Among the report's key findings were:
- The recession and subsequent sluggish economy appears to have impacted the generations differently, with the most notable dichotomy among the two youngest adult generations: Millennials and Generation X. Millennials are managing their finances surprisingly well despite having by far the lowest income levels while Gen Xers are having a harder time with debt, making ends meet, and most aspects of overall financial planning.
- Early and late baby boomers with minor children appear to be over-prioritizing college planning at the cost of their own financial security and leaving themselves very vulnerable to major catastrophic events as a result of not taking care of their own needs. Only 16% of early baby boomers and 10% of late baby boomers reported having a long-term care insurance policy even though the average cost of a private room in a nursing home is
$90,520a year according to the 2012 MetLife Market Survey of Long-Term Care Costs, making it one of the most significant threats to financial security in retirement.
- Retirement planning remains the one issue all generations are most vulnerable in, even for late baby boomers that are on the cusp of normal retirement age. Within this group, 50% have not run a retirement projection, and only 25% know they are on target to retire comfortably. While this is concerning, even lower numbers for younger generations could pose a greater threat considering that younger employees are less likely to receive full
Social Securitybenefits and more likely to face higher taxes and inflation when they retire.
"When you look at the groups as a whole, you recognize that they are really dealing with issues stemming from perspectives and habits rooted in their generations," she says. "Millennials entered the workforce during a time when it was 'cool' to be thrifty, Gen Xers lived in the shadow of the Boomers and have a generally cynical attitude toward achieving their goals, and Boomers—both late and early—are part of a generation that had everything tailored to their needs. This really creates a different set of issues as a result for each group."
Davidson notes that the financial services industry hasn't typically recognized these differences, thinking of financial planning from a more analytical and technical perspective rather than relating to the different attitudes generations have about managing their money. This has been particularly costly to Gen Xers and Millennials who are distinctly different than early and late baby boomers in terms of how they need to be approached.
She adds, "There has been a lot of emphasis on the significant challenges facing Boomers when it comes to retirement, namely that more and more employees in this generation are being forced to delay retirement, or worse, are having to retire for health reasons with insufficient savings, but not enough emphasis has been placed on younger generations who are already struggling more than Boomers did at their age due to the recession." According to Davidson, "This is hugely concerning because there will be an even larger crisis if other generations, especially the Millennials who are now the largest generation in our history, cannot retire comfortably."
"There is no one-size-fits-all formula to financial planning anymore," he says. "These younger generations, in a lot of ways, are relying on the industry to help them with what they don't know, and they need more targeted guidance that makes sense to the issues they face, not the ones their parents and grandparents dealt with." He adds, "It's definitely time for society to recognize the specific financial issues of these groups."
For employers, Davidson points to innovation in plan design and technology as paramount to helping younger generations to succeed. Retirement plans that automatically enroll employees and automatically escalate their contribution rates have helped younger workers to save more for retirement. Online platforms that provide detailed analysis of employees' financial behaviors and priorities have helped employers to identify the financial and educational needs of different generations within their workforce. This, she says, enables employers to design workplace financial education programs that specifically address these needs. Successful programs often use technology to incorporate social media, webcasts, and other live multi-media events where employees from around the country can connect and discuss their experiences with each other—something the Millennials and Generation X are showing they prefer to traditional education delivery.
The key, according to the latest research coming out of the field of behavioral economics, and borne out in the experiences of companies who have achieved significant retirement savings rates among younger employees, is to take the same technology that is used for impulsive shopping and spending and make it a tool for automatic planning and saving for retirement.
Financial Finesse is an unbiased financial education company providing personalized and innovative financial education and counseling programs to over 500,000 employees at over 400 organizations. Financial Finesse partners with organizations to reach goals such as reducing fiduciary liability, increasing plan participation, decreasing stress, and increasing productivity through its unique approach to financial education. Financial Finesse does not sell products nor manage assets. For more information, visit www.financialfinesse.com.
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Source: Financial Finesse
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