PLANADVISER - July/August 2018 - 46

frequently recommended, often actually have a good reason
to do so.
He says there are cogent arguments to be made that
many young people who are expecting to earn more in
the future than they do today should prioritize immediate
needs ahead of retirement savings. For many Millennials,
eliminating higher-interest credit card debt or paying down
student loan debt takes precedence-or younger individuals
with limited resources may decide to prioritize buying
a home or building emergency savings.
" This is textbook economics, and the optimal balance
between paying down debt and investing for the future
can be figured out pretty easily, " Biggs says. " We don't hear
this discussion going on because, I think, the rigor of analysis
among many of the people who are out there telling
everyone to save all they can in the 401(k) all the time is, to
put it mildly, lacking. "
Heather Coughlin, U.S. solutions leader for financial
wellness at Mercer in New York City, agrees that employers
and Millennial-age employees will both benefit from
greater consideration of the debt issue. Short of offering
student loan repayment benefits or broader debt counselling
linked to the DC plan (see " Giving Them a Break, " page
50), employers might consider at least providing general
education on the subject.
As Coughlin notes, the total amount of U.S. student loan
debt has topped $1.4 trillion, including nearly $75 billion
in PLUS [parent loan for undergraduate students] loans
taken out by individuals on behalf of their children. In
terms of work force percentages, fully 72% of employees
say they have outstanding student loans or have successfully
finished repaying loans while working.
" These numbers show that student loan debt repayment
is among the top work force challenges in the U.S., " Coughlin
says. Citing her own statistics from within the Mercer book
of business, she suggests the majority of workers who say
they worry about their finances regularly also say debt has
delayed or prevented them from saving for retirement.
It is not just Millennials taking lower-paying jobs who
struggle to repay debt. From her perspective working with
law firm clients, Naz Vahid, managing director and law firm
group head at Citi Private Bank in New York City, says it is
not uncommon to see younger married couples enter the
work force with more than $1 million in combined student
loan debt. According to Citi Bank survey data, twice as
many people with student debt than without are worried
about their personal finances, and, across all generations,
financial worries drop drastically for people without
student debt.
The upshot for advisers and plan sponsors is that
communicating with participants about balancing retirement
savings with more immediate needs is a necessary
part of building a progressive DC plan. And, as not all Millennials
carry significant student loan or credit card debt, other
challenges can be addressed in communications as well.
Robert Johnson, president and CEO of The American
College of Financial Services in Bryn Mawr, Pennsylvania,
suggests Millennials' other biggest challenge is risk aversion.
Like the Silent Generation, who experienced the Great
Depression, Millennials " were shaped by the cataclysmic
financial event of the financial crisis of 2008, when they
were just entering the work force, " Johnson says.
" The challenge here is helping Millennials' overcome that
risk aversion, " Johnson says. " Talk about market cycles. "
Gen X: Stuck in the Middle
Generation X, roughly those born from the early or mid1960s
to the late 1970s, faces many of the same debt challenges
confronting Millennials. Additionally, though, they
are stuck in the savings sandwich-called on to financially
support both young children and aging parents during
prime earning and saving years.
The sandwich challenge belongs to this cohort simply
given its age range-and is heightened by the fact that Gen
Xers established their careers during a period of difficult
political and economic transformation. Investors and job
seekers in Gen X faced down both the dot-com market
crash of the early 2000s and the Great Recession credit
crisis of 2008 through 2009 relatively early in their careers,
leading many to miss out on earnings potential or to hold
off on saving adequately.
According to the latest cut of data provided by Wells
Fargo from its annual " Defined Contribution Study, " those in
the sandwich generation of their family, defined by the firm
as " people who are responsible for taking care of their aging
parents as well as their own children, " are much more likely
to cite rising health care costs as a major hurdle to retirement
saving than those who do not have these responsibilities
(30% vs. 18%). Sandwich-generation members are also
more likely to cite higher health costs as a reason they fail
to save more for retirement (71% vs. 56% of non-sandwichgeneration
workers). These are areas where plan advisers
and sponsors can target communication campaigns and
education efforts, the research suggests.
Catherine Collinson, president of the Transamerica
Center for Retirement Studies in Los Angeles, observes that
Generation X " is at an age when they are super-busy, " so
building a focus on retirement planning can be a challenge.
" The critical mass of Gen Xers are in their 40s and are
likely to be raising kids, perhaps looking after aging parents
and paying off credit card debt, " she says. " They are more
likely to have taken a loan from their retirement plan, and
many are not saving enough. They are behind on retirement
savings and need a wake-up call. "
According to the recent survey report " Moving the
Needle: Targeting Generation X " -commissioned by
Jefferson National, the advisory solutions business of
Nationwide-among all members of Gen X, when asked
about their top financial concerns, 46% cite saving enough
for retirement; 28%, the cost of health care; 21%, financing
their children's education; and 20%, protecting assets.
Many of the things that financial advisers and plan
sponsors can do to help Generation X are fundamental to
retirement planning: Get them engaged by providing them
with a calculator to estimate their needs. Do a gap analysis
to set forth a plan that would put them in a better position
46 | planadviser.com july-august 2018
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