10 minutes
Why credit unions should take a personalized approach to helping their employees reach their financial goals
Understanding how baby boomers, Gen X, millennials and now Gen Z view finances and the events that shaped those perceptions may help you break down barriers and build trust with your employees. Further, proactively connecting with the various generations through specific life events will allow you to provide personalized retirement plan guidance, and that can build long-term employee loyalty.
Boomers: Still Time To Improve Retirement Planning
Baby boomers, the post-World War II generation born between 1946 and 1964, were raised believing that money was a taboo topic. Talking about money was rarely done, and it was not uncommon for them to believe that they didn’t have the level of wealth necessarily to participate in advanced financial planning activities.
Boomers grew up with an awareness and understanding of traditional pension benefits. Pensions served as a primary source of retirement income for many of their parents and were a passive source of income from the standpoint of planning. In their parents’ era, active financial planning as we understand it today did not exist, and the associated retirement savings skills were not learned.
When 401(k) plans were introduced in the 1980s as a supplementary source of retirement income—and one that relied on active planning—boomers had to learn how to maximize this benefit on their own with no learned history from their parents. Later, this generation was impacted by the Great Recession in 2009 and has had less time than younger generations to financially recover before they retire.
Assumptions that there’s no need to discuss money matters or that there is always “plenty of time for that conversation” and related planning could be detrimental for baby-boomer employees. That’s especially true when considering, according to the PwC 2019 Annual Employee Financial Wellness Survey, the top financial concern for baby boomers is not being able to retire when they want to. Boomers have not been great savers, and only one-third of them expect Social Security and savings to be sufficient to support them in retirement.
Although about 10,000 baby boomers reach age 65 each day, the tail end of that generation is still five to 10 years younger than that—and many are planning to work beyond that age. In other words, many boomers still have time to make significant retirement planning decisions. Take these proactive steps to help improve your boomer employees’ retirement strategies:
- Encourage boomers to clarify when they expect to retire, and build a strategy to meet that goal.
- Create a sense of urgency around next steps, but not so much that it alarms employees.
- Introduce baby boomers to tools that help them understand and measure their post-retirement income needs. Choose tools that help them track whether they’re on target to meet their needs, so they can address any financial gaps before they retire.
It’s also important to note that over the course of the next 25 years, 45 million U.S. households will transfer a staggering $68.4 trillion in assets from one generation to the next, specifically from baby boomers to Generation X and millennials, according to a Cerulli report.
Gen X: Sandwiched Between the Needs of Children and Parents
Wedged between boomers and millennials, Generation X—born between 1965 and 1980—are often overlooked and underestimated. At about 65 million, Gen Xers comprise a smaller group than boomers and millennials, who both numbered about 72 million as of 2019, according to the Pew Research Center.
This disparity in size sometimes leads to errant assumptions that Generation X carries less social influence, despite being the first generation to represent significant diversity in ethnicity, household (the first “children of divorce”) and lifestyle. It also ostensibly translates to being more easily ignored than the larger groups.
Perhaps this is why Gen X is defined by core characteristics that speak mainly to individualism.
But what does this mean for Xers planning for retirement? They are more naturally inclined to “go it alone” when developing a retirement plan. But unfortunately, so far their success in doing so has been limited. Only 34% of Gen Xers from the 2019 PwC survey mentioned above said they’re confident they’ll be able to retire when they want to, down from 41% in 2018. Less than half said they and their spouse/partner had saved as much as $50,000 for retirement, and 30% have already withdrawn money from their retirement accounts.
On the plus side, 70% of Generation X employees are actively saving for retirement. What they need is guidance as to how to get their knowledge, instincts and savings working for them as they move toward retirement.
Of the generations now in the workforce, more Gen Xers are likely to face the competing financial pressures of simultaneously raising children, supporting adult children and caring for elderly parents—all while trying to save for their own retirement. Consider this in your communication strategy with them.
- Given the complicated paths of Generation X, take the “big picture” into consideration when building relationships with your Gen X employees. Get to know their unique situation and how it can impact their plan for retirement.
- Help them focus on important financial decisions, not just for the future but the “now”—maintaining cash flow, growing assets and protecting what they’ve saved.
- Listen to the financial challenges they face, which may include college tuition for children, supporting aging parents, pursuing new skills or careers, and a myriad of other responsibilities they are balancing with their own needs.
Millennials: Value One-on-One Advice
Millennials—born between 1981 and 1996—are the biggest generation in U.S. history and will make up 50% of the U.S. workforce by 2030. Millennials are better educated than prior generations and although they are often stereotyped as lazy and entitled, 52% report having some type of income-generating “side hustle” in addition to their full-time job.
