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Help Gen X and millennial clients bridge the savings gap

Younger generations face a significant "savings gap," making it challenging to determine the best strategies for their retirement planning. The stakes are especially high for Gen Xers and millennials as they approach retirement age.

When participants were asked, 鈥淒o you think you鈥檙e ahead of where you should be, behind, or on track with retirement savings?鈥� in a 2024 Bankrate study,¹ 43 percent of Gen X respondents agreed with the statement 鈥淪ignificantly behind where you should be.鈥�&苍产蝉辫;

Both Gen Xers and millennials face unique challenges as they prepare for retirement. And because they鈥檙e closer to retirement, Gen Xers may feel the stress of falling behind on savings. They may also be searching for more financial guidance.

Let鈥檚 take a big-picture view of Gen X and millennial savings

To start, it鈥檚 helpful to acknowledge the economic and societal factors that impact their ability to save.

• Student loan debt: This burden hits these generations hard. The need to stay on top of debt has hindered some in their journey to save more.
• Rising living costs and health care costs: These have dramatically impacted their long-term savings. Income also hasn鈥檛 kept pace with these costs.
• Delayed milestones: Many Gen Xers and millennials have married and bought a home later in life than their parents鈥� generation. 
• Shifting retirement savings responsibility: Gen Xers and millennials entered the workforce with self-directed retirement savings plans instead of the traditional pension benefits their parents largely enjoyed. While these vehicles can build retirement wealth, their success depends on financial knowledge and commitment 鈥� educational resources that were often scarce when these generations began saving.
• Sandwiched by costs: With several financial priorities placed upon these generations, that has meant retirement savings may take a back seat. Saving for children鈥檚 education or caring for aging parents creates what we know as the 鈥�sandwich generation.鈥�&苍产蝉辫;

Financial professionals can help overcome these shortfalls

In recognizing the power of professional guidance, here are some actionable strategies that may help clients take control of their savings goals.

• Provide basic investing education: For example, Gen Xers have misconceptions³ on how and when to invest in index funds and the difference between funds and government bonds. They may benefit from direct education about the potential implications of investing in one or both market opportunities. 
• Offer personalized planning from the start: Learn about the client鈥檚 lifestyle and risk tolerance and let them know you will prioritize their personal needs when developing retirement plans. Have direct conversations about  鈥� both those unique to them and those that are more traditional 鈥� to help them direct their personal vision. 

Unique goals may include travel, new hobbies, or charitable donations. More traditional goals include time with family and living comfortably. 

• Help address the savings gap with traditional and creative strategies: Remind these clients of what is available to them and help them consider their options.
  • Take advantage of employer match programs.
  • Utilize catch-up contributions for those 50+.
  • Introduce tax-advantaged savings options (e.g., IRAs, 401(k)s, and HSAs). 
  • Learn how to determine when to make retirement withdrawals.
  • Use automated monthly contributions.
  • Boost savings with tax refunds, bonuses, or inheritances.

Talk to clients about how alternative options can be part of a diversified plan. This includes annuities and protected accumulation products to secure guaranteed income, which could help with a longer retirement. Share strategies that can help Gen Xers and millennials with debt reduction, maximizing contributions, or reallocating investments and diversification like fixed income. Remember, many clients need guidance on maximizing their savings and catch-up contributions. Some could benefit from fully grasping the power of compounding interest.

*Each investor contributes $20,000. Annual return 6%, compounded annually.

• Provide tools and resources: Leverage retirement calculators, digital tools, and projections to help clients plan. A is a unique tool your clients can complete. Share relevant blogs, articles or other worksheets to arm them with information. For example, curate a library of articles and helpful tips to share directly with your clients. 

• Tap into behavioral coaching: These generations may seek help to overcome emotional barriers to saving. This could mean help starting a budget if they are overspending or reviewing which account types make most sense for them. Ask questions to understand their history with savings. For example, do they dip into savings for big purchases, are they consistent, or are they purely saving for retirement? 

• Create a partnership to help build your client鈥檚 confidence: Gen Xers and millennials want to collaborate with their financial professionals⁴ and play an active role. This could be as simple as conducting regular check-ins and progress tracking with adjustments based on life changes. Consider this checklist for client reviews. Celebrate client successes as they close savings gaps and share success. And talk about a holistic approach to finances by incorporating debt management, tax optimization, and more.

There is time to close the savings gap

Remind clients it鈥檚 never too late to build savings, regardless of age. Many of those over 50 may not know that contribution limits⁵ on tax-advantaged accounts have increased for them. Plus, as you help these clients start to build on their savings, you can introduce more growth strategies for long-term solutions. 

Learn how annuities may help clients reach their goals. Help Clients with Solutions for Growth  

Insights on 麻豆传媒 Connect. Tips, tools and resources to grow your business by helping clients retire with confidence.

1    study on retirement savings readiness.
2 on the generation鈥檚 savings shortfalls.
3 on the generation鈥檚 survey results.
4 on younger generations鈥� view on financial professionals.
5 information on contribution limits.