Advisor Support is Key to Driving Confidence and Outcomes Among Younger Participants

Access to an advisor tends to improve retirement confidence, according to a recent survey by the Employee Benefit Research Institute (EBRI). The Retirement Confidence Survey found that 83% of workers with advisory access feel confident about retirement readiness, compared with just 53% of those without. But is that only because those with advisors are more likely to also have accrued greater wealth over time — or will it also hold true for younger workers with smaller portfolios? 

A Kiplinger deep dive into the EBRI data suggests the advisory confidence “boost” is actually greatest among lower balance savers. In other words, professional financial guidance may have its most meaningful impact on younger workers in the early stages of their wealth-building journey. 

More than three in four Gen Z employees, those born from 1997 to 2012, are saving for retirement through employer-sponsored retirement plans and/or outside the workplace. Automatic enrollment trends play a role here. But prevailing generational sentiments have a large impact on behaviors too: nearly six in 10 Gen Z and Millennial 401(k) participants expect their personal accounts to be their primary income source in retirement, while only 5% anticipate relying mainly on Social Security. 

But saving — and saving enough — aren’t necessarily one and the same. And unfortunately, those falling behind the curve on retirement readiness may not even realize it’s happening.

Meanwhile, many younger Americans are embracing the growing trend of “soft saving,” favoring quality of life today rather than delaying gratification and saving for future goals, such as retirement. Faced with heavy student debt, economic uncertainly and financial milestones such as homeownership feeling out of reach, some younger workers are choosing to prioritize travel, social experiences, and their mental health. Living in the moment, however, may come at substantial cost later on in terms of both mental well-being and quality of life in retirement if savings are inadequate. 

This is where an experienced advisor can make a significant impact on the trajectory of a young participant. Part of the mental health “boost” of soft saving may come from the avoidance of facing the realities and challenges of planning for a secure retirement. But avoidance will only provide relief for so long — and delays in retirement planning can be costly and difficult to recover from. By providing guidance, perspective, and personalized, data-driven strategies, advisors can help younger workers balance enjoying life today while preparing for tomorrow.

Sources:

• https://www.investopedia.com/inside-gen-z-s-soft-saving-movement-are-they-trading-future-security-for-present-comfort-11831300  
• https://www.ebri.org/retirement/retirement-confidence-survey  
• https://www.cerulli.com/press-releases/gen-z-and-millennials-expect-to-lean-on-401ks-over-social-security-in-retirement
• https://www.kiplinger.com/retirement/retirement-planning/financial-advice-and-retirement-confidence-by-wealth-level  
• https://www.transamericainstitute.org/research/publications/details/four-generations-persevering-against-headwinds-uncertainties-prepare-for-retirement  

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