SSGA Debunks 5 Retirement Savings Myths about Generation X and Millennials

BOSTON--()--New research from State Street Global Advisors, the asset management arm of State Street Corporation (NYSE: STT), challenges generational assumptions about employees who participate in workplace Defined Contribution retirement plans and recommends different actions employers can take to better engage their employees. The research also highlights surprising similarities across “Gen Xers” (aged 33-50) and Millennials (aged 22-32) as it relates to retirement readiness. For example, regardless of age over 80% of employees understand that creating a successful retirement depends on making it a priority and starting early.

“Many long held beliefs about how Millennials and Gen Xers want to engage with their DC plan are off base and call for some myth-busting,” says Fredrik Axsater, senior managing director and head of Global Defined Contribution at SSGA. “When employers combine a deeper understanding of employees’ views about retirement and focus their engagement efforts around important life stages, like starting a career or starting a family, savings programs can be far more successful.”

The research surveyed plan employees aged 22-50, a group SSGA has named “Generation DC.” This group is the first cohort to rely predominantly on a defined contribution plan as their primary source of retirement funding. SSGA believes that by studying Generation DC, employers can better understand how to improve the experience and structure of DC plans.

According to the SSGA research, there are five myths to debunk as a result of their research.

  • Myth 1: Millennials would rather interact with apps than humans

    Reality: Although Millennials are most likely to say they want apps to help them prepare for retirement, they also want an annual human interaction – even more than older employees do. 59% of those aged 22-25 say they “want an in-person meeting once a year and technology isn’t really going to help,” compared to 38% for Gen Xers aged 45-50.

    Action: Employers should recognize that younger employees may need more guidance than can be solved by an app.
  • Myth 2: Millennials don’t care about planning for retirement—it’s too far away

    Reality: 88% of Millennials agree it’s important to start saving for retirement early similar to the 86% for their more experienced Gen X counterparts. Additionally both Millennials and Gen Xers agree that saving for retirement is a priority (83%).

    Action: Harness younger employees’ awareness of the importance of retirement preparation and connect that to a specific action such as enrollment or saving a little more.
  • Myth 3: Most people are “over” the financial crisis

    Reality: Risk averse beliefs are still rampant today. Over half of millennials (54%) admitted that their parents’ experience with the financial crisis that began in 2008 has impacted their confidence as investors. That increases to 60% for those who are 33-39 years old.

    Action: If market volatility rears its ugly head, don’t avoid it. Speak to employees rationally about volatility and the reality of long-term investing and importance of “staying the course”.
  • Myth 4: Employers hold the reins when it comes to informing and influencing employees

    Reality: Friends and family come first when it comes to influence. 68% of Generation DC said that friends and family are the ones who told them to start saving. Additionally, over 90% indicated that their spouse/partner’s annual salary played an important role in their financial wellbeing.

    Action: Employers can find ways to engage both employees and their family members with simple, jargon-free messages about retirement planning that stimulate healthy conversations.
  • Myth 5: We need to educate people more about retirement and investing

    Reality: Experience is a significant contributor to literacy. SSGA used a standard battery of questions to test literacy and the results indicate that as people hit their 40’s their literacy about basic financial and investing improves. For example, when asked if buying a single company stock provided a safer return than a stock mutual fund, only 46% of millennials correctly answered that the stock was more risky. However, 57% of Gen Xers answered correctly and that increased to 77% for the 45+ group.

    Action: Be consistent with core “rules of thumb” messaging about retirement preparedness and recognize that the 40 and over population is more prepared to talk comprehensively about retirement planning. Employers should engage them more fully on their life journey while they can still make a difference, instead of waiting until they are 50.

“Our research highlights numerous opportunities where employers can tailor approaches to meet employees where they are in their life, not necessarily where we believe their generational preferences may exist,” continued Axsater. “Employers can reach employees well ahead of retirement by targeting the 40 plus age group with clear, actionable steps for a better retirement including communications on how to save more, diversify investments and spend down savings in retirement. For younger employees, an over-emphasis on auto-enrollment may be causing employers to miss an opportunity to discuss savings goals and strategies. We recommend rethinking those assumptions.”

This survey was fielded in partnership with Boston Research Technologies, an independent marketing research firm. Data were collected in October 2015 using a panel of 1,500 U.S. workers, aged 22-50, who were employed on at least a part-time basis and offered a DC plan by their employer.

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About State Street Global Advisors

For nearly four decades, State Street Global Advisors has been committed to helping our clients, and those who rely on them, achieve financial security. We partner with many of the world’s largest, most sophisticated investors and financial intermediaries to help them reach their goals through a rigorous, research-driven investment process spanning both indexing and active disciplines. With trillions* in assets, our scale and global reach offer clients unrivaled access to markets, geographies and asset classes, and allow us to deliver thoughtful insights and innovative solutions.

State Street Global Advisors is the investment management arm of State Street Corporation.

*Assets under management were $2 trillion as of December 31, 2015. Please note that AUM totals are unaudited.

Investing involves risk including the risk of loss of principal.

The views expressed in this material are the views of SSGA Defined Contribution through the period ended November 30, 2015 and are subject to change based on market and other conditions.

The information provided does not constitute investment advice and it should not be relied on as such.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Corporation express written consent.


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State Street Corporation
Andrew Hopkins, +1 617-664-2422
Elizabeth Powell, +1 202-468-0908


State Street Corporation
Andrew Hopkins, +1 617-664-2422
Elizabeth Powell, +1 202-468-0908