Despite warnings about future shortfalls in retirement savings, many young adults choose not to save for retirement. More than two-thirds (69%) of Generation Y workers who can participate in a tax-deferred 401(k) retirement savings plan are not doing so, according to results of a study from Mintel.
In the study, Mintel considered Generation Y to mean those born between 1977 and 1994 (aged 14 to 31). Generation Y comprises 21% of the U.S. population.
“Today’s young adults will likely need to rely more on individual savings for retirement than their older counterparts,” said Susan Menke, Senior Analyst at Mintel. “But so far, they aren’t preparing to do so.”
Financial advisers could help Generation Y realize the importance of long-term savings. By encouraging young adults to make small monthly contributions to a retirement account, “advisers can help them build a nest egg slowly but surely,” Mintel said in a release.
“Plus, focusing on retirement gives advisers an avenue into Gen Y,’ Menke says. “From there, they can partner with young adults, helping them create a financial plan that gets them through expected and unexpected life events.”
Targeting Generation Y
Mintel found that teens and 20-somethings make up a sliver (5%) of financial advisers’ client base.
“Advisers still primarily target wealthier, older adults,’ explained Menke. “With less disposable income, Gen Y isn’t seen as a lucrative clientele. But financial advisers are missing the opportunity to catch young adults now and keep them as they grow older—and richer.”
In 2007, adults aged 30 and under received only 2% of investment direct mail offers tracked by Mintel Comperemedia, which tracks trends in direct marketing, the release said. In contrast, adults older than age 60 received 41%.
Some companies are making an effort to target Gen Y, according to Mintel Comperemedia. USAA promotes an IRA with no fees and a low minimum contribution to encourage younger adults to start saving so their money can grow over time. Bank of America targets tech-savvy youth by promoting an online integrated platform for its brokerage accounts and an automatic investment plan.