Today, there are 75.4 million millennials living in the United States, making these 18-34-year-olds America’s largest generation. Not surprisingly, young people also are taking over the workforce, with one in three American workers classifying themselves as a millennial, according to the Pew Research Center.

This trend will only increase with time: It’s projected by the year 2050, there will be 79.2 million millennials (aka Gen Y) living in the United States.

When it comes to planning for their financial future, this group is facing some unique challenges. This generation came of age during the 2008 financial crisis and witnessed the economic fallout from the Great Recession, which is shaping their attitudes toward saving.

At the same time, young people are struggling with student loan debt – the average class of 2016 graduate, for example, owes $37,172, according to Student Loan Hero.

In addition, even a small cut in income, as little as 10 percent, can wipe out savings and endanger Gen Y financial security, says research from TIAA Institute's report "Operating and Financial Leverage in Gen Y Households."

These obstacles have resulted in young people delaying major life milestones, including starting to save for the future. In fact, the word “retirement” does not resonate with Gen Y, perhaps because it is perceived as a distant need when they are struggling with much more immediate priorities.

Starting early is the best way to ensure dreams for life after work are realized, but when TIAA analyzed how Gen Y is saving for retirement, it found 32 percent are not saving any of their annual income for the future.

Knowing the importance of working with young people early in their careers to educate them about the merits of saving for a secure financial future, here are some approaches tailored to Gen Y participants:

Encourage enrollment, matching and regular small increases – Enrolling in an employer-sponsored retirement plan is a critical first step for Gen Y participants. Contributing even just a small amount can make a big difference, especially since younger workers benefit most from the power of compounding, which allows earnings on savings to be reinvested and generate their own earnings.

Encouraging enrollment also helps younger workers get into the habit of saving consistently, and benefit from any matching funds. Emphasize the benefits of employer matching contributions as they help increase the amount being saved now, which could make a big impact down the line. Lastly, encourage regular increases in saving, which can be fairly painless if timed to an annual raise or bonus.

Help younger workers understand how much is enough – We believe the primary objective of a retirement plan is offering a secure and steady stream of income, so it’s important to help this generation create a plan for the retirement they imagine. Two key elements are as follows:
- Are they saving enough? TIAA’s 2016 Lifetime Income Survey revealed 41 percent of people who are not yet retired are saving 10 percent or less of their income, even though experts recommend people save between 10 to 15 percent.
- Will they be able to cover their expenses for as long as they live? Young professionals should consider the lifetime income options available in their retirement plan, including annuities, which can provide them with an income floor to cover their essential expenses throughout their lives.
  
  Despite the important role these vehicles can play in a retirement savings strategy, 20 percent of Gen Y respondents are unfamiliar with annuities and their benefits.

Provide access to financial advice – Providing access to financial advice can help younger plan participants establish their retirement goals and identify the right investments. By setting retirement goals early, and learning about the appropriate investments, Gen Y participants can position themselves for success later on.

The good news is TIAA survey data revealed Gen Y sees the value financial advice can provide, with 80 percent believing in the importance of receiving financial advice before the age of 35.

Understand the needs of a tech-savvy and digitally connected generation – It’s important to meet this generation where they are—on the phone, in person or online. We’ve learned that this generation expects easy digital access to their financial picture, and we offer smartphone, tablet and smartwatch apps in response.
- Engage Gen Y with digital tools - Choose ones that educate in a style that does not preach and allows them to take action. One way to reach Gen Y on topics such as retirement, investing and savings is through gaming.
  
  We’ve found that the highest repeat users of our Financial IQ game are ages 24-34, and that Gen Y is significantly more engaged with the competition, with 50 percent more clicks.

Perhaps more than any other generation, Gen Y needs to understand the importance of saving for their goals for the future even if it’s several decades away. Employers play an integral role in kick-starting that process: first, by offering a well-designed retirement plan that empowers young people to take action; and second, by providing them with access to financial education and advice that encourages them to think thoughtfully about their financial goals—up to and through retirement.

The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.

TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products.

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Instant Insights /

Starting early is key to helping younger workers achieve financial success

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