We’ll admit that at this point we’re confused. Seemingly contradictory studies are released on a weekly basis that peg Millennials at either flush and retiring at 40 or destitute slackers forever in Mom’s basement.
The latest, from J.D. Power, leans towards the former, and rates the younger generation as “best prepared for retirement.” That’s not a superlative one might expect to describe Millennials, but according to the study released today, it’s true.
Its “2018 Group Retirement Satisfaction Study Millennials” finds they’re most likely of all demographic groups to have set specific retirement goals and have the highest amount of savings—relative to age—in group retirement plans.
The inaugural study evaluates participant satisfaction with providers of group retirement plans, such as 401ks, based on six factors: interaction across live and digital channels; investment and service offerings; fees and expenses; plan features; information resources; and communications. Plan providers are ranked in three categories based on their overall mix of business in terms of average plan size.
“The fact that many in the youngest generation of plan participants are actively preparing for retirement now sends a clear message to providers,” said Mike Foy, Senior Director of the Wealth Management Practice at J.D. Power. “They need to be focused on upping their game on their digital and mobile offerings to meet the expectations of this digitally engaged customer segment, not only to help differentiate themselves with plan sponsors who make provider selection decisions on behalf of the employees, but to position themselves to benefit from rollover events when employees eventually leave their jobs.”
With roughly $5.3 trillion in wealth currently sitting in 401k plans, he adds, “getting the group plan participant satisfaction formula right now is crucial for the future of the wealth management industry.”
Other highlight include:
- Yes, Millennials are most prepared for retirement: Among all generations of group retirement plan members, 51 percent of Millennials have set specific retirement goals, compared with just 44 percent among both Gen X and Boomer participants. Of the 51 percent of Millennials who have set goals, 83 percent say they believe they are on track to meet them.
- Boomers missing the mark: Nearly two-thirds (61 percent) of Millennials have at least $25,000 in total retirement savings, and 27 percent of them have more than $100,000, with an average of 30-35 years before retirement. By contrast, 75 percent of Boomers have more than $100,000 in savings with an average of just three years until retirement age. The average Boomer will hit age 65 with just 3.4 years of current income saved, far short of the 10 years some experts recommend.
- Just one-fifth of 401k participants plan to roll over to current plan providers: While there is an enormous “money in motion” opportunity looming, just 20 percent of current group plan participants say they “definitely will” roll over those assets to their current plan provider in the future. However, when plan participants are digitally engaged, aware of guidance and education resources, and experience transparency around fees, the likelihood that they will roll over their assets to their group plan provider increases to 48 percent.