The last thing millennials want to think about when joining a company is saving for old age. What could seem more distant than retirement to fledgling employees just starting their careers?
But with Social Security benefits guaranteed to scale back within the next 20 years, millennials need to now save more than ever to maintain a decent standard of living in their golden years. Wise business owners will take time to educate employees about planning for retirement. Further, they’ll offer robust savings options that attract driven, loyal team members who will help to establish a competitive market presence.
The big three options
The 401k plan is the most traditional arrangement, and many companies match employees’ monthly 401k contributions. Millennials, and other employees, tend to favor this option, because it requires little effort to establish and they don’t have to consciously decide to put money into the account each month; an allotted amount is simply deducted from their take-home pay. Matching contributions are viewed as “free money,” so offering this option increases the odds of attracting and retaining top talent.
Roth IRA plans are not typically employer-backed, but they supplement more traditional savings programs nicely. Contributions are made on an after-tax basis, and account holders can withdraw their savings tax-free six months after their 59th birthday. This policy is especially appealing to those who expect to be in a high tax bracket later in life.
Profit-sharing plans have become remarkably popular with startup founders and employees. Team members participating in profit-sharing or employee stock options feel invested in the company’s success. Having prospects more closely tied to the trajectory of the business inspires employees to take ownership of their roles. They may not weigh in on every decision, but they’ll stay motivated to act in the company’s best interest.
Winning millennial buy-in
Young people who’ve heard they need to save for retirement are often unsure how to start or how much they should save. Once a benefits package has been selected, here are five ways to ensure that employees -- and, in turn, the whole company -- maximize savings opportunities:
1. Communicate the benefits.
People hired straight out of college or graduate school are probably unfamiliar with retirement savings plans. Educate them on the options offered and explain how saving now will affect their futures. Draw a clear link between these decisions and their economic goals to increase their understanding, as this will lead to greater participation.
2. Ask for feedback.
Listen to employees’ complaints and concerns about the savings plans offered. They’re the ones affected by them, so be willing to revise benefits if necessary.
3. Provide financial coaching.
Help employees determine a time to retire and the amount of money needed to achieve that goal. Many don’t realize they need to account for inflation in their long-term planning, or they assume they can survive on Social Security alone. People who devise a realistic budget can safeguard their economic futures by ensuring their retirement accounts generate the necessary income level.
4. Support increased contributions.
Encourage employees to up their contributions as their salaries increase. This is an easy way they can save more money because they’re already budgeting based on a lower pay rate, so it won’t interfere with their current standards of living.
5. Host budgeting workshops.
Many millennials are excited to dive into the workforce but struggle to manage student loan debt and other financial responsibilities. Expenses vary from year to year, as people get married, have children and take out mortgages. Annual workshops allow employees to reevaluate their money management systems as circumstances change.
People who feel secure in their finances are less stressed and more able to be truly present at work and at home. Entrepreneurs can give employees that peace of mind by offering strong incentives to save for their bright future.