Retirement Consulting
Millennials make up the generation of individuals born
from around 1980 through the early 2000s. These young
people face a unique set of challenges. Their life expectancies
are longer than any other generation’s, they tend to distrust
institutions, and they are more risk averse than preceding
age groups. In addition, though they tend to save, they
often don’t invest.
We know from studies that millennials wish to seek expert
advice, so the opportunity is there to make them an important
component of your client base. But acquiring younger clients
and communicating the principles of investing and saving
while overcoming their distrust is a challenge. Having a
clear and concise message targeted to millennials can bring
success, so what will capture their attention?
Leverage the Laws of Compounding
The rallying message to this diverse workforce could be
something like “save early, save often”—adapted from “vote
early, vote often,” a phrase popularized by the nefarious
Tammany Hall politicians of 19th-century New York—to
bring home the benefits of saving early and of compounding
over the long term.
Millennials tend to place a high value on education. For
them, a concrete illustration can be extremely helpful:
Saving $100/month today in an employer-sponsored
retirement plan over a 40-year period, compounded
at 8 percent, could become a $486,861 tax-deferred
account at retirement. Not bad for $48,000 worth
of contributions! And that doesn’t even include an
employer match!
Contrast that with waiting 10 years and a portfolio
that grows to only $217,114. Because of compounding,
starting young with a modest contribution can yield
greater results than making significantly larger
contributions later in life.
Free Money and FOMO
According to Wikipedia, “Fear of Missing Out, or FOMO,
is a form of social anxiety—a compulsive concern that
one might miss an opportunity for social interaction, a
novel experience, or profitable investment . . . ” This may
be one reason for the explosive growth of social media.
Why not use social media and this “fear” to encourage
millennials to participate in their employer-sponsored
retirement plans, especially when the employer offers a
match? Use statistics to bolster your assertions. For example,
ask a millennial prospect, “Did you know that everyone
at your company under age 40 saves at least 6 percent of
their pay in the 401(k) plan?”
We all like something for free—regardless of our
generation—but most of us harbor skepticism about whether
that something really is free. Explain to millennials how
not
participating in an employer-sponsored retirement
plan with a company match is really equivalent to taking
a pay cut. How many employees would tell an employer,
“Okay, just keep 3 percent of my salary.” Again, share a
quick illustration about the impact that the employer match
can have on long-term savings. Commonwealth offers tools
As your baby-boomer clients begin to take distributions from their retirement
accounts—thus impacting the revenue and profitability of your practice—younger
generations, such as the millennials, may hold the key to the future growth of your business.
“Save Early, Save Often”—A Rallying Cry
for Millennials
JOHN PETERS, CFP®, AIF®, AND DEREK SWINAMER, AIF®
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