In general, people approach serious discussions of financial planning enthusiastically. Ultimately, though, the conversations quickly deviate into “what do you think about [my favorite stock]?” or, “I lost/didn’t lose X dollars last fall,” or, “listen, here’s my [insert highly unorthodox scheme], it’s gold, DON’T YOU AGREE?!?” To be fair, these conversations can be quite entertaining, probably more so than me lecturing on the importance of retirement planning, but by ignoring the slightly mundane conversations we are ignoring an enormous problem.
As co-founder of a networking group for Ann Arbor’s young professional population, YP Underground, I meet a high volume of 20- to 30-somethings, and recently I surveyed several on their knowledge and interest in financial planning. Generally speaking, these professionals are very well-educated, still gainfully employed, and have the opportunity for highly successful futures. I mean, they’re Ann Arborites. They comprise the exact demographic over which everyone clamors. Clearly they have it figured out, right?
You may have grasped from the sarcasm that I am not comfortable with the responses. Nor am I shocked or judgmental. Were it not for my vocational experience and professional education, I would probably submit very similar replies. I wouldn’t know how much income is the “right” amount to save, I probably couldn’t coherently explain the difference between a traditional and a Roth IRA, I might not be saving regularly to a retirement plan, and the concept of retirement probably wouldn’t even be on my radar (as it is not for a vast majority of my respondents). Not to mention I probably wouldn’t be able to define what retirement meant to me. No longer are we taught these things, even with one of the best public higher education institutions right in our back yard (for the record, I am a Michigan grad and I certainly didn’t learn about 401(k) contributions in the four years I spent there. Nor were the ramifications of “student loan consolidation” accurately conveyed, but that’s a story for another day).
The survey revealed a most disturbing contradiction—overwhelmingly, respondents understood that they would have to work beyond age 65, and many did not feel they would be able to retire. A majority also reported that they did not believe they would receive full Social Security and Medicare benefits, if any at all. And yet a whopping 88% stated that they were only mildly worried or not even thinking about retirement. Have they given up hope that society has left them with nothing to work and so they should just scrap the whole thing?
I don’t think so. Ann Arbor young professionals are worried about paying the rent and paying the bills.
The impetus to attract and retain young talent lies in the fact that these folks are crucial to the success of this community, as they are for any city. So often we see initiatives directed at making downtown life easier or more appealing for this specific population, and many times addressing affordable housing. I won’t contradict the argument that cheap rent will attract talent and is an important discussion.
My expertise is not housing, so let me approach you from a different angle. Survey results indicate that people want
to save, they just don’t feel as if they’re able to do so. Are area employers offering competitive benefits packages that incentivize participants to save? Employees of the University receive a highly competitive two for one match on 403(b) contributions up to 5% of salary (though anyone hired after January 1, 2010 will now have to wait a full year for this match
). Understandably the University is a behemoth, and as the county’s largest employer can better afford to provide contribution matches than smaller companies.
- Ask a financial advisor to come in and speak to your employees about retirement options. Many are thrilled to do so just for the opportunity to meet new people. Yes, in many cases they may try to sell their services or a product, however they may also provide some really sound advice.
- Support automatic IRA enrollment.
- At the beginning of each year provide internet links to IRA contribution eligibility and limitations. Encourage employees to contribute what they can throughout the year, or to make a previous-year contribution prior to April 15th if they have extra cash on hand.
I’m not imploring you to hand-hold, and honestly the young professional population does not expect that. You can see it in their responses—they anticipate working a long, long time. My hypothesis in all this is that if you help empower them to plan for a future that doesn’t include toiling until they drop dead maybe they’ll work for you, in Ann Arbor, for years to come.