Retirement Planning for Millennials: How Employers Can Help

Quick look: There are currently more than 75 million millennials in the U.S., and the oldest are already in their mid-40s. With rising everyday costs and a shakier Social Security outlook, employers who offer the right benefits can make the path to retirement a lot clearer for this significant portion of the workforce.

Millennials aren’t the “new kids” in the workforce anymore. Born between 1981 and 1996, this generation is now largely in their 30s and 40s, juggling everything from their careers and families to mortgages and caring for aging parents. For many, retirement may still feel years away, but questions about whether they’re saving enough and what retirement will look like are becoming harder to ignore.

Read on to learn more about the financial challenges millennials face, how they’re preparing for retirement, and what small employers can do to help them solidify their future financial success.

Life after work: what retirement is slated to look like for millennials

Now the largest living generation, millennials comprise more than 75 million people in the U.S., and as they grow older, retirement planning is coming into sharper focus. At the same time, many are balancing that saving against mortgages, childcare costs, and student loan payments.

Millennials are also expected to face more retirement funding hurdles than the generations before them. The Social Security Board of Trustees projects that the combined trust funds will be depleted by 2034, at which point only about 81% of scheduled benefits would be payable. This share is forecasted to decrease to roughly 72% by the end of the century.

To address the gap, the Social Security Administration is working to eliminate waste, fraud, and abuse, and the program could be reinforced by raising the retirement age, adjusting payroll taxes, or making other reforms, but these fixes could mean paying more in, receiving less out, or both.

These figures paint a clear picture of the importance for millennials to proactively prepare for the future, regardless of what reforms take shape, and the value that retirement-focused benefits can have for them.

How much are millennials saving for retirement?

So, how is this generation getting ready for their golden years?

According to recent surveys, the average millennial holds roughly $83,000 in their retirement savings account and contributes approximately 9% of their pay. Research also shows that 85% of millennials who are offered a 401(k) plan participate in it, and they tend to start saving between the ages of 26 and 28.

Despite the financial pressures they’re navigating, millennials generally are optimistic about where they’re headed, with 60% feeling positive about their personal finances and nearly half saying they’re more financially stable than their parents were at their age.

Employers can build on these positive saving habits by making it easier for employees to understand, access, and make the most of the financial wellness programs and benefits available to them.

4 ways to help millennials prepare

Retirement may take a bit more planning for millennials than it did for past generations, but the fundamentals of saving remain the same. Most financial experts recommend replacing between 70-80% of pre-retirement income once you stop working, and a common rule of thumb is to save around 15% of pre-tax income each year to reach that target.

Here’s what small and medium-sized employers can do to help their millennial employees hit these numbers.

1. Offer a 401(k) plan with match

Plenty of millennials have gotten a head start on saving, but there’s still a gap employers can help close. Bureau of Labor Statistics data shows that 21% of private-sector full-time workers don’t have access to an employer-sponsored retirement plan.

Providing a 401(k) is a great way to attract and retain millennial talent in particular, as 88% believe employers should be required to offer a retirement plan. Matching employee contributions can take it a step further, with 87% thinking an employer match should be mandatory.

Even a modest employer contribution can give employees another source of retirement savings while encouraging them to participate consistently.

2. Host financial wellness trainings

Millennials are carrying more day-to-day financial pressure than some people realize. PYMNTS research found that around 70% of millennials across income levels are living paycheck to paycheck. And people want guidance: Bank of America reports that 26% of employees want their employers to provide resources on topics like emergency savings, debt reduction, and general financial wellness, double the share from just a few years ago.

Employer-led financial wellness trainings can give employees a better understanding of the benefits available to them and how those benefits fit into their broader financial goals. Many 401(k) providers also offer training on investing basics, saving for retirement and college, and paying down debts, all of which are topics millennials are actively navigating right now.

3. Provide support with student loans

Student debt remains one of the heaviest financial burdens for millennials. 35% of all borrowers belong to this generation, with 11 million of them having outstanding student loan debt.

Employer-sponsored student loan repayment programs can help ease some of that financial pressure. It also puts other long-term goals closer in reach, like strengthening an emergency fund or buying a home.

4. Offer affordable medical benefits

Healthcare costs can also affect how much employees are able to set aside for retirement. Offering comprehensive, competitively priced medical, dental, and vision plans can help employees manage those expenses. Additionally, flexible savings accounts (FSAs) and health savings accounts (HSAs) can help cushion out-of-pocket costs, and HSAs in particular offer a triple tax advantage with:

• Deductible contributions
• Tax-free growth
• Tax-free withdrawals

Another plus is that these funds roll over from year to year, stay with employees even if they change companies, and accumulate interest, making them a great way to save for future medical needs during retirement.

And while small and mid-sized businesses (SMBs) alone may not qualify for the most affordable plan tiers, partnering with a human resources (HR) outsourcing provider can potentially solve this.

Turning to an HR partner for extra retirement support

Building a benefits package that supports employees’ long-term financial goals takes time and ongoing administration. For an SMB, those demands can be difficult to take on alongside everything else happening across the business.

Partnering with a professional employer organization (PEO), a type of HR outsourcing provider, can take a lot of that off your plate.

ExtensisHR, for example, handles the full range of benefits administration and management services that support millennial employees as they prepare for retirement. And because PEOs bundle their clients together, it means you can qualify for large-group pricing and unlock competitive rates on benefits like:

• 401(k) plans, with financial wellness training across a range of topics
• Medical, dental, and vision insurance with FSA and HSA options
• Student loan repayment programs
• And more

If you’re looking to maximize the retirement preparation assistance you provide, while minimizing the additional HR workload you take on, partnering with a PEO could be the right move.