Millennials are taking investing and retirement seriously. That is the surprising conclusion of the J.D. Power 2018 Group Retirement Satisfaction Study.
While the survey makes the claim that millennials are most likely of all demographic groups to be prepared for retirement, that’s a bit of a stretch, considering that the oldest millennial is only 37 years old (demographers have determined millennials are made up of those born between 1981 and 1997). J.D. Power found that they have set specific retirement goals and have the highest amount of savings—relative to age—in group retirement plans.
The study evaluates participant satisfaction with providers of group retirement plans, such as 401(k)s, based on six factors: interaction across live and digital channels; investment and service offerings; fees and expenses; plan features; information resources; and communications. Plan providers are ranked in three categories based on their overall mix of business in terms of average plan size.
“The fact that many in the youngest generation of plan participants are actively preparing for retirement now sends a clear message to providers,” said Mike Foy, Senior Director of the Wealth Management Practice at J.D. Power. “They need to be focused on upping their game on their digital and mobile offerings to meet the expectations of this digitally engaged customer segment, not only to help differentiate themselves with plan sponsors who make provider selection decisions on behalf of the employees, but to position themselves to benefit from rollover events when employees eventually leave their jobs. With roughly $5.3 trillion in wealth currently sitting in 401(k) plans, getting the group plan participant satisfaction formula right now is crucial for the future of the wealth management industry.”
Following are some key findings of the 2018 study:
- Millennials are most prepared for retirement: Among all generations of group retirement plan members, 51 percent of Millennials have set specific retirement goals, compared with just 44 percent among both Gen X and Boomer participants. Of the 51 percent of Millennials who have set goals, 83 percent say they believe they are on track to meet them.
- Boomers missing the mark: Nearly two-thirds (61 percent) of Millennials have at least $25,000 in total retirement savings, and percent of them have more than $100,000, with an average of 30-35 years before retirement. By contrast, 75 percent of Boomers have more than $100,000 in savings with an average of just three years until retirement age. The average Boomer will hit age 65 with just 3.4 years of current income saved, far short of the 10 years some experts recommend.
- Just one-fifth of 401(k) participants plan to roll over to current plan providers: While there is an enormous “money in motion” opportunity looming, just 20% of current group plan participants say they “definitely will” roll over those assets to their current plan provider in the future. However, when plan participants are digitally engaged, aware of guidance and education resources, and experience transparency around fees, the likelihood that they will roll over their assets to their group plan provider increases to 48%.