The paper, “Retirement Plans for the Millennial Workforce: New Values Need New Plan Designs,” was recently released by Buck Consultants and examines the traits of employees born after 1980 (i.e., Millennials) and how plan design can reflect these traits.
For one thing, Millennials are technologically savvy, so presentation of plan information is important, says Jerry Levy, a principal and retirement consultant in Buck’s Chicago office, and co-author of the report. “Millennials are used to having information on demand, and it being presented in the most up-to-date way,” he tells PLANADVISER. “You need to have an attractive Web portal that meets their expectations.” The website features should be user-friendly and intuitive, he says, as well as include links to frequently asked questions, blogs and discussion areas.
Millennials also have a tendency to act later rather than sooner, says Levy, so plan features should anticipate this. He adds, “Automatic enrollment and automatic escalation would be very helpful to them.” Similarly, plan sponsors should consider offering managed accounts and target-date funds as part of their investment options, he says.
Plans may want to address retirement-related tax issues. “Since some Millennials may be in a higher tax bracket when they retire, you may want to have a Roth option for your plan,” says Levy. This way, they can take care of taxes now and not have to worry about them later.
Levy also recommends plan sponsors offer Millennials the means to recognize current economic conditions and adjust savings goals accordingly. Millennials will appreciate an outcome-based DC plan that comes “fully loaded” with pre- and post-retirement features, helping individuals better prepare for retirement. It will enroll them in the savings plan with a realistic savings target, select appropriate funds, and make adjustments as needed, the report says.
Finally, Levy notes that Millennials are a more mobile work force, staying employed with a company for shorter lengths of time than their predecessors. “They may leave one job to learn more at a new one.” Giving Millennials the means to roll over their retirement balance from a previous employer can be useful, especially from a recruiting standpoint.
A copy of the paper can be downloaded here.