Helping Generation X stay on target for retirement

Despite being a third of the American workforce, Generation X is oft overshadowed by their older and younger counterparts: baby boomers and millennials.

The statistics show that employers can’t afford to ignore this next wave of retirees.

Every year that an employee delays retirement can cost large companies as much as $3 million, according to Prudential research. That should scare employers, considering only 59% of Generation X workers are confident in their finances, according to MetLife’s annual employee benefits trends study. But there are programs available that can help Gen X stay on track to prepare for their post-work years.

“Generation X is busy juggling family and work responsibilities; they need a retirement program that lets them invest without having to monitor it constantly,” says Colleen Blake, senior vice president of people at GuideSpark, a workforce communication software company.

Employee Benefit News spoke with Blake about best practices for helping Generation X prepare for retirement.

EBN: Millennials get a lot of media attention, but who is Generation X?

Colleen Blake: Most people in Generation X have a car, house and family they’re taking care of — and they’re in a better position to do that because of where they are in their career. For this reason, they generally don’t have high interest debt. Millennials, on the other hand, have to be more conscientious of debt and big purchases they want to make, and even more so for Gen Z. These younger generations are just starting out, they’re not as secure in their career as Gen X.

EBN: What should Generation X be doing to prepare for retirement? What’s the best retirement program for them?

Blake: The 401(k) is a safe bet because that’s with you throughout your career, and many employers offer a match program. Most Gen Xers already have one, so it makes sense to continue the investment. And one of the best things about it is once you’ve made that enrollment you just leave it alone until you need it.

The HSA is also becoming popular, but it requires understanding what your healthcare costs will be. I’m reading more and more that if you have chronic conditions, it might not be the most cost-effective option.

If your employer offers a target date fund, that’s definitely worth looking in to. These funds automatically adjust rate and type of investment based on your desired retirement age goal. The longer you have until retirement, the account tends to invest in stocks. The closer you get to retirement, it reduces stock and invests more in bonds. It’s one of those trends where you can see the results and performance over the course of your investment.

EBN: Why do you think TDFs are especially suited for Gen X?

Blake: This is me as a consumer sharing that bit; I’m a Gen Xer who uses a target date fund. For someone like me, I like to put it away, walk away, and on an annual basis we can decide if we need to change anything or if it’s the right investment. Target date funds choose for you, and you watch how it grows; this is where the autopilot thing is nice. It allocates based on a formula and it will make those types of investments based on that formula. Risk tolerance is either increased or more conservative based on whether you want to retire sooner.

EBN: What should employers be doing to help this generation prepare for retirement?

Blake: Financial literacy [is] something every generation can benefit from. I think employers should provide that education through the employee lifecycle, what I call the three O’s: onboarding, off going and off boarding.

Different generations have to make different tradeoffs. For Gen X, it might be either saving for retirement or saving for their child’s college. For millennials, it might be paying off student debt, or buying a car. As HR professionals, it’s our job to provide the framework to help employees think about those tradeoffs.

We need to remind them that saving for retirement is just as important as their physical wellness. We need to teach the workforce the whole concept of power of compounding and the difference between saving at age 25 as opposed to 35. I think it’s also important to help employees set a goal for when to retire, and deciding where to save and what tax advantage accounts your company offers that can help.

EBN: How can employers get that message across?

Blake: It needs to be communicated in simple human terms, and I think it’s got to be consistent messaging. Leveraging mobile devices is a great way to get it across. If your company is already using Slack, or any other platform where employees are collaborating, that’s also a great way to distribute messages. Just make sure it’s relevant, personalized content.

EBN: Are there any other retirement trends employers should consider?

Blake: Auto-escalation tools; they allow you to increase your account contribution every year. It’s another trend I’ve been reading about as well. I think it’s a good tool to help employees in the long run because it increases their savings little by little as they progress in their career. And it works for every generation.