How to Alleviate the Barriers to Millennials Saving for Retirement

April 17, 2018

In last week’s blog post, we discussed a concerning finding—one that still has us shuddering at the mere thought of it.

According to a February 2018 report from the National Institute on Retirement Security (NIRS), two-thirds of today’s working millennials have $0 saved for retirement.

Basic math dictates that, in order to reap the benefits of compound interest, you should start saving for retirement as early as possible. That means the 66.2% of Americans between the ages of 21 and 32 who have nothing saved are starting off even further behind than one-third of their peers.

It gets worse. Some financial experts estimate that millennials will have to make pre-tax retirement plan contributions of 15%-22% of their salaries starting in their 20s if they want to ensure the security of their retirement. Oof.

Needless to say, we just can’t take this lying down. But what can you do to change the course of this trend for yourself? Fortunately, we have a few ideas:

1. As explored in our previous post, NIRS reports that one of the primary barriers to millennials’ participation in an employer-sponsored retirement plan is eligibility requirements. While 66.2% of millennials have access to a retirement plan through their employer, only about half of those people actually participate. This is often due to criteria set by the employer, such as tenure with the organization or the number of hours worked.

One way millennials might alleviate this pain point is by educating themselves about their particular employer’s eligibility requirements—whether they’re already employed or still job hunting. Research the specifics of an employer’s retirement plan offering just as you would other job-related information such as insurance and benefits, PTO, salary, or career trajectory. Don’t hesitate to broach the subject with your current or prospective manager or HR professional; the resources available to help you plan and save for your future should be just as critical a factor in your consideration as how much vacay you’ll accrue in time for SXSW next year. (Bonus: Simply expressing an interest in such forward-thinking goals will make you appear as even more of a go-getter.)

2. This is where it starts to get better. The NIRS research also found that when millennials have access to and are eligible for an employer-sponsored plan, the rate of their participation is extremely high—we’re talking almost 95% on average. Clearly, millennials want to save; they just need a clearer path to do it.

Another way to streamline the retirement-saving process might be to eliminate the process part. In other words, instead of making money-conscious millennials jump through administrative hoops just to participate in their employer’s retirement plan, organizations could introduce an auto-enrollment feature that would automatically register workers in the plan once they meet its eligibility requirements. As the AARP has noted, “…By removing administrative barriers to saving, automatic enrollment can increase the likelihood that workers contribute to retirement.” BOOM.

3. But we’ve saved the best for last. Here at Colorado PERA, we’d be remiss if we didn’t include what might be our most financially-potent recommendation of all: Consider coming to work for a PERA employer. As a PERA member—whether you’re a teacher, a legislative aide, a snowplow driver, or one of many other different types of public servants—the points above become moot because you’re automatically eligible—and set up—to start contributing to PERA’s defined benefit plan from Day 1.

The percentage of your PERA-includable salary that automatically goes from each paycheck into PERA’s retirement trust funds is set in statute (currently 8%, although that will likely change with the introduction of Senate Bill 18-200), which simplifies the whole retirement-saving process. Plus, with your PERA benefit being portable across all 500+ employers in our system, you’re not tied to having to remain with a single agency, organization, or governmental entity for your entire career. And let’s not forget the most important part—upon retirement, PERA’s defined benefit plan will pay you a monthly income for the rest of your life.

Are you convinced yet? For more information on PERA-supported careers, click here.