Helping young adults rebalance work, life and retirement goals

Today’s young adults, including the youngest millennials and older members of Generation Z, are experiencing a first working decade that’s very different from those of generations before them. Among the differences: high levels of educational attainment, significant student debt, a greater proportion of gig work, fluid expectations for their career paths, effects of a global pandemic and a practically unfathomable retirement target date.

It’s important to recognize the ways work, life and retirement savings have changed over the course of decades, especially given the unique circumstances of the past few years.

Many millennials and Gen Zers began working during already tumultuous economic times in the mid-2000s. Now, with the COVID-19 pandemic (which began in early 2020), young adults just getting started in the workforce today may find themselves in another new landscape. According to recent research, in October of 2020, 69% of adults ages 20 to 29 who’d graduated from college with a bachelor’s degree or higher the previous spring were employed, compared with 78% the previous year.¹

How do these uncertain times affect retirement planning, and how can young adults prioritize and achieve retirement savings while also responding to fast-changing conditions at work and in life?

Young workers’ experiences: why differences matter

The early working years often set the theme and tone for the rest of a person’s career. That’s when workers learn critical skills, start building professional networks and get grounded in the basic knowledge of a career field. It’s also during this time that foundational habits are developed — and that includes saving and planning for retirement.

Many young adults have already faced significant early career disruptions with the ongoing pandemic. And while they have more education, it can come at a cost: greater debt. Plus, those extra years of study delayed the start of work, so younger adults began to earn and save later than previous generations.

How advisors & plan sponsors can help young adults establish balance

There’s a positive side to the fast pace of change in young adults’ lives. As a whole, they tend to embrace lifelong learning and aren’t daunted by new technologies, systems and ways of working. They have accepted the reality that new experiences require new learning, and are willing to look for information in unconventional places. Another plus: Young adults today may have 40 years or more to prepare for their retirement.

How can you help? First off, now is the time to make younger employees aware of the smart choices and habits that can help them get started (or get back on track) with saving for retirement. Here are a few important considerations for helping young adults.

1. Remember, there is no monolithic generational attitude. Millennials and Gen Zers are more diverse than previous generations. Their varied experiences engender differing perspectives on issues including financial priorities.
2. Young adults are in a prime habit-building phase of life. Now is the moment to help them understand and build healthy habits at work, in life and in planning for retirement. 
3. Specific triggers can spur young adults to start saving. Recognizing and understanding employer-provided benefits and matching contributions can help motivate them to increase their own contributions and maximize benefits. So can reminders that they’re not getting any younger.
4. Basic financial literacy is an important place to start.  Making sure they understand concepts like compounding, inflation and basic investment principles can help them build confidence and prioritize financial fitness.
5. Young adults are ready and willing to learn. As digital natives, they’re comfortable using technology to access learning. They’re a prime audience for online influencers, so it may be helpful to identify and share legitimate budgeting, saving and investing tips from influencers in, for example, the FIRE (Financial Independence, Retire Early) movement.
6. A written plan can help. Young adults can benefit from feeling prepared for the inevitable: major life milestones, job changes and even unexpected economic challenges. A written plan can help them keep retirement goals in mind, prepare for the unexpected and move forward with confidence.

Retirement solutions

What might young adults be looking for when it comes to financial stability and their retirement? We offer a number of different solutions that can be implemented to help them feel more confident about their future. Review what’s available.

SOURCES
¹Pew Research Center, College graduates in the year of COVID-19 experienced a drop in employment, labor force participation, May 14, 2021

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