Go beyond a basic 401(k)

Go beyond a basic 401(k)

Give your employees more than just a 401(k), join the movement.

5 min read

What to do when young employees don't join the 401(k)

David Ramirez
March 21, 2023
What to do when young employees don't join the 401(k)
Table of contents

There’s a lot competing for your employees’ attentions, and saving for retirement is often one of the furthest things from people’s minds. While this can feel frustrating, it’s also an opportunity to help millennials adopt great savings habits and get started early. If you want to help more employees in their 20s to join the 401(k) plan, you need to reach them at the right moment, use technology to create a seamless enrollment process, and give them the freedom to learn about their investments on their own time. Your goal is to make the plan more accessible, so employees can join and save without reservation.

Here are four strategies that we’ve gleaned from our conversations that you can implement at your company that could help improve Millennial retirement savings rates.

401(k) Tips to Help Millennials Save for Retirement

1. Automatically enroll employees into the plan the moment they’re eligible.

There’s a reason why people’s good intentions to join the 401(k) plan fall to the wayside, procrastination and focusing on today’s needs are hard hurdles to jump over. Auto-enrollment eliminates employee inertia and is a proven way to boost 401(k) participation rates. Studies show companies that use automatic enrollment see a 91% participation rate.

2 . Forget the in-person seminar

Companies traditionally rely on in-person seminars and paper-based investment election forms. While backed with good intentions, the traditional experience is disjointed and pulls a person out of their normal day, where technology can ease in seamlessly to a 25-year-old’s everyday life. According to a study published by Dartmouth College research study, financial seminars have small impacts on individuals’ retirement savings.

participation -02

Since we are talking about millennials, good luck getting them to put down their smartphones in a 401(k) benefits seminar! Instead of seminars, try online and mobile enrollment and education. Some 401(k) providers offer electronic signup options, and we’re willing to bet that your younger employees will prefer to interact digitally with their 401(k) instead of signing up using paperwork. Our virtual advisor, Dave, provides plain English (and Spanish) employee communications and advice, via online and mobile devices.

3. Modernize your communication channels.

It’s not just about offering the ability to enroll in your 401(k) via phone, you actually need to be able to reach your millennial employees on their devices. Did you know that text messages outrank phone calls as the dominant form of communication among millennials? Try communicating with your employees via text messages. Ask your 401(k) provider if they offer text-based onboarding as a means to get to those hard to reach millennials.

If your millennial employees aren’t saving enough for retirement you’re not alone! Federal Reserve reports show that fewer younger Americans had retirement accounts in 2013 than did in 2007.

4. Self-directed windows = more choice and more opportunities for potential growth

Many younger workers are more engaged with investing than prior generations. They are more likely to invest in cryptocurrencies, use online trading apps to trade stocks and less likely to invest in non-index mutual funds, according to a 2022 Survey from Schwab. A core menu of 15 mutual funds just may not cut it.

Not surprisingly, when asked what types of investments they'd like to see in their 401(k) plan, they put cryptocurrency and environmental funds near the top of the list:

Schwab 2022 Participant Survey

Find out how you can add a self-directed brokerage window and self-directed 401(k) crypto window.

Go beyond a basic 401(k)
Give your employees more than just a 401(k), join the movement.
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About Author -
David Ramirez

David Ramirez, CFA, is a recognized 401(k) expert with over 20 years of experience in 401(k), ERISA, cash balance plans, and ESOPs. A UC Berkeley graduate, he played a pivotal role at Financial Engines, a 401(k) advisory firm founded by Nobel Laureate William Sharpe, Ph.D., where he was a portfolio manager who helped manage over $50B in 401(k) assets.  His clients included some of the largest Fortune 500 companies and state governments.

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This material has been prepared for informational and educational purposes only and should not be construed as a recommendation by ForUsAll, Inc., its affiliates or employees (collectively, “ForUsAll”)  to activate a cryptocurrency window or invest in crypto.  Investing in crypto can be risky and investors must be able to afford to lose their entire investment.  You should consult with your own advisers before activating a cryptocurrency window or investing in crypto.  ForUsAll does not provide legal, tax, or accounting advice. Please refer to your Plan's fee disclosure for more details.© 2023 ForUsAll, Inc. All rights reserved.
1 Schwab 2022 401(k) Participant Study - Gen Z/Millenial Focus, October 2022.
2 As of 12/31/2022. Employees include both current employees and terminated participants with a balance.
3 "Morgan Stanley At Work: The Value of a Financial Advisor" Morgan Stanley, March 2022.
4 Sarah Britton was a client when she provided this testimonial through an independent third party review website. She received no compensation for her remarks. There are no known conflicts of interest in the provision of her comments related to the services provided.