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Generational Differences: Why Employers May Need to Reimagine Retirement Benefits

Generational Differences: Why Employers May Need to Reimagine Retirement Benefits
Posted on Wednesday, August 4, 2021 by Marcy Klipfel
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Younger generations are changing the way we think about work.

women-suffering-from-mental-and-financial-hardships

For one, career trajectories are completely different for Gen X, Millennials, and Gen Z than they were for the Boomer generation. According to a recent study by Aegon, nearly 70% of young adults between the ages of 20-29 expect to have far more job changes than previous generations. What’s more, less than 10% expect to work for a single employer for more than 20 years.

That type of job-hopping didn’t happen for the Boomer generation where more than half of workers over the age of 60 have worked for a single employer for two decades or more.

Employers need to rethink retirement benefits

With the quit rate skyrocketing to 4 million in April of 2021, employers are going to need to start rethinking retirement benefits that fit a new, more mobile workforce who are still worried about their own financial well-being.

Less money, more problems

Young adults in the U.S. also face mounting financial challenges that Boomers never had to contend with—increasing student loan debt, expensive housing, and stagnant wages, for example. The data doesn’t lie:

  • 34% of young adults from age 18 to 29 report having student loan debt.
  • More than half of young adults in the U.S. between 18-29 were living with their parents in 2020, the first time this has happened since the Great Depression.

Plus, contending with a global pandemic that will have lasting ramifications to financial stability. But, despite these challenges, younger employees continue to focus on their financial well-being, with 62% saying their top life priority is planning for their financial future.

Planning for the near future

Isn’t it good news that planning for financial stability is a top priority for many younger employees? The answer is, kind of. Younger generations are focusing on paying for basic living expenses, child and elder care, and paying off long-term debt. Retirement is a far-away island that may not even exist when the time comes. Instead of it being a tangible option, two-thirds of young adults see retirement as a transition that might continue to include some sort of paid work.

This can make it very difficult to pinpoint a target retirement date and expected length of retirement, both of which have a major impact on planning.

The fact is, retirement looks different for many younger employees. And the one-size-fits-all approach to retirement planning and benefits is dangerously tipping into retro territory, and not in a good way.

For employers to help employees become more financially stable they may need to focus on a few key strategies:

  1. Think beyond retirement. Consider benefits to help employees pay off student loan debt so they can free up some income for longer-term savings needs.
  2. Communicate your options. Employers play a crucial role in helping young employees navigate and understand financial well-being. Many younger employees surveyed by Aegon said they decided to start saving thanks to an employer-sponsored retirement plan. Plus, many said they would increase their contribution if there was an employer match.
  3. Put it on auto. Auto enrollment into a retirement plan will vastly help younger employees start saving for the future. Coupled with educational seminars, emails, or even learning cafes, employers can help navigate employees to making smart financial decisions for the future.

HR teams need to focus on their employees’ financial well-being; let’s act now. To learn more, check out our guide, What Keeps Employees Up at Night – 7 Tips for Evaluating Their Financial Well-Being.

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