For millennials who are just stepping into their workaday world, planning for retirement is definitely not something they seem to have on their mind. However, as Social Security benefits are sure to scale back over the next two decades, retirement planning has become a must for every millennial who wants to maintain the same standard of living during retirement.
Whether you are an entrepreneur who wants to educate your young employees about planning for retirement, or a concerned parent who wants a secure future for your child, following these four tips will help you reinforce the importance of retirement planning and inspire them to act in that direction.
1. Give Them 3 Irresistible Options
Young millennials who are hired straight out of grad school are often unsure about retirement planning because they are unaware of their options, and don't know how to start or how much to save. If you help them know their investment options and find the approach that works best for them, they will surely consider the idea of contributing.
- 401(k) Plan
The 401(k) plan is the most favored investment option for millennials because it needs little effort and the matching contribution from the employer is attractive to millennials, who view it as "free money".
- Roth IRA
While Roth IRA plans are not employer-sponsored, they make an excellent addition to a traditional 401(k) plan. The best part about investing in a Roth IRA is that the contributions are made on an after-tax basis. This means that all the withdrawals made during retirement after age 59½ are absolutely tax free!
- Profit Sharing Plans
This type of defined contribution plan enables employers to contribute cash or company stock to tax-deferred retirement accounts for their employees. Profit sharing plans are remarkably popular among the employees of young entrepreneurs and startup founders. They not only motivate team members to invest in employee stock options but also inspire them to actively contribute to company success.
2. Coach Them from Scratch on Maximizing Savings for a Richer Retirement
Many millennials don't realize that they won't be able to survive on their Social Security benefits alone, so providing financial coaching is the best way to win millennial buy-in. Help them determine an appropriate time to retire and the amount of money they need if they want to retire rich.
Coach your millennials on devising a practical budget by accounting for inflation in their retirement planning. When they know what it will take to safeguard their future and to sustain the same standard of living when they are no longer earning, they will proactively participate.
3. Inspire them to Invest by Integrating ESG Strategies
Seven in ten millennials have expressed that they are deeply concerned about the environmental, social and ethical impacts of the businesses they are investing in. For this reason, environment, social and governance (ESG) strategies are highly effective at motivating millennials who like their investments to reflect their personal values. ESG strategies provide millennials a better way to align their retirement planning investments with their core beliefs and long-term financial goals, making them much more likely to save than spend.
4. Show them the Bigger Picture
Several research studies have revealed that millennials are much more likely to save for their retirement when they feel connected to their older self. But how do you help them do that?
The best way to have millennials rev up for retirement planning is to make use of age morphing technology. This is an innovative and effective app designed to show you what you may look like when you retire. To emphasize the concept of retirement planning for a financially secure future, the app also shows the future rates of several items ranging from consumer durables to cars.
Using technology for a generation that has grown up in the digital era will definitely do the trick for you and energize them to plan for retirement. Another technology that connects well with tech-savvy millennials is the "will you have enough to retire" tool. Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle.