Recently we learned that many 401(k) participants are open to the idea of periodic, automatic escalations to their retirement plan contributions, and encouragingly an earlier study by State Street Global Advisors also found that workers would respond favorably to such an initiative. Specifically, 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 Millennial and Generation-X workers, and both groups appeared to already recognize the financial challenges they could face in old age. For example, 73 percent of all 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 also be found within the survey results.
Millennials, for instance, generally appeared more open to new technologies that can help with retirement preparedness, including 71 percent of Gen-Y respondents who said that they believe they could benefit from an employer-provided app or similar digital tool that keeps them informed about their retirement savings and encourages them to take productive actions, such as boosting their contribution rate. However, many young adults still enjoy the human touch, with 59 percent of Gen-Y respondents even saying that meeting once a year with a financial advisor would benefit them more than some new technology.
The desire for one-on-one assistance is not surprising since 63 percent of surveyed Millennials said they manage their financial life “mostly by intuition,” and 65 percent admitted they do not “really know much” about saving for retirement. As for Gen-X respondents, 22 percent reported that they do not regularly read their retirement account statements, and 29 percent said they “do not understand investing.” The latter is evidenced by the 23 percent of Gen-X respondents who 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 at least understand the concept of compound interest.