The millennial generation is focused on both short- and long-term goals. They are risk-conscious and aware of the social capital they hold with their assets. Much like older generations, they will need help from the financial industry to successfully navigate today’s complex markets and achieve long-term financial success.
Although 72% of millennials describe themselves as self-directed with direct control over their wealth, they also tend to lack financial knowledge compared to older generations, according to the Deloitte “Millennials and Wealth Management” report.
Millennials consult peers and media before acting; less than 10% of investment decisions are made alone. Millennials value traditional media and face-to-face meetings for advice; 82% would even appreciate more personal meetings with an investment advisor Consider the following when working to build a successful relationship with your millennial employees:
- A retirement benefit platform with a great digital experience, transparency and customer-centric models will help engage millennials.
- Millennials would benefit from education on industry averages for typical financial advisor fees and what investable assets are needed to work with a typical financial professional.
- Present retirement strategies that are easy to monitor and maintain, freeing millennials to focus on short-term strategies and lifestyle demands.
Gen Z: Pragmatic, Idealistic Children of the Great Recession
Born between 1997 and 2012, Generation Zers are not all kids—they range from age 8 to 23. As more members of this new generation enter adulthood, there’s increasing interest in their behaviors, lifestyle and financial habits.
For instance, adult members of Gen Z witnessed their older friends (millennials) struggle to land well-paying jobs while amassing significant debt. Plus, by coming of age during the Great Recession, older Gen Zers have a pragmatic view of the world of personal finance. They focus on preparation and being financially responsible.
Three key values held by Generation Z are vigilance, resourcefulness and openness. Although they’re careful with their money, they like to donate and get involved in social issues. Like most young people before them, they want to change the world.
A majority of Gen Z employees (71%) say they are moderately to very stressed about finances. The top financial stressors for older Gen Zers are purchasing a home and living paycheck to paycheck.
But Gen Z already wields a purchasing power of between $29 billion and $143 billion annually, and 89% say planning for their financial future makes them feel empowered.
Some strategies for you in looking to connect with Gen Z employees:
- Create communication efforts that align with their values. Focus on how your credit union is doing its part to make your community and the world a better place.
- Offer financial management and planning resources that operate on their preferred digital platforms, remembering that speed and privacy are key factors.
- Prepare to connect with a widely diverse and often outspoken group. This is a confident group when it comes to their financial futures.
Life Events Affect Financial Attitudes & Behaviors
While it’s good practice to personalize your approach based on the generations, it’s equally as important to focus on life events that may be impacting your employees’ current goals, attitudes and behaviors.
Here are nine life events that may force employees to seek financial advice:
- Graduating from college
- Marriage
- The birth of a child
- Divorce
- Job and income changes
- Buying a new home
- Illness or hospitalization
- Retirement
- Death of a spouse or partner
Unfortunately, less savvy employees may not immediately recognize the connection between such events and the need for financial advisement. That’s why it’s crucial to keep a good relationship with them and to give them the tools and frequent reminders to take care of their financial well-being.
It’s also important for credit unions to think about the impact of current global events on employees and how you can tailor your communications to meet their immediate needs. The recent global pandemic is a clear example.
Credit unions had to quickly respond to an outpouring of employee questions and fears and try to prevent them from making emotional decisions that could damage their investment strategies. Some had to help employees get by and provide them with constant education on changing loan regulations and financial aid options.
The bottom line is this: More and more credit union employees are seeking personalized financial service from someone they can trust. They expect their employer to be able to meet their unique needs, wherever they are in their lives.
To fulfill that desire as a credit union, one of your main focuses should be on creating connections and building relationships. Care about your employees—stay updated on their goals, values and life events—and your financial knowledge should fill in the gaps.
Generational Interests in Financial Topics
Looking at 2019 data from a limited-scale financial fitness program run by Financial Fitness Group, in conjunction with the CUNA Mutual Retirement Solutions 401(k) website, here are the top three financial topics that millennial, Gen X, and baby boomer plan participants are most interested in:
- Millennials: Living within your means, building a budget and managing debt.
- Gen X: Living within your means, building a budget and managing debt.
- Baby Boomers: Social security, paying for healthcare in retirement and determining your retirement needs.
The primary topics consumed by millennials and Gen X indicate they are faced with financial challenges related to building and maintaining their financial lifestyle. While boomers are also grappling with their financial challenges, their focus is naturally turning to how they will transition and manage their finances at and through their retirement years. cues icon
Michael Conte is the director of retirement solutions for CUESolutions Platinum provider CUNA Mutual Retirement Solutions, Madison, Wisconsin. Reach him at michael.conte@cunamutual.com. For more information about becoming a CUESolutions provider, please email kari@cues.org.
