Saturday, September 12, 2015

10 Ways the Class of 2019’s 401(k) Will Be Different

Time marches on, and each generation comes to the workplace with its own unique set of experiences and expectations.

Each August since 1998, Beloit University has published the Beloit College Mindset List, providing a look at the cultural touchstones that shape the lives of students entering college in the fall. For example, the class of 2019, who were for the most part were born in 1997, have never licked a postage stamp, never known a world without Google or Splenda, and have grown up in a world where wi-fi is an entitlement.

Despite those differences, the class of 2019 will one day soon be faced with the same challenges of preparing for retirement as the rest of us. They’ll have to work through how much to save, how to invest those savings, what role (if any) Social Security will play, and — eventually — how and how fast to draw down those savings in retirement — whatever, and whenever, that turns out to be.

Here are 10 things I think we’ll be able to say about most of the Class of 2019 when it enters the workforce:
  • They’ve never had to wait to be eligible to start saving in their 401(k) (their parents generally had to wait a year).
  • They’ve never had to sign up for their 401(k) plan (their 401(k) automatically enrolls new hires).
    They’ve never had to make an investment choice in their 401(k) plan (their 401(k) has long had a QDIA default option).
  • They’ve never had to rebalance their 401(k) account (their 401(k) default option was an asset allocation fund or managed account, automatically rebalanced by professionals).
  • They’ve always had fee information available to them on their 401(k) statement (it remains to be seen if they’ll understand it any better than their parents).
  • They’ve always known what their 401(k) balance would equal in monthly installment payments.
  • They’ve always been able to figure out how much they need to save for a financially secure retirement (though they may not be any more inclined to do so than their parents).
  • They’ve always been able to transfer their balances online and on a daily basis (and so, of course, they mostly don’t).
  • They’ve always had an advisor available to answer their questions.
And perhaps most importantly, they’ll have the advantage of time, a full career to save and build, to save at better rates, to invest more efficiently and effectively.

- Nevin E. Adams, JD

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