Millennials shouldn’t worry about retirement! OK, now that our CEO, Liz Davidson, and the rest of the research team at Financial Finesse are having heart palpitations (and the CFP® Board has started the process of stripping my credentials) I must clarify this statement. I don’t mean that Millennials (a.k.a “Gen Y”) should ignore saving for the future. My point is that as the saying goes, “Sometimes it’s not what you say; it’s how you say it.” When it comes to financial planning, we often give the right message in the wrong way.
Think about any commercial that you’ve seen for retirement planning or investing. Have any of them been geared towards anyone under 50, let alone 40? There is nothing wrong with the retirement and investment industry focusing their attention on the Baby Boomers – they are the ones that are concerned about a life changing event just around the corner and frankly they have money to invest. Unfortunately, if there is any generation that needs to be prepared financially, it is our youngest generation in the workforce.
As the recently released Retirement Preparedness report from Financial Finesse points out, employees under 30 are actually less prepared for retirement than they were last year and will face higher medical costs, longer life expectancies, and the potential for much higher inflation and higher taxes. So how do we fix it? Maybe we don’t talk about retirement. Think about it. When you were 26, were you worried about what you were going to do after your career was over or were you trying to figure out what in the heck you were going to do for a career?
There is a lot of talk about various methods of reaching Millennials – social media, smartphone apps, and SEO marketing, but in the end, it doesn’t matter how we deliver the message if the message doesn’t resonate. What does matter to someone early in their adult life? I would suggest that the motivating factor when I was a young adult was being able to make my own decisions. From the time we are teenagers and get a taste of freedom, we tend to crave all the freedom we can get our hands on.
So what does freedom have to do with retirement? Everything! Think about it. What retirement really means is that you have options: Do you want to keep working or not? Do you want to live here or travel, or maybe relocate to the place you’ve always wanted to live? In many ways, retirement is the ultimate expression of that teenage craving for the freedom to do whatever we want.
So if you are a human resources professional trying to boost 401(k) participation, a financial planner working with younger clients, or a concerned parent talking to your kid about money, there is a key message here when talking to Millennials about financial freedom. Don’t dwell on retirement. Emphasize that money can’t buy you love or happiness (once your basic needs have been met), but it can buy you freedom to live life on your terms.
For all of the doomsday talk about the financial challenges facing Millennials in so many ways, they have the greatest opportunities of any generation. If a young person today takes advantage of their full 401k match and they max out their health savings account and contribute to Roth IRAs for an entire career, they have a great chance to build wealth. In an era with massive student loan debt it won’t be easy, but if we can help young Americans understand that the biggest limitation on them is not their age but their debt, they will find a way to solve it.
It’s what we do as Americans. Then Millennials will be in a position where they can use the money freed up by paying off their student loans and increasing their savings of all types. Many employees also have the opportunity to set up an automatic increase in the percent they set aside in their 401k every year. Those factors could help them accumulate a bigger nest egg than their parents or grandparents could have imagined.
If you are in the Millennal generation and you are burdened with student loan debt, imagine having your student loans paid off in 5 years. What if you could buy a house and still be debt free by 45? What would life look like if you had true financial freedom (a.k.a. “kiss my back side money”)?
It can happen if you make small changes to help fund the big picture, but it starts with believing it is possible. The reality is that Millennials need to seriously focus on creating and following a plan that will give them financial independence. However, the traditional retirement messages of previous generations needs to be re-framed or Millennials could become the “lost generation” when it comes to retirement.
So go to iTunes , download some of my favorite 80’s rock and Don’t Stop Believing that you can take control of your financial present and future! (Yes, many of us Generation X types are as cheesy as an Adam Sandler or Vince Vaughn movie.)
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