Last month we learned that many 401(k) participants could benefit from a periodic and automatic escalation of their retirement plan contributions. Encouragingly, a study by State Street Global Advisors suggests that workers would respond favorably to such an initiative because 69 percent of surveyed 401(k) participants said that it would be “OK” if their employer increased their contribution rate 1 percent each year. The study's sample consisted of Millennials (ages 22–32) and Generation X (ages 33–50) workers, and both groups appeared to already recognize the financial challenges they could face in old age.
For example, 73 percent of adults in this survey acknowledged that they will likely live a lot longer compared to older generations, 83 percent agreed that saving should be a priority, and 87 percent believed that they must start setting money away for retirement as early as possible. Despite these shared core beliefs about retirement, a few clear generational differences could still be found within the survey results. Most Millennials, for instance, appeared to see the value in technologies that can help with retirement preparedness because 71 percent of Gen-Y respondents said that they believe they could benefit from an employer-provided app that keeps them informed about their retirement savings and encourages them to take productive actions, e.g. boosting their contribution rate.
However, many young adults still enjoy the human touch, with 59 percent of Gen Y respondents saying that meeting once a year with a financial advisor would benefit them more than new technology. Discouragingly, 63 percent of surveyed Millennials said that they manage their financial life “mostly by intuition,” and 65 percent admitted that they do not “really know much” about saving for retirement. As for Generation X respondents, 22 percent reported that they do not regularly read their retirement account statements, and 29 percent said that they “do not understand investing.” The latter is evidenced by the 23 percent of Gen-X respondents that could not correctly answer a question about the differences in risk that typically result from investing in a single company stock versus a mutual fund. Ninety-one percent of surveyed Gen-X adults, though, did appear to understand the concept of compound interest.
Sources: State Street Global AdvisorsPost author: Charles Couch