

Baby boomers: Driven by fear

Lalonde sees baby boomers as the biggest contrast to millennials, thanks to their life experiences.

“Baby boomers can be driven by fear – fear of the markets and knowing what their parents went through with the Great Depression,” he says. “They can be great savers, but not good investors.”

An extensive study digs even deeper into the baby boomer retirement mindset, specifically what motivates them: While they are surrounded by technology, they are three times as likely to use online tools and calculators as they are mobile apps.

Baby boomers also overwhelmingly plan to work past 65 years old (65 percent) and envision a phased transition into retirement versus a “stop working” milestone (68 percent).

“Plan sponsors of 401(k) or similar plans have a tremendous opportunity to work with their retirement plan advisors and providers to offer transition-oriented resources and tools,” notes the report. It also recommends educating boomers on Social Security and Medicare options, as well as such tax incentives as the Saver’s Credit and catch-up contributions.

Generation X: A generation in danger

Generation X is often seen as the group set up for the most peril in retirement. They have weathered a Great Recession, watched their housing prices and mortgage rates fluctuate wildly, and have experienced debt, often tied to credit cards, as a natural part of their lives.

However, they decidedly want “more education and advice from their employers on how to reach their retirement goals,” but in contrast, “only 35 percent of Gen Xers who are now saving and investing for retirement actually use a professional financial advisor to help them.”

As with boomers, employers and advisors can help educate Generation X on tax incentives. Also, with Generation X retirement balances widely viewed as lower than they “should” be, researchers recommend discouraging loans and withdrawals from retirement accounts and educating participants about the ramifications of such action.

Seek the needs of all generations

Research and statistics aside, Lalonde offers key advice when dealing with any age group: Ask participants to write on a notecard the financial issue that concerns them the most, whether it’s getting out of debt or saving for college, and then use that topic to engage and make a one-on-one connection.

“I do short group enrollment sessions, but I’ll block 30 minutes to talk to each employee about what they’ve written on that notecard,” he says.

The strategy works, Lalonde says, because he can then steer the conversations toward retirement plans and goals.

“I try to strip biases and not make assumptions about any demographic,” he says. “What an advisor thinks is important isn’t important. Participants don’t come to enrollment meetings to talk about risk tolerance and mutual funds. They come to talk about what’s important to them.”