The Setting Every Community Up for Retirement Enhancement (SECURE) Act includes a mandatory requirement for 401(k) plan sponsors to allow long-term part-time employees to participate in their company’s retirement plans after December 31. In the past, most employees had to work 1,000 hours a year to qualify.
Now, those who have worked at least 500 hours each year for three consecutive years and who meet the minimum age requirement of 21 must be offered an opportunity to participate.
Dan Keady, a chief financial planning strategist at TIAA, says he believes the SECURE Act’s eligibility requirement will spur younger part-time employees to enroll in the future. “We do expect to see more part-time employees participating in company retirement plans going forward, and that is a big positive for individuals,” he says. “It is incredibly important to start saving early and, in doing so, even just a small amount can make a big difference towards an individual’s long-term retirement goal.”
To get started, employers should communicate to younger workers who aren’t participating in the plan through targeted communication and ongoing outreach, Keady says. He says plan sponsors should tell their employees that it’s important to start saving for retirement at an early age, and he encourages employers to think critically about the default option they’re offering for younger workers. Plan sponsors can also provide education on the importance of lifetime income. “Employers play an instrumental role in helping younger workers get started on their financial journey,” he says.
Robert Conzo, CFP, CEO and managing director of The Wealth Alliance, shares a similar thought. He says emphasizing the effects of saving early can motivate workers in their 20s—especially part-time employees—to begin contributing. For example, those who begin saving for retirement during their early 20s and achieve an average rate of return can double their money by age 65, he says.
Enrolling in a company’s 401(k) plan means these participants will likely be exposed to other employer-sponsored benefits, including financial advice. Since younger workers often do not have enough assets under management for advisers to make an appropriate profit, some advisers are offering subscription services with monthly fees to provide services, Keady says. But younger workers can also check in with their employer’s benefits staff about free services linked to the plan. “Before entering into these services, be sure to check out free advice associated with your workplace plan, as this may meet your needs,” he says.
Personalizing financial advice is also effective at encouraging people to save, and particularly so for part-time workers, who may not be financially prepared to start on their retirement savings. “Employers should understand how to connect with younger people and drive the main thing that they understand,” Conzo says. Use the concept of saving $100 a month, or another amount specific to what the employee could afford to help them understand how savings can add up. Another strategy he recommends for younger employees is saving 50 cents for every $1 spent.
Embarking on social media campaigns and marketing services online will also help draw clients to an adviser’s practice, says Conzo. While a Raddon Research study finds that only 29% of Millennials and Generation Zers would take financial advice from a brand ad they saw on social media, these younger workers responded well to influencers who worked with financial advisers. Even if a participant had no personal interest in the influencer, they were more likely to trust their insights than a traditional ad. “Millennials and Gen Zers respond very well to social media,” Conzo says. “Putting these services on social media, from a savings perspective, is very important and that’s another way of reaching participants.”